OZ Minerals Limited (OTCPK:OZMLF) Half Year 2022 Earnings Conference Call August 25, 2022 9:00 PM ET

Andrew Cole – Chief Executive Officer

Warrick Ranson – Chief Financial Officer

Bryan Quinn – Strategy and Growth Executive

Kaan Peker – RBC Capital Markets

Good day and thank you for standing by. Welcome to the OZ Minerals' 2022 Half Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

I would like to hand the conference over to your speaker today, CEO, Andrew Cole. Please go ahead.

Thank you and good morning and thank you everybody for joining us. I'm talking to you today from Ghana land, and I would like to acknowledge the traditional elders of past, present and emerging. I also want to pay my respect to the traditional owners of the land in which our mines are located [indiscernible] new people. And thanks to many traditional owner groups around Australia that support us in our exploration projects.

On the screen is a slide of our management team. We've had a few new starters since the beginning of this year, so I wanted to briefly introduce them. I'm also joined here in the room today by our CFO, Warrick Ranson; our Operations Executive, Matt Reed; and Strategy and Growth Executive, Bryan Quinn.

Today's call is a bit longer than usual as we have quite a lot to cover. We usually let our results speak for themselves, not only mean to showcase the value we have and plan to create, but by popular request and as we promised back in July, we've summarized not only the half year results, but also a summary of the exciting future our sector is looking forward to, OZ Minerals' evolved strategy and strategic aspiration, our annual growth profile and our careful capital allocation approach. All of which we expect we'll see this company continue to create superior value for all our stakeholders as it has done in the past.

I'm going to skip through the slide on the disclaimers. You can find these on our website, if you'd like to read the disclaimers in a bit more detail. As we have shared on previous calls, we have had some challenging first half operating conditions. We had sustained COVID absenteeism at the start of the year. We had a number of one-off weather and equipment interruptions. It impacted our first half operating performance. Pleasingly, over recent weeks, we've seen operational improvement plans gain traction and our South Australia assets regain their operating momentum. We want to thank our teams across the business for their efforts in a testing environment. Despite the softer production, we achieved an impact of about $900 million on net revenue of $909 million and EBITDA of $358 million at a healthy operating margin of 40% on operating cash flows of $375 million. As a result of this and the board's confidence in our operational performance and the macro environment, the board decided to pay a fully franked interim dividend of $0.08 per share consistent with the prior four years. Thank you to our shareholders, who continue to support us.

I'll now go into a bit more detail on our half one performance. The operational improvement plans we've been placed a few months ago at Prominent Hill and at Carrapateena are gaining traction. And the things are now seeing mining and development rates return to plan. This combined with the recent case propagation at Carrapateena has increased our confidence in a stronger second half. As a result, we remain on track to meet group production guidance. As you know, all of our sites have expansion programs underway. At Prominent Hill, the Wira Shaf mine expansions make a good progress. I was at site just last week to see the civils complete as they now start shaft development from the top down. Today, we also approved a further $12 million investment to develop access and to continue drilling Prominent Hill's shallow Walawuru and Papa mineralized body bodies, both of which could result in additional mine tons above the 6.5 million tons per annum ore to be hoisted up at shaft.

At Carrapateena, the second crusher is underdevelopment and the block cave expansion access, which will enable the expansion of the mine to a lower cost 12 million tons per annum operation has commenced. At Carajás East, the Pedra Branca underground mine ramped up the full production in June ahead of schedule, use of the now completed Antas open pit mine at the tailings storage facility was also successfully commissioned. The prefeasibility study for the second Carajás East hub high-grade open pit satellite mine at Santa Lucia is on track for completion later this year. We've also released today the first stage drilling results for three separate exploration targets, all of which are within tracking distance of Antas. These are very high-grade intersection, which demonstrates the real potential this province has.

Looking ahead, we are focused on a number of key value adding activities. First and foremost, of course, we are working on the safe and reliable operation. We are constantly exploring opportunities to outperform on this front. We aim to finalize the West Musgrave land access agreement with the traditional owners and then progress the study to a final investment decision. We have also announcements looking in long lead items to protect budget and schedule and expect to spend up to $60 million through year end in doing so. The change is tracking the [indiscernible] prefeasibility study and we are continuing to drill the three new expiration targets to progress Carajas hub strategy.

Okay, I'm going to hand over to Warrick and ask him to take out through half year financial performance numbers.

Thanks Andrew. And good morning, everyone. So volatility in the macro and local context of our operating environment for the first half of this year driven by geopolitical events, supply chain challenges, the weather events and renewed COVID infections domestically and globally, have certainly created its challenges.

However, while recessionary risks have not disappeared, high frequency copper demand indicated for China are certainly beginning to turn more positive. The EV sector continues to accelerate and the optimism of the flowing of U.S. Fed monetary policy has provided more recent price support. We certainly remain positive and firm in our views that the medium- to longer-term fundamentals for copper remain favorable, driven by ongoing economic development, de-carbonization and electrification, and our own position on the cost curve to capitalize on these trends.

As Andrew has mentioned, we reported the net profit after tax of just over $109 million for the first six months of the year. The reduced earnings over the exceptional comparative period we experienced last year generally reflected three primary drivers. A number one off production interruptions, which included the extreme weather events, which flowed onto our supply chain, the conveyor belt failure at Carrapateena and labor and equipment productivity impacts from those industry-wide COVID-related disruption.

Secondly, we had high related and one off mining costs at Carrapateena. We incurred significant additional costs in managing the downtime repairs on the materials handling system. We mobilized additional fleet and labor to mitigate the productivity loss. And we had to make repairs to the Western Access Road following over flooding in January after a one in 200 year event.

And thirdly, higher exploration and development activity following the easing of the more stringent COVID restrictions that were in place in the previous half year together with project payments we made in Brazil. Our production volumes slowed onto sales and saw our net revenue fall to $909 million against a weaker comparative pricing environment.

But despite those lower volumes operating cash flows of just under $375 million remained robust assisted by higher customer receipts, but offset by higher payments after a full period of ramp up operations at Carrapateena and significant tax payments flowing on from our strong 2021 financial results.

Pleasingly, we have confirmed with the regulator, our eligibility for a deduction on the government's temporary full spending provisions and will receive a recovery of approximately $50 million in corporate tax in the second half, as well as minimizing any further tax installments for the balance of the year. And aligned with our policy of maintaining a sustainable dividend against balance sheet strength the Board approved the payment of a fully-franked interim dividend of $0.08 per share as Andrew has mentioned, remembering that last year includes a special dividend as well.

