MAC Copper Ltd (NYSE:MTAL) Q2 2025 Earnings Call Transcript

MAC Copper Ltd (NYSE:MTAL) Q2 2025 Earnings Call Transcript July 23, 2025

Operator: Thank you for standing by, and welcome to the MAC Copper Limited Q2 results call and webcast. [Operator Instructions] I would now like to hand the conference over to Mr. Mick McMullen, CEO. Please go ahead.

Michael James W. McMullen: Thank you very much, and thank you, everyone, for joining us. I’m joined on the call by our CFO, Morne Engelbrecht. I’ll run through the slides, and these will be released as well so that everyone can refer to them at your leisure. So this is our second quarter 2025 quarterly presentation. Obviously, there’s the usual disclaimer at the front that people can read at their leisure. And if I go to Slide 4, in summary, look, MAC Copper at a glance, it’s a well-capitalized, low-cost high-grade copper mine in a Tier 1 jurisdiction, and we’re trending towards greater than 50,000 tonnes of copper by 2026. Obviously, during the quarter, we announced the transaction with Harmony to sell the company in the absence of a superior proposal at USD 12.25 a share, all cash, and there’s been various announcements made about that.

We are on our growth pathway. We have a very strong balance sheet. At the end of 30th of June, we had a about USD 196 million of liquidity, and Morne will run through the components of that here shortly. We have been advancing our key growth projects, which are the ventilation project and the Merrin Mine, and we did the refinancing and we sort of said that we wanted to have less than 20% net gearing, which is where we are. And again, there were separate announcements about that. But that has reduced our interest costs by around about USD 14 million per annum. It’s reduced our interest rate to floating rate just under 7% right now. And we had USD 102 million of actual cash on the balance sheet at the end of the second quarter. So overall, we ended Q2 in a really good position.

Moving into the next slide. That position is always underpinned by operations. We’ve got a slide on safety here. And very importantly, we’ve seen a significant improvement in our safety record. We produced just under 10,600 tonnes of copper, which was a 23% increase quarter-on-quarter. And like we’ve said before, with CSA, we can produce anywhere from 2,000 tonnes of copper in a month to [ 5,500 ] in the month of July, potentially 6,000 tonnes really comes down to where we are in the stope sequencing. And also, I think, in the full form quarterly, we’ve made some commentary in there about how disruptive it is when you have a transaction like we announced, and that was certainly the case here during the first quarter and April as well, which if you look at how much we produced in April versus June, there was a significant difference there.

Grade was great, 4.4% copper grade, was an 8% increase quarter-on-quarter. We hit a few records during the quarter. So under our ownership, the most copper produced in a day was actually, I think, the 30th of June was 385 tonnes. And we had quite a few days around the 300 tonne mark. C1 for the quarter was a good USD 1.48 a pound. Whenever we talk about numbers, it’s always in U.S. unless especially stated otherwise. And that’s consistent with the goal of where we said we thought we could get the mine to. And really pleasingly, you can see in the month of June, we’re at USD 0.94 a pound C1. So overall, good operating results, everyone sort of settled down at sign after the transaction was announced, and then really delivered for us. Record quarterly operating free cash flow for us of about USD 42 million.

Q&A Session

And we do note here that the first Glencore Contingent Payment conditions will likely be satisfied in August of this year. And in the absence of the transaction that’s proceeding right now, that would then get paid in June of next year. We’ve had really strong production in the last few months. We’re maintaining our guidance of 43,000 to 48,000 tonnes for the year. I would say we’ll be in the sort of bottom half of that maybe. Grade, again, keeping the same grade, notwithstanding the fact that we have been producing well above that grade. We do sort of see the stope sequencing towards the — just the middle to the back end of the current quarter, we’ll start moving into a bit of that lower grade material. And then again, towards the back end of the year, we’ll see a pretty strong run in terms of production and grade.

Growth CapEx and sustaining CapEx, again, maintaining those guidance ranges we’re tracking for those. Again, the Harmony transaction, we have announced here in the last day or 2 that the restructuring agreements that were required with both Osisko and Glencore for Harmony have been executed. Got various CPs in them still to be satisfied, including the votes in FIRB and SARB. But that has allowed us to schedule a Jersey court here in the first court hearing for 30 July, which will then allow us to dispatch the circular on the 4th of August and targeting a vote date of 29 August at this stage. Exploration, I’ve got a little slide at the back. We don’t really give a lot of information on exploration these days because, quite frankly, I don’t think the shares trade on the back of the exploration results that we get, notwithstanding they are world class, but we’ve got some interesting stuff happening on exploration as well.

So look, our key goals for this year are really consistent, safe and low-cost high-grade production, which we are delivering on. Progress the Harmony transaction to close in the absence of a superior proposal, advance our ventilation project through, get first ore out of the new Merrin Mine in Q4 of this year and maintain balance sheet strength. And I think based on Q2, we are absolutely delivering on all of those things. Safety and TSF. Safety had — our TRIFR had been a bit sticky for about the first year, but you can see a very sustained reduction there which, again, against the backdrop of all the sort of corporate goings on with site visits and uncertainty around a transaction has been very pleasing. The team have worked really diligently to drive that incident rate down.

