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Edited Transcript of AYA.AX earnings conference call or presentation 29-Oct-19 10:59am GMT

Q1 2020 New Century Resources Ltd Earnings Call

Nov 1, 2019 (Thomson StreetEvents) -- Edited Transcript of New Century Resources Ltd earnings conference call or presentation Tuesday, October 29, 2019 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Barry Harris

New Century Resources Limited - COO & Site Senior Executive

* Patrick Walta

New Century Resources Limited - MD & Director

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Conference Call Participants

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* Michael Slifirski

Crédit Suisse AG, Research Division - MD

* Peter Arden

Bell Potter Securities Limited, Research Division - Resources Analyst

* Stuart Foster

Foster Stockbroking Pty Ltd., Research Division - Executive Chairman & CEO

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Presentation

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Operator [1]

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Thank you for standing by, and welcome to the New Century Resources Limited September 2019 Quarterly Report. (Operator Instructions)

I'd now like to hand the conference over to Mr. Patrick Walta, Managing Director. Please go ahead.

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Patrick Walta, New Century Resources Limited - MD & Director [2]

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Thanks, Jessie, and welcome, everyone. I appreciate you taking the time out of your busy schedules to listen to New Century's September quarter conference call relating to our activities and financial reports there. I'm very pleased to be able to present the September quarterly report. As you would have seen from the data that we released, it's very much been a turnaround quarter for the business, one that we achieved a number of milestones that we set out to do and have set us up very well for the future in terms of the expansion plans going forward.

So today, I'll take some time and I'll briefly summarize the overall quarter, and then we'll go through the entire operational performance, talking about hydro mining, the plant itself, shipping and sales and then, obviously, importantly, cash flow management as well.

So from an overall perspective, what's pleasing is we released September quarter guidance, and we hit it. We hit midrange September quarter guidance, achieving 26,000 -- circa over 26,000 tonnes of zinc metal, and our average C1 cost for midrange as well at $0.99 a pound. What's underlying that is the significant improvement in the performance during the quarter, and that's really highlighted by our exit rate, which is a function of the first of 3 major upgrades that we achieved inside the plant and then we've got plan to achieve over the FY '20 financial year. So 26,000 tonnes of metal, 10,000 tonnes of that was in September, so it was a significant increase in -- or a significant contribution, and our exit rate was very strong there.

We maintained a unique competitive advantage in that we have a high percentage fixed cost base, around 70% of our costs are fixed. Therefore, as we keep increasing our metal production, we keep lowering our costs. So as a result of that, our September C1s were $0.90 a pound. Inside that C1 is a 10-year high treatment charge, so we're still battling through the economic climate there around TCs, and I'll go into those, where we think they're going in the medium term. But when you take that C1, and we also released today effectively our all-in costs totaling $1.02 for September, we actually generated our first month of positive cash flow, which is a pleasing development for the business, particularly given the market in September. It was probably one of the worst markets overall in about sort of 10 to 12 years given a relatively low zinc price of around $1.05. But when you add in the 10-year high treatment charges, the take-home for the miner is -- has been very difficult. We've seen a turnaround in the last 6 weeks in terms of the zinc price as well, it's up around $1.16 at the moment, which is pleasing to see, and I'll go through what that means for our operations going forward as well.

We also expect continued further improvements from the operations there. We have our December quarter guidance out, and we're maintaining that December quarter guidance, and that's effectively -- it incorporates the next leg up, so looking at 27,000 to 33,000 tonnes of zinc metal and a C1 cost of $0.87 to $0.98, noting that we're already at $0.90 in terms of that September performance, so -- which is pleasing.

I'll go into some detail now in each section of the operations itself, and we'll start at the processing plant itself. So we talked about the metal production there, 2 crucial components to actually producing metal. Obviously, it's the mining rate and also the recovery. So they're essentially the 2 biggest functions there. It was pleasing that we're able to achieve a material gain in our recoveries over the quarter. So effectively, up -- the month of September averaged 52%, but also it's the consistency of the results, which is really important. So you see in the graph in Figure 6, which really tells the tale of the business, it's effectively the raw data of the business. We do go to some lengths to release as much data as we possibly can, and that really shows.