As usual, I'll talk to the next few slides Slide 6 to 8 collectively given they reflect the overall operating performance for the first half. Gross revenue for the first half of the year was $933 million, $109 million lower than the comparative period following both lower production and commodity prices with the prior period also including $34 million in gold hedging losses related to our stock piles and material.

As I mentioned, copper prices have rebounded subsequent to the end of the half, price volatility driven initially by concerns over slower near term economic growth are now being contrasted against a more positive short term outlook. Policy supporting China, as we particularly sold – is also becoming increasingly positive and is expected to support an infrastructure driven demand recovery over the balance of the year.

We saw a small increase in TCRC charges, reflecting market movements. Those state royalties declined against reduced revenue.

Over the first half we saw inflationary pressures increase further across Australia, Brazil and globally. Price escalation contributed about one third of the overall production cost increase.

On freight, rates are continuing to track lower. They still remain in elevated levels while the Baltic Dry Index is now at its lowest points since December 2020, hoisting capacity still remains tight. But we continue to manage these cost pressures and we're able to maintain a healthy 40% operating margin, despite the impacts on production and costs, with over 70% of our cost base, actually being fixed.

We continue to invest in our organic growth pipeline. We're just under $158 million invested to mine and further infrastructure development in Carrapateena. Excuse me, we progressed and Wira Shaf at Prominent Hill together with developments of Pedra Branca underground mine in Brazil and of course we continue to advance our work on West Musgrave in preparation for FYD later this year.

Income tax expense reduced over the previous year, given the – resulting our profit position. As I've said before, exploration and evaluation costs in Brazil are not attributable income tax items and are reflecting our effective tax rate for this half.

Cash outflows relating to financing activities comprised of $52 million for the payment of the 2021 final dividend to shareholders after DRP take-up and $41 million in payments to suppliers classified as lease payments. We continue to manage our overall liquidity levels effectively through our revolving credit facility, which in May was refinanced and upsized to $700 million with a five-year maturity.

And as previously noted, we have recorded a tax receivable balance of $86 million in the half after confirming our eligibility for capital deductions under the temporary full expense in provisions.

Collectively, this resulted in a net profit after taxes for the period of $109.2 million, as I've mentioned, and the board's determination in relation to our 2022 interim dividends, that dividend will be fully franked for Australian tax purposes, however, the DRP will not be offered this time.

On the balance sheet, we've summarized the comparative for the last six-month period. We intend to keep our balance sheet strong and support the current growth pipeline we have in front of us. I've talked about a number of these items already. So I'll just touch on a couple of key aspects on this slide.

Consistent with our capital management strategy, we continued to play our cash resources to the ongoing development of Carrapateena and capital requirements at Prominent Hill. Cash reserves reduced as previously forecast with expenditure on Prominent Hill were a sharp and the Block Cave declines at Carrapateena. We'll continue to use our revolver facility to manage our working capital needs as required.

We also continue to process rather our open pit stockpile material of Prominent Hill currently processing the lower grade gold stockpile to supplement underground production. Higher concentrated stock to the end of the half reflected shipment timing. And West Musgrave study and drilling costs are capitalized within exploration assets at this time.

We certainly remain focused on maximizing value across all our stakeholders in how and where we deploy capital. And whilst we have an enviable pipeline of growth activities, we remain prudent and disciplined in our expenditure, constantly reviewing and assessing the value and prioritizing our speed.

With that, I'll hand back to Andrew.

Thanks very much, Warrick. I'm now going to turn to the next section of our presentation, which speaks to who we are as a business, the opportunities ahead of us and how OZ Minerals can capture these. There is a lot of information in the deck and we are just not going to be able to do this content justice in the time we have. So Brian, Matt and I are going to go through this very quickly, calling out just a few of the critical points, and then we will leave it for you to review during your own time.

As always, we're very happy to talk to you one on one if you have follow-up questions. Firstly, all commentators, I think, agree that the future for the critical minerals industry is exceptional. This is a unanimous view with every resources company and their downstream customers jostling to enter the sector. Clear comparisons have been drawn between the age of electrification and decarbonization that we're now entering and the historic decades long iron ore supercycle that resulted from the industrialization of China. The world is structurally changing while most still desire to be well positioned OZ Minerals is ideally placed to capitalize on the soring demands for modern minerals that are integral to what is forecast via a multi decade electrification transition.

For the first time, we are collectively focused on decarbonizing our world for our children. This slide shows that the modern minerals we mined copper and nickel are integral to our global energy transition. No other metal will have the same intensity of use as we shift to cleaner energy.

On the graph to the right of this slide, you'll see that at the global increases its use of copper over the next 20 years more than half of that will be used for clean energy. Whilst we may see short term volatility and demand variations, the medium-to long-term fundamentals are undeniable.

We are notorious underestimating the human races’ adoption rates. As a close analogy, we all significantly underestimated mobile phone adoption rates. Similarly, demand for electric vehicles is forecast to grow from 7 million today to a staggering 56 million by 2030, equating to a compounded annualized growth rate of over 25%. I also wonder if we're underestimating this copper is not just an easy story. It's the key ingredient for grid infrastructure that will power our businesses and homes in the future. The bottom right of this slide, you'll see that the largest proportion of this demand for copper is coming from grids, which alone is forecast to double between 2020 and 2040.

Discovery rates and head grades are at an all-time low. And while, I think, we all agree that demand is set to grow dramatically, we must also recognize that supply of these minerals from space, stable jurisdictions like Australia will become increasingly scarce.

Additionally, global copper head grades are in decline and new discoveries at an all-time low companies have not invested sufficiently in exploration. And the few that have not discovered anywhere near enough to replenish depletions, let alone meet future demand. Not only this, but when a new discovery is made, it's historically taken an average of 17 years before it starts production. Larger deposits take even longer. [Indiscernible] time is increasing as a result of tougher regulations and higher societal expectations. This is a significant lead time which makes OZ Minerals' operations, existing expansions rare and highly desirable to the next phase of the copper market.

Turning to supply and demand, the current forecast show that from 2026, the copper market will begin to enter a significant long-term structural supply deficit. CRU is forecasting by 2035 there will be a 6.4 million ton deficit in the copper market. That deficit alone is equivalent to a third of the total copper market, this of course translates to price and then shareholder returns for those very few companies that have a dominant exposure to these commodities and a track record of value creation.

Now looking inwards to OZ Minerals strategy, we review our strategy frequently to ensure we are staying in front of megatrends. Whilst we have been focused on this for some time as evidenced by our progression of Carrapateena and West Musgrave, we have agreed to evolve our strategy from a copper focus to modern minerals. This reflects the fact that we are entering the electrification era. This will see us formally include copper and nickel in our target suite.

In time, we may investigate other electrification here in metals, our portfolio of quality long life, low cost copper nickel assets, all with brownfield expansion opportunities located in safe and stable jurisdictions, underpin our growth trajectory. This enables by an innovative culture of people who love what they do is the foundation of what I'll take you through today. A clear pathway to more than doubling our production in the years ahead, all from within our existing organic pipeline, something almost no other company can claim.

Over the last eight years, we have to find our own way of working, which we call the OZWay. As part of the OZ Minerals context, you can see here, our familiar OZWay graphic. It explains how all the parts of OZ Minerals fits together. It also now illustrates our focus on modern minerals having evolved from global copper. Every part of the OZWay is designed to help us make sound decisions and deliver on our strategic aspirations. It is far more in a graphic encapsulates the purpose driven organization that at our core helps people be the best they can be to create value for all of our six stakeholder groups.

Our approach is different and it has guided us to build a unique purpose driven company centered on value creation. We've now also evolved our strategic aspirations. These revised aspirations are centered around decarbonization, digitization, collaboration, and a commitment to creating value for our stakeholders, our refreshed strategic aspirations sharpen our future focus and help us conceptualize where we want to go and how we will get there. Supporting this, ongoing effort to harness strategic alliances and partnerships, which speed up development, reduce costs, reduce risk and effect transformative change across the sector, much faster than the average or any one group can on their own.

These building blocks constitute our very unique value proposition. I've outlined substantial market opportunity ahead of us, which I think we all share a common view on. I've now also shared with you how we have adapted our own strategy to encompass the opportunities ahead of us. So what makes OZ Minerals uniquely positioned to capture this growth better than others, it's quite simple. OZ Minerals has a one of a kind suite of long-life, low cost operating asset in low risk jurisdiction focus solely on these commodities. Our portfolio is not diluted by other commodities. And importantly, we have a demonstrated track record of converting ideas into highly value accretive assets for our stakeholders.

OZ Minerals are modern minerals mining company currently has the Australian Carrapateena and Prominent Hill mines, which represent the vast majority of our current production base. Both have expansion plans underway and additional upsides on top of these. We now also have the West Musgrave project, which is destined to be one of Australia's largest, longest life and lowest cost sulfide nickel producers. We also have a rapidly growing copper hub in the Carajás and exploration projects at various stages in Brazil and Sweden.

Our pipeline offers us flexibility and optionality. It also allows us to allocate capital for the most value accretive projects. OZ Minerals value proposition is as much focused on how as it is, what we do. Specifically, there are five characteristics, which I think are unique to us. Our low cost long-life assets, the location of our assets in quality jurisdiction, our growth pipeline, our market-leading decarbonization efforts and our culture that has resulted in a track record of delivery for stakeholders.

Our copper assets are among the highest quality in Australia. Carrapateena is a clear example of this being the second largest primary Australian copper resource for the 23 year mine life, there remains substantial mine life extension upside when considering the size of the resource base rolls it to the reserve. The graph on the right of the screen illustrate Carra and Prom Hill have sector leading profitability and ranked favorably as high margin copper assets.

And it's a similar story now for nickel, West Musgrave is one of the largest undeveloped and most sought after nickel projects in the world with countless groups approaching us to participate. It's located in a middle province that has seen little exploration in the last 30 years. We see substantial province upside and we have the capability to deliver on this. The team is working hard to consider further value opportunities for inclusion into the project. And we remain on track for FID in the second half of this year.

When investing jurisdiction is critical, OZ Minerals is the only company with a modern mineral focus located in safe and stable countries and nearly 100% primary source Australian revenue stands out among our peer set. Looking at the global landscape, most of the copper produced in 2021 was from medium or high risk areas, copper from low risk jurisdictions like Australia is scarce and there is the geopolitical component to our industry with recent increases in Chilean copper mining royalty is an example of how project profitability can rapidly shift in what in line with new legislation.

The bottom line is that Australia's copper is strategic in an increasingly polarized world. Whilst we produced a material amount of copper currently, our pipeline already has options to more than double copper equivalent production from 140,000 tons to over 340,000 tons per year.

This is well defined. We are not asking shareholders to trust the set of ideas. We have a methodical step by step plan with a clear pathway, each project and expansion opportunity. And we have an experienced team who has and can continue to convert opportunity into outcome. Whereas also a significant upside across all our projects, which is not yet reflected. And each of our assets is clear to see the potential mine life extension upside from converting resource to reserve. For example, Carrapateena's resource is almost five times the size of the tons in the current mine plan.

We will touch on each of these later in the presentation, but I want to call out just a couple here. At Prominent Hill, we are not processing constrained. We have a 10 million ton per annum mill have increased the shaft capacity to 6.5 million tons per annum and are looking at how we can fully utilize this increased hoisting shaft capacity. This combined with the potential to mine near surface deposit, such as [indiscernible] represents achievable potential upside for us to feed more tons through the mill. Also, Kalkaroo project could add over 40,000 tons per annum of copper equivalent over a 15 year mine life pending approval from resource shareholders at the end of this month.

We are also committed to reducing greenhouse gas emissions, preparing for the physical impacts of climate change and the transition to achieve overall net-zero carbon dioxide emissions. We have developed the decarbonization roadmap from the ground up to drive behavior and outcomes within the company and to ensure our stakeholders can hold us to account for delivering on these commitments. This is a roadmap that will take what our target achieving net-zero Scope 1 and 2 operation emissions by 2030. We are amongst the leaders in this space with a number of our peers still yet to outline.

Now, I quickly want to talk about our track record of delivering for shareholders. It takes time to develop an asset base that is as higher quality as ours. It has taken our management team several years to build the foundation between 2015 and 2020. We achieved some critical milestones that set up our long-term future. Through this period, we have delivered on our promise. This points to our track record of operational performance, prudent capital management and project execution.

We aim to leverage this capability to continue delivering for OZ Minerals next chapter. We have built this portfolio almost entirely of operating cash flow whilst paying dividends throughout.

We can continue to do this for all of our Brownfield expansion projects at consensus pricing. We’ve built a company culture and a suite of assets that have delivered a nearly 800% return to shareholders since 2015. This is substantially more than the actual returns of our peers as you can see on this chart. This comes down to our strategic capital allocation. We have reinvested significantly to facilitate growth, but also delivered on our dividend policy over time. This is the balance we expect to continue to ensure we can achieve our goals, but also reward shareholders who are on the journey with us.