You can see the graph, the blue line, the 7-day moving average of recoveries there. The band of those gray dots which is the daily dot -- the daily recovery dot blot is tightening and continuing to tighten. So we've seen that consistent recovery performance above the 50% mark there, and it's really pleasing to see that continue into October as well. Also of importance is the consistency in the hydro mining as well. So we go through our -- since we started operations 12 months ago, we were up and down like a yo-yo a bit with hydro mining, dealing with various small mechanical issues and other bits of downtime, teething issues there. But those issues really, over the last couple of months, have started to line themselves out, and that's quite telling in the graph as well. So we have good tight control in our hydro mining rate and what it's delivering into the plant, which flows into the stability of the processing and improving recoveries.

We've also been, of late, focused on ramping up that mining rate. So ramping it up to a target of 9 million tonnes per annum, and we've been achieving that and also maintaining recoveries during that process there. It's also important to understand how the plant's operating right now with the amount of plant we have online. So at the moment, we're running the rougher scavenger circuit at circa [8 million tonne per annum] rate. But we really only have 1 train of that circuit online, discounting the fact we've just brought on the second scavenger circuit. So on a normalized environment, we're actually running up towards 18 million tonne per annum mining rate. As we expand to 12 million tonnes per annum, we'll actually be bringing on the full second train. So 9 million tonnes per annum through 1 train becomes 12 million tonnes per annum through 2 trains.

Now what that actually does, it allows us to not only increase mining rate but also improve recoveries. So we'll be actually increasing residence time through the rougher scavenger circuit and also -- but also increasing tonnes because we're bringing on more volume. Every time we bring on additional volume, we get improvements in recovery, and it allows an improvement in throughput as well. So we look forward to continuing the ramp-up process and seeing the benefits of not only the new scavengers, which have literally just come online, and we'll see the effects of those throughout the December quarter. But also into the March quarter, we'll also see the effects of the new roughers to come on as well, which is great to see.

As discussed from a hydraulic mining perspective, grades continue to reconcile strongly. As we expected, we maintained a 100% proved ore reserve, so we've always had a high degree of confidence over the ore body in itself, and that's showing up now. We've had 4 quarters, pretty much to 2 decimal places, averaging the same grade, so that's expected to continue over time. And as I said, the hydro mining rate is really starting to get a lot more consistent as well.

Interesting to note from hydro mining, we've had a number of what are, from a cost perspective, relatively minor upgrades down at hydro mining, so some new nozzle designs put on to hydro miners and a slight variation in the way that we mine the ore body to improve the efficiency. And what we're seeing there is that while we initially thought we had a capacity of around 3 million tonnes per annum per cannon, we think it's slightly more than that, probably a total -- to a total of around up to 10 million tonnes per annum through 3 cannons. Now that doesn't mean we'll go to 10 million tonnes tomorrow, we still have to have the plant capacity to do that. And at the moment, we are pushing the limits of that plant capacity given we only have 1 rougher scavenger train online.

But what's pleasing is that it's clearly shown that we will bring a fourth mining cannon on, and there will be excess capacity to run at that 12 million tonne per annum mining rate down at hydro mining, and there will also be excess capacity in the plant to run at that 12 million tonne per annum rate. I'm certainly not flagging that we plan to be going higher than 12 million tonne per annum. It's nice to know that we do not have those constraints in terms of a physical throughput through the entire logistics chain. We do not have a constraint in getting to 12 million tonne per annum, so very pleasing to see. We've mined approximately 8% of our tailings ore reserve to date, so we're really -- again, just really getting excited from that process there.