I’m actually going to ask Matt to talk a bit about some of our assets and our Province Potential [indiscernible]. Matt?

Thanks, Andrew, and good morning, everyone. As Andrew said, we seek to develop mining provinces, where we can use existing infrastructure to process multiple orebodies over time making efficient use of our resources and minimizing our environment principal. Before talking about each of our assets and what their future potential holds is worth reflecting on what we’ve achieved.

What we have achieved at its core has been driven by our ingrained culture. It’s our innovation, agility and collaboration through partnering that’s got us here and importantly, that’s what allows us to replicate this success in the future. Our capability sits in unlocking value beyond an assets original potential.

For Prominent Hill, it’s a story of delivering value through project execution with discovery to production in seven years. And back in 2012, we had a six-year mine life ending in 2018. Standing here today, we’ve got another 14 years in front of us.

For Carrapateena, we’ve created a project from the ground up. When we acquired the project, there was no official resource. Today again, as Andrew said, we’ve delivered a 950 million tonne resource and redefined the potential of Carrapateena to Block Cave transition.

And then finally, West Musgrave, we identified a quality asset early partnered with – to help unlock its potential before then consolidating ownership. This adept early identification of key strategic assets as clear parallels to Kalkaroo.

We’re proud of our opportunity mindset and Prominent Hill is firmly established itself as a reliable low cost producer that has substantial options to increase production volumes. Prominent Hill’s already transitioned as you know, from an open pit to an underground mine. We’re now working through the integration of the Wira Shaf expansion. That expansion helps us reduce operational risk, enables the electrification of the aholic system and removal of the diesel fleet from underground.

Importantly, approximately 45% of the mineral resource at Prominent Hill is outside the new shaft mine plan, meaning there’s still significant scope to extend mine life. And as Andrew said, Prominent Hill is not processing constrain. So there’s an opportunity for us to use up to 10 million tonnes per annum of latent mill capacity. That’s really part of the reason we’re exploring how we can independently mine near surface deposit such as Walawuru and Papa, which have the potential to increase mine production rates beyond the 6.5 million tonnes in the future. There’s also potential to go resources to extensions in areas like Kalaya, Malu East, and Eastern Deeps.

Our underground reserve at Prominent Hill has grown over 6 times since 2012, on top of significantly increasing production over that period. Importantly, our resource of 140 million tonnes is – larger than the current reserve at 47 million tones.

If I move on to Carrapateena, which is one of the biggest mining projects in South Australia in the last decade. At present, of course, cave management remains the priority with the cave moving steadily towards breakthrough to surface. Also front of mine is our Block Cave expansion. This will help up the value opportunity of our existing sub level cave operation.

Similarly to Prominent Hill, the current Carrapateena resource is approximately 5 times larger than the tonnes mine in the current mine plan. So there really is a substantial opportunity to extend mine life with a growth pipeline that’s not currently considering the mine plan and includes the Fremantle Doctor resource with further opportunity provided by Khamsin and also the Saddle.

At West Musgrave, we are positioned in a unique and well endowed mineral problems that seen relatively little exploration in the last 30 years. It’s recognized as the second largest prime nickel resource in the country and shaping up to be a low carbon, low cost and long life mine. It’s a project that also seeks to be leading the industry with its sustainability credentials.

We’ve recently received all the required regulatory approvals for construction from the Western Australian government and minor agreement discussions with the traditional owners are progressing. Longer-term, the West Musgrave province holds further growth potential, and we’re exploring opportunities to increase production rates above the plan 12 million tonnes per annum. It’s a highly undeveloped region, limited drilling to date and going forward exploration will be focused on identifying further near mine deposits, in addition to those that you can see on your screen and Succoth alone has a resource of 156 million tonnes. We’re also looking at the potential for an onsite downstream nickel processing plan and seeking interest from third parties in its development.

We move on to Brazil. The Carajás province is a safe, mature mine in jurisdiction that hosts some of the best undeveloped copper gold deposits in the world. We hold the second largest number of exploration leases in this province after Vale and are pursuing a staged, low-risk, modest capital hub approach.

At Carajás East, we’re using the depleted Antas’ mines existing processing infrastructure to process all from the Pedra Branca mine, and other potential satellite mines. And now we’re using the depleted Antas’ open pit to tailings storage. At Carajás West, we’re focused on Pantera as a standalone site with potential for additional satellite mines.

Back to Carajás East, the plans to continue to use the existing infrastructure to process online from Pedra Branca and other potential satellites deposits, including Santa Lúcia as they come online and pleasingly Santa Lúcia study is on track to be completed in Q4 of 2022.

Then finally moving to Gurupi. The CentroGold Project is one of the largest undeveloped gold projects in Brazil and represents the first stage in unlocking the highly prospective Gurupi Province, once developed CentroGold would be ideally place to service nearby deposits such as Chega Tudo and Mandiocal should they provide viable those deposits are not currently included in mineral resource. The removal of the historical injunction CentroGold is also continuing.

So I’ll hand over now to Bryan to talk about Kalkaroo and exploration.

Thanks, Matt. This is a great opportunity to share some of the growth work underway including the recent agreement with the Havilah for Kalkaroo. This is potentially, as Andrew said, one of the largest undeveloped open pit copper deposits in Australia. It’s been subject of interest of many other companies over a long period of time.

We’re very pleased to have the Havilah Board recommending their support for the optioning of Kalkaroo to OZ Minerals with a shareholder vote to be complete on the August 31, 2022. The locations ideal for OZ Minerals it’s within close proximity to good infrastructure and not far from Broken Hill. And it’s very important investment opportunity for South Australia as well.

This project has a potential to be a scalable, low cost and long live operation in the province surrounding Kalkaroo as well. In fact, the potential province can grow this region significantly. If you think about the Kalkaroo business itself, there’s also a strategic alliance we have with Havilah some areas around Kalkaroo, which we can actually grow into in the future, which we are fun to drill commence – drilling or commence actually in that area post the shareholder approval of this month.

Importantly, the reserve is 100 million tons, that 4.7% copper and 0.44 grams per ton of gold, which generates potential of 474 kilo tons of contained copper, and 1.4 million ounces of contained gold over the life of Kalkaroo.

This is within a potential resource of 242 million tons, 4.9% copper and 0.35 gram per ton of gold. So it’s quite a significant opportunity just in the Kalkaroo itself with much work to be done to fill up these reserves into the future. Kalkaroo is also a great opportunity in terms of the [indiscernible] and has the opportunity to be in the second half on the lower half of the cost curve globally.