From a shipping and sales perspective there, we continue to ship in line with production rates, meeting a monthly shipping requirement there. We now completed 17 shipments to date through 7 different smelters across China, Europe and Australia. That will continue to grow obviously. Importantly also, the quality of the concentrate that we're shipping continues to improve. So I mean going back to January -- December and January when we were really kicking things off, we were producing a sort of 47-odd percent product. As we brought on the cleaner circuit upgrades, that continued to improve. And also as we bring on additional upgrades, that would improve.

So we're really running at about a 49.5% to 50% zinc product at the moment with the knowledge that we actually want to get that down further because we know that it improves recovery. For every 1% of grade, you can typically get about 1.5% to 2% of recovery. So we have -- we're fully able to sell without penalty products above 48% zinc, so there's an opportunity there to actually improve recovery as the circuit balances and as we actually optimize the performance there. So right now, we're producing a very good quality product. A 49% or 50% grade is in line or better than majority of the current top 10 zinc producers, and so we should see support for our product going forward in the marketplace as well.

So that concludes the performance side of the operations as well. I'll flick across to the cash flow report now, and we'll go into some of the details around that. So overall, despite a 28% increase in metal production, we suffered another decline in the macro environment in zinc. So you might remember, last quarter, the zinc price declined, I think, to the tune of about 18% and -- sorry, so the June quarter. And in the September quarter, it continued to drop -- to decline to the tune of about 15% as well. So as a result, even though we're increasing our metal production, we're actually receiving the same or less in terms of the total quarterly cash flow from those sales.

Also, what gets affected with this is your -- is the value of your shipments on the water, and we have some commentary in the quarter about that. So for example, we may ship something in the month of May, and we'll get paid 90% of that shipment at a certain zinc price, let's say it's $1.20. But then that ship will be delivered to China, and then the final invoice will be paid 1 or 2 months after the month of arrival, so 1 or 2 number, depending on what the contract is. But the entire invoice gets repriced, it's called a QP, the entire invoice gets repriced at that final price. So as the zinc price goes down, the value of shipments that we still have 10% of that value outstanding have actually dropped. And we suffered as a result of that this quarter.

I do note though that the reverse effect -- because when the zinc price increases, so we have some substantial tonnage on the water at the moment that is effectively priced at around $1.03 to $1.05. And obviously, with the zinc price -- recent zinc price increase of up towards $1.15 to $1.17 provides a very, very good opportunity for us in terms of an uplift from the mark-to-market as it's called there. So we should see that, hopefully, come through over the next 1 to 2 quarters, assuming the zinc price stays where it is or continues to improve, so that's quite good.

We continue to spend capital in terms of expansion and sustaining capital. So we have a remaining budget of $27 million. And what's pleasing there is we're now running out of things to spend money on. We only have so much plant that needs to be refurbished. And so while we're continuing that on budget and on schedule, that will be delivered effectively by the end of this financial year or just by the end of this financial year. And as a result of that, operational cash flow will start to then transfer into free cash flow.

We're still at a robust financial position, so we have -- we reported we have $53 million in cash and receivables made up of $45 million in cash. And we had, as of 30 June, $8 million effectively in short-term receivables, you might say so, invoices yet to be paid and the value of fully contracted concentrates sitting in the shed awaiting its shipment as well. So $53 million cash in the bank, $27 million left to spend on expansion and sustaining capital for the rest of the financial year and operations that are starting to churn a few dollars at $1.05 zinc price or lower. So we feel we're in a very good position there. Now all of that also has to be accompanied by improving operational performance. So every quarter, we've increased our metal production. And every quarter, we've driven down our costs, and we fully expect that to continue as well. So it sets the business up to be in quite a good position.

We still maintain our Varde debt facility, so $60 million senior secured debt facility. We did originally have a $40 million unsecured facility available, which is subject to some conditions. That facility has now expired. The reality is that with the changes in the zinc market condition, that was an expensive facility that we didn't feel that we would need to use. With the zinc price drop, it became apparent that we may need to use that. However, it's quite expensive in terms of the headline rate plus the silver royalty in there. So given the market conditions that were apparent and still are apparent, it didn't seem prudent financially to take on more and more debt and high expensive debt, hence, the execution of the capital raise to enable us to deliver on our ramp-up.

Now we are in very active discussions with both Varde and potentially other lenders around the expansion of that existing $100 million facility, which really puts us in a good stead. So we'll expand that much lower rate facility, and that will put us in good stead to have a nice working capital backstop that we can continue to execute the ramp-up process really under any price environment. So we're not assuming that the zinc price -- the recent zinc price uplift is just going to stay there. We have to assume that it could go down again. And as a result of that, we need to make sure that we're fully armed in terms of working capital available to execute the ramp-up because, ultimately, we know that as we go to 12 million tonnes per annum and we continue to optimize our recovery performance, we're going to be a sub-$0.70 a pound producer under any TC modeling. So obviously, in your C1s, you have treatment charges, and so they will fluctuate.

On an all-in cost basis, we see that as a strong opportunity under any treatment charge price environment. And we also know that if zinc prices were to get as low as $0.70 a pound, you would have 2/3 of the entire global zinc market underwater. So it's certainly not a sustainable position for the market to ever be in, and we're already seeing the zinc market respond to prices getting as low as $1. So we certainly don't see it going down to that level in the near future, but we want to make sure that our business is robust enough to be able to handle those sort of zinc prices as well. And we know that that's the process that we're executing over the next 6 to 9 months.

So overall, that's the bulk of the quarter there. Let me just cover off some of the other corporate activities. We also announced a royalty deferral program with the Queensland Government during the quarter, which was pleasing, and we're also deferring a private royalty at the moment to maintain cash position in the business as well. So everyone's very much focused now on continuing to execute the ramp-up, and we ultimately know that increases metal production, it also lowers costs, so we're getting an increasing margin on a larger amount of tonnage, and any improvements that we've seen in the zinc price are obviously -- we're going to be able to take advantage of that as well.

Thanks. That concludes the bulk of the quarterly financial and activities report. I can throw it over to some questions now, and I'll come back with some concluding remarks as well.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Michael Slifirski with Crédit Suisse.

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Michael Slifirski, Crédit Suisse AG, Research Division - MD [2]

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Congratulations, Pat and team. It's terrific to see all those milestones achieved. There were plenty of data initially, but one by one, you're ticking them off, so it's really, really very pleasing. Two quick questions. First of all, with respect to the approaching wet season, how do you think about the risk of sort of seasonality in your guidance? Does the wet season potentially impact you in any adverse way?

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Patrick Walta, New Century Resources Limited - MD & Director [3]

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Yes. Thanks, Mike. Good question. I've actually got our COO, Barry Harris, on the line. He can talk through some of the technical and operational initiatives that we're doing on site to mitigate that. I will flag though in terms of how we report guidance, for example, we actually take into account wet season in that time, so losing several days in the quarter -- an assumption of several days lost in the quarter, for downtime. However, we have a number of initiatives that we have conducted and are conducting to mitigate that effect.

Barry, are you available on the line to spend a couple minutes talking through those facilities?

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Barry Harris, New Century Resources Limited - COO & Site Senior Executive [4]

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Yes, I am Pat. With the guidance range that we put out, as Pat alluded to, we do factor in quite a number of days of downtime for wet weather, not that we're anticipating that to be the case because our whole mine design is set up such that the only water that actually ingresses the mining works is water that falls from directly above. We have put in trenching along the rest of the dam surface and along the back of the dam to take all water that falls on any of the rest of the catchment area, out and around to the decant at the bottom end of the dam and recapture that water in the evaporation dam to be reused in the mining operations after that.

The other thing that we've done this year, having learned some lessons last year, is we've actually set it up such that the slurry winning pumps can be lifted up on electric winches to the top of any water that does make its way down in the launder to the final pontoon area, and we've put in a couple of key pieces such that we can pump that 700 liters a second off the top of that, straight directly into the evap dam. So lift it up and just take the water out of the workings. And the other thing we've also done is we brought in another set of diesel pumps, which we've put into the pontoon area as well, which can pump another 1,000 liters a second ex pit. So collectively, we can pump ex pit 1,700 liters per second, which is a substantial amount of water out of the actual workings, so that will really limit that downtime that we have from the operation.