So we’ll be working hard in the next 18 months with our partners to assess this opportunity and try and ensure this – the best chance to bring it to life for OZ Minerals. Let me just talk about exploration pipeline in general, we sort of work on developing these through earn in agreements and partnerships with highly regarded explorers. This approach provides us with exploration expertise in specific geological terrains and locations in the jurisdictions we like around the world.

As you can see from the information in the deck, we have a range of projects over multiple jurisdictions. Greenfield exploration with potential for organic growth is progressing in several locations Australia, Brazil, and Sweden. We’ve also a number of inorganic Greenfield targets to earning [Technical Difficulty] when the time is right. Our approach is to build a pipeline of projects and rigorously progress and if we determine that a project does not have the potential to generate the value we’re looking for, we quickly will see that expansion and withdraw from these opportunities.

Our focus is to build a pipeline of projects that can transition from inorganic to organic and feed our project pipeline for the future. In addition to the junior explorer partnerships with a strong and robust partners with – we’ve leveraged project and logistics opportunities between two companies that best suit our respective capabilities. Currently with 12 exploration projects in Australia, across Northern territory, Queensland, West Australia, and South Australia, both copper and nickel, seven copper exploration projects in Brazil and five in Sweden.

We’re also looking at other jurisdictions, which align to our strategic explorations. The majority of the exploration projects in Australia and Sweden, a joint venture and where Brazil is owner operated by OZ Minerals. We released today some very exciting interests from our exploration activities in Brazil. These potentially support the Carajás East hub that matches referred to, as you can see these target explorations doing significant mineralization from diamond drilling in very friendly regions.

These results will go a long way supporting our hub and spoke strategy in new Carajás. We strive to have four or five of these Antas hub inclusive of Grota Rica, Tapuia and Valdomiro. In addition to the Pedra Branca and Santa Lúcia projects that Matt just spoke of.

Thanks everyone for taking the feedback. And Andrew will pass to you.

Thanks very much, Bryan. Thank you, Matt. I’m just going to make a quick remark and then we’re going to open up Q&A. Just a couple of forward looking statements from the market outlook in my view for renewable minerals like copper and nickel that has never been stronger. And we are hearing that narrative being echoed around the globe now. We have a unique set of copper, nickel assets. They all have long-term growth potential, and they are in all in quality location as a company. OZ Mineral has an excellent track record of delivering shareholders and their stakeholders all underpinned by quite a unique culture. We’re very much looking forward to an exciting future.

So operator, can you please open up the lines and remind people how to ask questions? And as a reminder, I’ve got Warrick, Bryan, Matt, and myself here to answer questions.

Thank you. [Operator Instructions] And our first question comes from the line of Paul Young with Goldman Sachs. Your line is open. Please go ahead.

Good morning, Andrew and team. Andrew really interesting times. You clearly on the front foot and you clearly think you’re undervalued. So can you talk maybe a little bit about the blue sky valuation scenario? First of all, we know they use about $2.90 copper price on your reserves. But when you’re looking at coppered value for OZ Minerals. What upside case do you run on copper price and capital projects? And when you’re looking at – and then looking at Carrapateena in particular, you highlight rightly so that the resources five times larger than the current plan mine tons. How do you think about risk weight evaluations on future blockages and expansions around Carrapateena.

Yes. Hi, Paul. I’ll ask Warrick in a second to talk a little bit about how we run valuations, if you like, because we run a raft of scenarios that, that you’re absolutely right. And that’s one of the reasons we’ve put into the deck the mix of resource and reserve. It obviously costs an awful lot of money to convert resource to reserve when you’re 20 plus years out. So we take a prudent approach to conversion of resource to reserve drilling enough resource to move through the reasonable timeframe. We use consensus pricing or if you want to talk a bit about how we do that, the ranges we assess cases…

Add to that, Andrew. So Paul, I mean, we use a range of factors when we looking at different projects. So certainly we have our mid case, which is effectively our internal deck, but then we look at both up and – up size in terms of what the prospect could be. And we also look at variabilities within that. So it’s not just about commodity prices. It’s also about FX and other drivers particularly in terms of the cost factors. So we get a full range of understanding across there. The other thing that we do is we actually think about scenarios in terms of how those different assumptions might unfold and apply those and effect with a probability wide is assessment of our projects in terms of that. So both – picking up both those pluses and potential downs size and in terms of our consideration.

Okay. Thanks. It sounds like you’re not going to share any numbers, but specifically on upside, but Andrew, can I just maybe switch to West Musgrave, you might have been painted into a little bit of a corny here on this one, as far as approvals or concern and timing keen to hear your views on this. But you’ve allocate another $60 million for this project. It’s clearly tough to build things in WA at the moment and get the A team on contractors at the right price. But have you changed your approach based on the approach from BHP and what I mean by that is you’re saying that you’re looking at a larger scope now above 12 million tons. What are you suggesting there? And are you now in a situation where you sort of have to approve this project in the second half?

Look, I’m sure, the answer is no, we’ve not changed our approach on West Musgrave. So we are working to finalize the scope of the project, which is from a technical perspective is almost done. As I’ve mentioned before, we’re just working through the commercial packaging of the project working with key partners and suppliers. The last thing that we are working on is the land access grant with owners. So we’ve spent the last five years, six years building a relationship with the traditional owners of the land. They are very supportive of this project. It is the first mine that they’ve got on their land. So, we’re taking a cautious approach with them to ensure they know exactly what we are going to be constructing if or when this project gets approved.

We’ve now got all of the state and federal approvals to go ahead and build the project. So, we’re right at the last pieces, if you like, but our approach on the project hasn’t changed. The project in my view is getting stronger, not weaker. The market is getting much stronger for nickel. It’s getting stronger for copper. And we’re seeing a lot of the end users. So electric vehicle manufacturers – manufacturing manufacturers, starting to come up the supply chain to secure commodities for their supply chain. So, no, we haven’t changed our approach still on track for a FID in the second half of this year.

And our next question comes from the line of Levi Spry with UBS. Your line is open. Please go ahead.

Hello. Good morning, Andrew and team. Thanks for the call. Can I just follow up on the West Musgrave, so exactly what is the increased budget being spent on?

So, what we’ve allocated as of today is a $60 million for securing long lead items, build slots and the like for the project. So, we can maintain schedule and budget just while we wrap up the scope of the project, Levi. We’ve, and I should probably say one other thing that sort of Paul raised, I probably didn’t answer that well is, we’ve been working with key suppliers on West Musgrave for a number of years now. So, if I work through the top three and the key ones with Lucia on the mills, we have a very good working relationship with them. They are very keen to see these vertical role mills used in a hard rock mining environment. And I’m very comfortable and confident with the partnership we’ve got there. So, I don’t think that is necessarily at risk if you like, because of the macro environment.