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Michael Slifirski, Crédit Suisse AG, Research Division - MD [5]

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Terrific, Barry. A second question then with respect to the environmental bonding. Is there any sort of development there? I think you talked about perhaps a potential change in structure. I'm interested whether anything's changed there? And with the progress of mining, whether that 190 -- I forgot, was it $192 million, $193 million, whether that's still the number to be thinking about.

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Patrick Walta, New Century Resources Limited - MD & Director [6]

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Yes, thanks, Mike. It's another good question. There's no doubt that from a physical operations perspective, we are reducing the surface area of the disturbance on the site. So we're not only reducing the amount of water that's in the evap dam, so we'd get that down to a nice low level and then we just have recycling coming back in from the processing plant and we utilize that down there, but we're also physically removing tailings, so you can see it in the pictures, it's quite evident that tailings are physically being moved and put into the pit. So that surface area of disturbance is progressively reducing as per our plan. Now you may recall that we -- the original deal that we did, to acquire the project of MMG. MMG has kept the environmental bond in place, and it is -- it's valued around $193 million at the moment, so that's the bonding requirement there. Our activity has physically reduced that number, but MMG has kept that bond in place.

Around 6 months ago, the Queensland Government changed legislation around how it deals with financial assurance bonds. And so companies like ourselves, for example, or the size of us, been moved from requiring a cash-backed bond to actually getting their own surety bonds in place. So we're going through the motions now to potentially replace MMG in the near term with our own surety bond, and that frees us up in a number of different ways to utilize our own cash flow for different purposes. So that will be a development that progresses over the next sort of 3 to 6 months, which should be great.

And also, the quantum of the financial assurance will decrease. We have lodged a new application with the Department of Environment and Science around a revised number, and that's what -- something we look to do either annually or once in every 1 to 2 years, as part of the rehabilitation process. So there's nothing official that's been developed out of that. But we certainly see that, over time, whether it's in a week, a month, a year, the financial assurance number will continue to decrease because we are physically reducing the surface area of disturbance on the site. And we look forward to reporting that progressive reduction over the year, over the coming months as well.

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Michael Slifirski, Crédit Suisse AG, Research Division - MD [7]

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Maybe one last one, with respect to QPs, it's cost you a bit in the September quarter. But you're indicating that in the current quarter, where zinc spot prices are, there's potential for a positive QP adjustment. How would we model it? How -- I think you talked about sort of 2 to 3 months' settlement period, prices going from $1 or $1.02 or something to where the spot is now. So how do we estimate what you got exposed to settlement at any one time?

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Patrick Walta, New Century Resources Limited - MD & Director [8]

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Well, good question. Each contract is slightly different, so they're not all 1 number, 2 number or anything like that. We have a number of offtake partners, we do both spot contracts and long-term contracts, so they all have slightly different terms. And also the shipping distances are fundamentally longer as well. So shipping something to Europe takes a lot longer than to Hobart or to China. So it's difficult for us to provide, I guess, an accurate forecast consistently of exactly when those will -- so when those numbers come in and the value of them because you're effectively trying to predict the zinc price somewhere between 1 and 5 months' out from where you currently are.

Probably the best way to do it is to think about a concept that 10% of the value of our production is outstanding, and you can take the average price of that production in a quarter so -- and versus the zinc price. So for example, zinc price was $1.05 in the September quarter, and we produced around, I think, over 50,000 tonnes of concentrate. So effectively, you still have 10% of that value outstanding. We actually have, I think, some that were in the previous quarter outstanding, and that price has now effectively moved from what would be $1.03 to $1.05 to $1.15 to $1.16. So you'd not only get a mark-to-market improvement on the remaining 10% of value of your outstanding shipments, you'll also get the delta which are on the remaining 90% as well. So if the whole shipment -- or that whole 90% were sold at $1.03, you're going to get a top-up from $1.03 to whatever that final zinc price is.

So I apologize, I can't give you an accurate number, particularly until we're ramped up and fully at steady state and it becomes a lot easier to predict.

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Operator [9]

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(Operator Instructions) The next question comes from Stuart Foster with Foster Stockbroking.

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Stuart Foster, Foster Stockbroking Pty Ltd., Research Division - Executive Chairman & CEO [10]

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Just wanted to ask, on the -- what do you call it, the ship, the Wunma, on that 5 yearly survey, does that affect the shipments you can make?

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Patrick Walta, New Century Resources Limited - MD & Director [11]

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Thanks, Stuart. Yes, another -- a good question. It's -- short answer is yes, but the long answer is we also are able to manage around that. So the Wunma, every 5 years, will go off and be refurbished or surveyed to make it -- allowed to be a registered oceangoing vessel. So it just dropped in this year, and that's the way we do it. Now technically that means that the Wunma is unavailable for approximately a 3-month period. It will come back in, in late November, early December. It will be back, and we'll be using it.

However, since Century started back in 2000, there's been a ship-sharing agreement between Century and McArthur River. So Glencore owned the McArthur River mine. That had the Bing Bong Port, which is around 300 kilometers up the coast from Century's Karumba port facility, and McArthur River have what's known as a sister ship, which is the Aburri, which is a slightly smaller but effectively the same design as the Wunma. And so there's a ship-sharing agreement in place that, every 5 years, both the Wunma and the Aburri have to go in for refurbishment. And so for the period that the Wunma is in refurbishment, both companies share the Aburri. For the periods that the Aburri is in for refurbishment, both companies share the Wunma.

So there's been a little bit of tap dancing, so to speak, in that we effectively only get a ship for around half of every month at the moment. So we are able to manage our, I guess, the cash flow from shipments through holding certificates at the port facility as well. And then also when we have a ship available, whether it's the Aburri or the Wunma, we are shipping day and night effectively. We're running a very sort of aggressive shipping schedule there to make sure we get it out on the water. So probably one of the reasons why we still had some contracted and sold products sitting in the shed at the end of the quarter, but we simply just didn't have enough time during the quarter to get it all shipped out and captured on the quarterly reports there.

So that's a process that's just managed. And as I said, come the end of November, we get the Wunma back. The Aburri is already back. That's been refurbished. It's the Wunma that's been finalizing its refurbishment at the moment. So we'll see that we'll have a big shipping quarter in -- sorry, a big shipping month in December, and then going through into the new year, it will be smooth sailing, figuratively and literally.

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Stuart Foster, Foster Stockbroking Pty Ltd., Research Division - Executive Chairman & CEO [12]

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Right. Okay. And any refurbishment requirement on Wunma is that -- that's included in your sustaining CapEx budget?

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Patrick Walta, New Century Resources Limited - MD & Director [13]

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Yes, correct. So the sustaining CapEx budget this year is significantly higher than it will be annually. Typically, sustaining capital is -- the majority of it is around dredging of the river. So we dredge the Norman River every year for the Wunma to allow it to get through unencumbered. Otherwise, we'd have to run the tides and do things like that. But this year, when you include a larger-than-normal dredging program, if you remember, the big floods that occurred which knocked out the railway line in Northern Queensland earlier this year, while we didn't get affected, our construct pipeline was unaffected and our operations didn't stop, all of the silt from those -- from that big wet came through the Norman River. So we did some dredging in about July, August last year, and it effectively filled up pretty quickly and far more than it normally does. So we had to do a larger-than-normal dredging program this year. And then also you had the Wunma cost on top of that. So our sustaining capital budget was to the tune of around $14 million this year. And going forward, that will be closer to sort of $5 million to $6 million tops. We'll get through that as well. And obviously, you can see the expansion capital budget is very much one-off. It's associated with the refurbishment and expansion to 12 million tonnes.