Secondly, all of our land sculpting work and our civils work we are using exact contracting. We have built a longstanding relationship with exact here in South Australia. They built our roads, they built our tailings dam. There are a family owned business with nearly all long-term employees. So again, I don’t feel like we’re exposed on that package of work.

And then thirdly, we are using GR Engineering who – we’ve had involved in the design and scoping of this project for a number of years. And similar to exact there are a company that have got long-term standing employees and in a stable environment. So, I think the principle packages behind this project are actually in very good shape if or when we’re ready to pull a trigger on the project.

Excellent. Yes. And thanks for the extra color. Maybe just moving more to the update at Carrapateena. So, you mentioned the improvements you’ve had operationally and also that you’re gaining confidence in the breakthrough timing around the breakthrough. Can you just talk to those two items in terms of the de-risking events that they both are, I guess can you share some numbers around the improvements operationally and maybe the development angle and also what are the – what does the breakthrough mean? Does it mean you can pull faster and get grade? If yes, there was lots of questions in there, maybe.

Yes. Let me provide an overarching summary if you like, like on hand, and Matt provide some detail. As we said out this was last year, I think we said, this year, the two critical aspects for Carrapateena to get the cave broken through to service and to get the second crushing – crusher built. So both of those are critical activities to allow the production Carrapateenato be optimized for throughput rate effectively. Very pleasingly the cave we’re now starting to see some surface depression, if you like. So, we are starting to see some surface expression. You want to talk a bit about what you’re doing the improvement projects? What you’re seeing with rates and mining rates like that [ph].

Yes, yes, no problem. So, I think, yes, firstly, we are very positive and encouraged by the cave growth progression, particularly over the last four weeks to six weeks. And we see it as a, really as a de-risking, de-constraining opportunity or moments for the mine. We’ve been working on a series of improvement activities over a number of months now, and we shared that at our quarterly results. We’re seeing really stable performance now around our critical development activities, which relate to those priorities that Andrew just mentioned. We’re seeing improvement across the board also now in some of our operate – underlying production operating activities, drove point availability, equipment availability, and utilization and so on. So, we’re feeling increasingly confident about the performance at Carrapateena.

That’s obviously really important Levi, because when once the cave breaks through, we can actually optimize the mine for production as opposed to cave propagation, which is very frustrating. So the quicker breaks through the better off will be there.

Yep. And the sneaky one. So if you can see it on the surface, so, I imagine that that’s a matter of weeks.

I’m not going to give you a date, because I think that would come back to haunt me, but yes, having surface expression and seismic activity now from the top of the cave through the surface is very encouraging.

Our next question comes to the line of Mitch Ryan with Jefferies. Your line is open. Please go ahead.

Good morning, Andrew and team. Thank you for taking the questions this morning. My first one is, I’m just trying to understand to reconcile comments that, that you made in the press in late July, Andrew of investigating delay options for West Musgrave. With the positive view that you’re putting out today on the asset, I guess, other than the bid from BHP, what’s changed?

I don’t think anything’s changed. So, I think if you go back, I first made comments about investigating delay options at West Musgrave about it’d be close on a year ago now, I think and if you recall that fund, the West Australian border was closed and you literally could not move people backwards was between West Australia, South Australia or anywhere else in the world. Inflation was very difficult to predict COVID was rampant. The conditions that we were in when we were talking about investigating delay options. Clearly since the start of this year those conditions have changed. I would also assert that we’re now starting to see reversal of escalation trends in some areas we’re seeing pricing come – starting to come down on some of the key inputs, which is, which are key things we would like to see such that if, and when we make a financial investment decision, we are confident that we can deliver it on time and on budget. So I would assert that this is not a new thing at all. Whilst we’ve been investigating a variety of options, they have been entirely dependent on the environment of operating and that’s becoming more and more favorable.

Okay, thank you. And my second question in sort of pivoting in the opposite direction. If we look at Slide 9 in the strategy presentation, you call that an upside copper price of US$4.40 a pound. In that sort of environment, if that played out, what projects could you or would you look to accelerate?

Yes, I think Slide 9 is the CRU base. Yes. So the pricing slide in there is CRU’s scenario that they publish. I’m not sure we would necessarily accelerate or change anything we are doing. We are moving our projects as fast as we can to a decision point. Our projects – all of the projects that we work on are bottom half cost producers anyway, so they’re highly resilient. They’re not price dependent. I would assert the impact would be on margin, earnings and returns to shareholders, not necessarily anything different that we would actually do in the project. And if a project is price dependent and we discovered that that’s the case, we’ll exit the project before we would develop it.

Great. Thank you very much. Really appreciate the color guys. Thank you.

Thank you. And our next question comes from the line of Kaan Peker with RBC Capital Markets. Your line is open. Please go ahead.

Hi, Andrew, Warrick and team. Just turning to the strategy document. It suggests that there’s long term and regional potential and some of these options that have been considered, maybe if you can provide some detail around when studies or updates will be given on the Fremantle Doctor block cave on West Musgrave, One Tree Hill and Yappsu, yes, if there’s any sort of timing or indication of project studies on those three or four projects? Thanks.

Okay. [Indiscernible] questions. So I’m trying to keep my answer fairly short. So firstly, starting at Carrapateena, our primary focus of course, is getting the sub-level cave optimized, which Matt’s talked about already. Then it’s on the transition to the block cave, which gets 12 million tons per year. That is a critical enabler opening up the Carrapateena Province. Once we’ve got a block cave operating at 12 million tons per year, that then enables us to potentially develop block cave two, three on the Carrapateena ore body and start stepping out to the Saddle and Fremantle Doctor. So they are consequences of – positive consequences of us getting the 12 million tons block cave up and running at Carrapateena. So I think we need to know that they are there. I think they’re valuable. They are exploitable as our scoping study that we published a few years ago now shows that our primary focus is on getting the block cave transition done smoothly and as quickly as we possibly can, that’s the primary focus at Carrapateena.

If I go to Prominent Hill, half of Prominent Hill mineral resource, it’s still outside our reserve, outside our mining inventory and it’s open in multiple directions. But Prominent Hill’s mine life is already 16 years now, I think thereabouts. So we are working heavily on the Papa and Walawuru areas, which are shallow deposits, which will allow us to potentially put separate trucking circuits on and mine these in addition to the 6 million ton and to 6.5 million ton from shaft. So they are about much shorter-term cash flow if you like starting hopefully in the near turn. We will turn our attention to the larger, deeper resource in future years, but it’s valuable. And we think it’s valuable because the historical resource to reserve conversion of Prominent Hill is one to one. So I suspect much of that resource will convert to reserve in time.

At West Musgrave, as you know, our primary focus has been on Nebo and Babel to demonstrate that an investment in the base case is justifiable. We still have circuit sitting there as Matt alluded to earlier. That’s not in our base case, but I think it’s 10 kilometers from Nebo and Babel. So certainly within trucking distance, the grades just over 0.6%. I would assert anywhere else that would already be a mine. So I suspect it will end time convert and it’s valuable, but it’s just not now base case.

And as you pointed out, there are drill intersections around Nebo and Babel that have ore grade with nickel intersections in that we just haven’t followed up. We certainly will in time, but our primary focus is getting the base case up and running. We really don’t want to distract our teams from things that potentially could create value in need with time when we really need to get the base case up and running. So look, that’s quick walk through those three, I could talk about this for a long time though because there is more upside on each of the – at each of these and then the other assets.

Sure. I think also the point was isn’t the current issue actually executing on growth projects. And I think most of the strategy document is around long-term growth that isn’t being priced in. And I suppose the confidence then around Carrapateena being back on track in FY 2023 or CY 2023, sorry, I suppose it goes to Levi’s question.

Yes. Absolutely. Short-term delivery is critical. I would assert that over the past eight or so years, we’ve demonstrated that we can operate reliably. We’ve delivered apart from the start of this year where we’ve had some one off operating challenges. We’ve been very predictable and reliable in our returns to be able to build Carrapateena and expand Prominent Hill and get West Musgrave up all from operating cash flow without needing debt, without needing to go back to the market. So I think that’s just evidence that our operating discipline is certainly there. And I’m very pleased to see the operating discipline started to come back into those assets as Matt has already talked through. Once the cave breakthrough Carrapateena, it will be a critical enabler for us to be able to optimize production as opposed to optimizing cave development. So that is very important for us.

Sure. Just second question, if that’s okay. Just want to circle back on something that Matt mentioned, I think you said always seeking to develop mining provinces near existing infrastructure. And looking at Slide 50, looks like there’s exploration plans or activity around Brazil, Australia and there’s also Sweden. Maybe if you can talk about Sweden, it seems like it’s close Boliden smelter and couple of the mines around there?

It is. Sweden, we’ve got, I think five exploration projects in Sweden. They are centered around some very highly prospective ISCG terrains with and there are existing mines in those belt. We have got very encouraging results from Sweden. We haven’t spoken a lot about that today because it still is an exploration program per se, that we are using that exploration program to learn how to work in Sweden and gain experience in that operating environment. We are staying in Sweden because it’s actually proving to be a very mining friendly jurisdiction. And we see a lot of upside in those exploration projects, which are right. There is some very good infrastructure in that area. We have a very good relationship with Leveäniemi [ph] we've got a lot of respect for them. They are technically incredibly innovative. They work very well with partners, which we love doing so, I'm very hopeful for that district if you like.

Sure. Thank you. I'll pass it on.

Thank you. And our next question comes from the line of Matt Greene with Credit Suisse. Your line is open. Please go ahead.

Hi, good morning Andrew and team. I sort of start with the Prominent Hill, just a 10 million tonne option that you've highlighted today. I guess we just take a step back and look at the medium term strategy around Prom Hill, now, you be de-rating the mill down to 6 million tonne supported by the shaft haulage. Now if you are able to develop those shallow mining areas and I appreciate you are still doing the work here, but what does this potentially look like? Is it fall down to the six with the option of putting it back up to the 10 million tonne level? Or are you looking to potentially fast track some of this and perhaps push out that that de-rating 6 million tonne; any sort of color that will be helpful? Thanks.

Yes. Matt, so – as you said we've got a 10 million tonne of copper at Prominent Hill. The left mill is still running at full capacity. So it's taking our – or that we mine from underground currently, and we're supplementing that underground or we stockpiled or to keep the mill at 10 million tonnes per year. The shaft is rated at 6.5 million tonnes per year. Our current underground mine plan is at 6 million tonnes per year, but we are rebuilding that mine plan to aim to exploit the full 6.5 million tonnes per year. We are also in parallel working on Papa and Walawuru to see how much we can extract from those in addition to the 6.5 that will take it somewhere hopefully or going well north of that number.

But there are still additional opportunities in that. So philosophically, we are aiming to keep that 10 million tonne per year processing plan full. There is plenty of resource and reserve at Prominent Hill, that's not the challenge. The challenge is extraction. So the shaft I think is rated at 70% utilization. So there's opportunity potentially in that. There are other shallow mineralized zones around Prominent Hill that we in time will get to. But our philosophy if we can to fully utilize a mill, we don't want to see them empty.

That's great. That's helpful. Thanks, Andrew. And I guess just on the approach by BHP, I imagine this is been quite disruptive on several fronts. But I just wanted to ask what's the feedback been from your traditional owners at West Musgrave you paralyzed today. You've worked hard over the years on that relationship, so have they voiced any concern given there's now I guess a risk around the change in ownership?

Look the approach hasn't been that disruptive. To increase an approach from BHP was an offer and the Board considered the approach and we unanimously agreed that significantly undervalue the companies. We rejected it. I meet with our shareholders regularly and I've certainly had since then, and our shareholders have been supported – unanimously supported our rejection of the offer, and they agreed that it undervalued our value of this company. So as far as we are concerned we are getting on with creating value for our stakeholders. That's what we're focused on and I think that's what we're good at.

Thank you. And our next question comes from the line of Trent Allen with CLSA. Your line is open. Please go ahead.

Hi, thanks guys. Just again on the – on the BHP offer. I know you've knocked it back at $25 a share, which is a – which we agree with. Now a few years ago, when you were talking about funding Carrapateena at a larger scale, and now maybe West Musgrave, you were thinking about joint venture partners and sort of asset based transactions. You're still open to those ideas. For example, you might sell part of one of the projects to someone who would want to kick-in some funding exchange for share of the ownership and sort of come on the journey with you rather than offering to take you out altogether? Thanks.

Yes. Good morning, Trent. Look as a company we – one of our strategic elements is around partnerships. So we work in partnership on many things including BHP in some cases. We're working together on a Northern pipeline to supply water into south – north of South Australia. We will always listen to people who want to be part of these assets. We're certainly getting a lot of inbounds on West Musgrave because of the nickel and unique location of that asset. So we're certainly always open to partnership opportunities like that.