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Stuart Foster, Foster Stockbroking Pty Ltd., Research Division - Executive Chairman & CEO [14]

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Yes. And on that expansion CapEx budget, should we expect most of that to be spent in sort of first half of 2020?

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Patrick Walta, New Century Resources Limited - MD & Director [15]

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So we've got effectively 3 more quarters in this financial year. Certainly, the physical works, we remain on schedule to deliver the ramp-up to 12 in March. So we turn on the second train of roughers in March in 2020. So the accrued amount of cash for it is effectively spent by around that time. The physical cash outflow is obviously 30, 60 days after that time. So it's certainly spread across the 3 quarters, probably weighted more towards the first 2 quarters than the final quarter though, it's remaining in this financial year.

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Operator [16]

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The next question comes from Peter Arden with Bell Potter Securities.

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Peter Arden, Bell Potter Securities Limited, Research Division - Resources Analyst [17]

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So well done on the production. I just noticed that in your deferral of royalties with the state government, there's some apparent commitment to increase or do more exploration or some aspect there. Are you able to explain how that works?

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Patrick Walta, New Century Resources Limited - MD & Director [18]

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Yes. Certainly, Pete. Thanks for the question. There's no, I guess, sort of legislative commitment to it. It's really recognition of continuing to leverage the core value proposition at Century, which is all this capital. So Queensland Government very much recognizes that the infrastructure at Century is strategically important for their agents. So not just the existing deposits, the mine site, the processing plant itself, but also the logistics chain. So the slurry pipeline still represents the only economic route for the transport of bulk concentrates in Far North Queensland and also the port facility and transshipment vessels.

So for us to continue the operations in that region provides an opportunity for development of further projects in that region. So the incentive around royalty deferral is very much also aligned with our strategy of continuing to maintain and increase the economic mine life of the Century operations there. So while there's no formal commitment, it's recognizing that we are committed to -- or leveraging that value proposition and continuing to generate earnings and extending the mine life from the assets.

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Peter Arden, Bell Potter Securities Limited, Research Division - Resources Analyst [19]

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Okay. So they're not looking for you to push a whole lot of buttons on exploration. They're happy to see what you're doing is heading in the right way.

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Patrick Walta, New Century Resources Limited - MD & Director [20]

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No. We're more pushing that imperative. But yes, just so we can continue to generate value.

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Operator [21]

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There are no further questions at this time. I'll now hand back to Mr. Walta for closing remarks.

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Patrick Walta, New Century Resources Limited - MD & Director [22]

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Yes. Thanks, everyone. Thanks for taking the time to listen. I just wanted to, I guess, follow up with some remarks about the last 12 months. We've effectively been operating now for 12 months and going through our ramp-up process. We're entering a pretty exciting stage. We've obviously had our bumps through this ramp-up process there, and we really feel now we've turned the corner on those operational difficulties there, also seeing an improvement in the macro. And at the scale that we're operating now, we're now producing at over 100,000 tonne per annum run rate -- 120,000-plus really, we are a top 15 zinc producer in the world and quickly hunting down that top 10 zinc producer status as we always wanted to achieve. What's significant about that is that we continue, on a quarter-on-quarter basis, to increase our metal production towards those rates, and which also drives down our cost.

We don't actually need a huge margin, so we don't need higher zinc prices to generate significant earnings and significant returns for the shareholders. And we've seen that even at effectively a $1.02 all-in cost versus $1.05 zinc price, we started to generate positive cash flow. So those costs will continue to drop. Production rate will continue to increase, which allows us to grow that margin on an expanding production base. So it sets us up in very good stead. And we are -- essentially, we are the leverage play for zinc globally. There is no other company in the world that on a scale that we're doing that is leveraged as a pure zinc play. So naturally, that affects you in the downturn like we've seen over the last 6 months, but the reverse effect is strong when the zinc price starts to climb and when the base metal markets start to improve. So we're looking forward to tapping into the other side of the cycle as a fully ramped up top 10 zinc producer.

Thanks very much, everyone.