Thanks. I've got a very specific one just on [indiscernible], does the change of ownership deal affect the JV there?

[indiscernible] just change of ownership, the joint venture there. Sure, it's still going to hurt.

Yes. [indiscernible] then we will obviously have eight-month period to assess the location. And obviously then we'll decide if we want to take it up or not take it up at that point in time.

Yes. So in short, no, I don't think the changes in control is, a topic here and [indiscernible] have been very supportive of the process, still going to a shareholder vote on 31.

Thank you. [Operator Instructions] Our next question comes from the line of Lyndon Fagan with JP Morgan. Your line is open. Please go ahead.

Thanks very much. Back again on the BHP offer, I'm just interested in the decision not to engage with BHP. I'm just wondering whether you've got any concern about the downside to the share price, if the bid gets pulled. And I guess in relation to the value, I mean, how do you see it? Are we a couple of ballparks away? Thanks.

Hi, Lyndon. Look as I answered the question previously, I think with one of the other questions the Board was unanimous in the offer submitted to us significantly undervalued the company. OZ Minerals has traded above that offer price for almost half of the last 12 months. So I think if you introduce a big wealth for the last 12 months, it's like 7% or thereabouts. So I think it's fairly easy to see and understand that that bid – that offer came at a very opportunistic time when copper prices had dropped off from 10,000 down to just under 8,000. Our share price went with it for a couple of months. So quite easy to see that in a sector that is rapidly growing and every commentator is saying that it's going to have supply and demand gaps in the not too distant future, that we have got an awful lot more value to create in this company than selling at $25 per share.

Thanks, Andrew. I guess the other question is a, it's a great pack outlining the growth potential in the business, but I guess there's a couple of things missing for us to really put it together. There's some big capital items, the Carrapateena block cave, the West Musgrave CapEx, both of which I assume have had significant inflation. I'm wondering whether you can talk about that and also the balance sheet. If we're sticking to the one and a half times net debt on EBITDA, I'm just interested in picking up on the comments that you don't need additional funding to go ahead with West Musgrave and everything else in that pack and maintain that ratio. Thanks.

Yes. Sure. So let me talk about a couple things, where I can make some comments on the balance sheet. All of the long-term capital requirements for these projects we've put into the market. So we can get one of our teams to take you through the various capital forecast that each of the projects is if you'd like, very happy to do that for you. And there has been, I think as you rightly point out inflation over the last year or two in our markets that need will be reflected in projects and input costs. We can still comfortably say, if you put West Musgrave aside for a second, that we can fund all of the brownfield expansions that are in our current pipeline and continue to pay dividends at our sustainable pace from our operating cash flow. West Musgrave requires a funding solution, which is exactly what we are working on at the moment.

And I'll get where I talk about our balance sheet in a minute. I should also point out though that not all of the capital costs are necessarily heading upwards. And let me give you one example. At Carrapateena, when we released the block cave expansion study, the surface infrastructure required an 8 million ton per annum plant extension to take and then 4 million ton plants up to 12 million tons for the block cave. Our current plant is, has demonstrated that it can do well over five, and we've got a pathway to six through fairly small incremental debottlenecking.

So that's an example where we've improved the existing facility, which is going to remove the capital from the block cave expansion capital, so not all of these numbers are necessarily heading upwards if you like, as we continue to debottleneck our current asset. Ranson the balance sheet?

Yes. So Lyndon, yes the first thing I'd say is we didn't say that we would necessarily say under 1.5, we said 1.5 is our capital management framework.

And then we would be comfortable stepping outside of that if we had a pathway to come back down fairly quickly. So we continue to have a disciplined approach for our capital allocation and continue to work through how we really maximize the use of our balance sheet. Obviously our current low level of debt provides us with, a number of options where we're starting. And I think one of the really positive aspects of the growth pipeline that we're currently working on is that rapid uplifting cash generation, post 2027, 2028 with the progression of Carrapateena block cave and the additional output there. And then hopefully West Musgrave coming on there at the same time. So I think it really does provide us with number of funding options. And our pipeline is a pipeline.

It's not about doing, saying that we're going to do all of it. It's about, creating the value out of that pipeline and then being able to sequence it in a way that actually works for us. And I think, so that's sort of part of the way in which we think about it. And I'll just say, trust me, I really haven't been short of funding offers in terms of our projects. So yes, I mean, as Andrews said we put projects, that's certainly the capital there.

And is equity part of the funding considerations for West Musgrave?

We don't exclude anything in terms of our thinking. We’re really thinking about, what's in the best interest of developing the project and how we create value for our shareholders. So the whole suite of options is open with any of our projects really, the same as any minor, not just stuff…

Thanks a lot, guys. Really appreciate the color there.

Our next question comes from the line of Michael Evans with Acova Capital. Your line is open. Please go ahead.

Good morning guys. Thanks very much. In fact, Lyndon asked the questions I wanted to ask with regards to the balance sheet and how you thought about funding all this. So I take it that that 1.5 net debt-to-EBITDA is that your primary guideline? I'm sure you look at a number of different metrics, but is that the one we should think about the most in terms of looking at the funding capability and sort of managing your downside or do you look at gearing ratios as well?

Yes, we do. We look at the, the suite Michael, so interest cover obviously free cash flows to EBITDA sorry, free cash flow to debt gearing leverage. Yes, there are all sort of factors within our broad attention.

And just while I've got you on West Musgrave, is that you talk about sort of funding that you think about the funding for that as a separate facility, then your sort of corporate facility that you existing sort of 700 million, would it be a different basket of funding given it's a greenfield, a new project?

Yes, our corporate facility, you said the working capital effectively liquidity buffer facility obviously sort of plays in a little bit, but we would look also, we certainly think about longer term debt arrangements, if depending on the – ultimate profile of the spend and the project. So whether or not that’s a five year facility. So we've certainly got that in place over most of the, the required funding period, but we certainly will just compliment that. We still, we're not really looking at things like project financing. We prefer to again, use the strength of our balance sheet about how we think about some of those growth – facilities.

Okay. That's great. Thanks guys.

Thank you. And I'm showing no further questions at this time. And I would like to turn the conference back over to Andrew Cole for any further remarks.

Great. Thank you very much operator and thank you everybody for dialing in as usual. If you have any questions you'd like to walk through, please give us a call and we'll organize the right.

This concludes today's conference call. Thank you for participating. You may now disconnect.