Again, no reportable incidents for last year and none this year either. The Stage 10 TSF embankment works are progressing well. They’re on track for completion in the fourth quarter of this year, which is 1 of our, I guess, our 3 main capital projects for the year. And pleasingly, we worked — or our team work with the regulator to get a reduction of AUD 4 million in our environmental bond, the RCE. So that was good. We also donated AUD 100,000 to the local Cobar Shire Council’s museum effort, which is really important in terms of selling Cobar as a destination and why mining is so important out there. And as we’ve always said, we’re quite happy to put money into the local community because that’s basically where we operate. On the recommended transaction with Harmony.

Obviously, a lot of work has gone into both getting to announcement, but also then the restructuring agreements and both Osisko and Glencore have worked with us and with Harmony to get those things papered up. And again, the timetable is being published there, but we are working towards a vote date on the 29th of August. We will also hold our Annual General Meeting on the same day as well. And the circular, as I say, we’ll have a pretty fulsome description of the transaction, we’ll have a pretty fulsome background of the transaction, and that is planned to be sent around on the 4th of August at this stage. Record date is the 29th of July. So unlike in Australia, relatively long period between record date and vote date. But everyone has plenty of notice, I think, at this point.

So production, as you can see, a big jump on the previous quarter, which had been a bit of a slow start to the year. Really, a lot of that came in from the back part of May. Certainly in June, you can see the impact of a 6% copper grade in the month of June, lots of copper coming out, very low C1 obviously, and grade has been in excess of 8% for much of the last couple of weeks of June and extending into July. As of yesterday, we produced 4,500 tonnes of copper in July. We expect this month to be somewhere in the order of 5,900 to 6,200 tonnes of copper at an average grade of around about 7%. And you can see some of that super high-grade ore coming from the bottom of the mine. That is CSA. We’ve spoken about this many times before publicly.

We have a small number of very high-grade reasonably bulk tonnage stopes that drive our annual production. And as we explained after Q1, we just didn’t have those online. We had them in Q4 last year, didn’t have them really in Q1, and then we got into them in Q2, and now that’s extended into Q3. So I guess, that is CSA for you, right? Like it is in a Porphyry where we’ve got the same grade, plus or minus a couple of percent for the full year. We have a small number of big high-grade stopes that drive our production, right? And that’s why we get a bit of volatility in our quarter-on-quarter production. You can see there, we had a fair bit of concentrate laying around, and that is — that pile has only grown. Great results on costs, obviously, all-in costs continuing to trend down, notwithstanding obviously just a small amount of general cost escalation.

The plan, again, has continued to demonstrate it can produce at far in excess of what we currently can mine. But that’s why we’re developing some other ore sources. And again, as I said, for the rest of the — well, the back half, I suppose, of the Q3, we do expect grade to moderate a bit reasonable bulk tonnage stopes with grade to moderate a bit. And we do have a planned change out of some of the concentrate filter plates in August. But even so, we expect Q3 should be a reasonably strong quarter, particularly in this instance, we’ve actually started off with our best month in the quarter with July as opposed to being — having to come home with a wet sale, which has been the case in a few of the other quarters. So in general, we’re pretty happy with the way sites settled down.

They’re operating really well. The team is all going well. We’ve made a few changes as well, just to sort of get people enthused and add some extra resources. We’ve been bringing in some extra equipment. Now that we can probably utilize that, we might also put that extra equipment into the mine. With that, I might hand over to Morne, our CFO. He can talk to the next couple of slides in terms of the financials.

Morne Engelbrecht: Thank you, Mick. Good evening and morning, everybody. Going to Slide 11 now. This is covering the overall capital expenditure and development leaders where we had another record on the MAC ownership and development meters for the quarter. So overall capital expenditure, as you can see, they increased by around 85% quarter-on-quarter. So this is mostly driven by, obviously, the increased activity around the vent project and the Merrin Mine, which I think we’ll go through next — with the development meters overall increasing to that record-breaking 1,196 meters for the quarter. That’s obviously on the MAC ownership. With the Merrin Mine development need is increasing by around 65% to 530 meters. And the vent project increasing by 125% to 564 meters.

So this translated into growth capital expenditure for the quarter, increasing by 139%, and this is mainly driven by those 2 key projects for us in terms of the vent project, which is around USD 7.3 million spent for the quarter. And the Merrin Mine, which is around USD 3.5 million for the quarter. Obviously, very pleasing to see those key projects being executed really well by the team at site. And obviously to plan with the Merrin Mine coming online in Q4 this year. On the sustaining CapEx side, that mainly consists of the Stage 10 TSF, which has stepped up a gear and progressing to plan, and that’s sort of earmarked for completion in Q4 of this year as well. Moving to Slide 12 now and the all-important cash flow waterfall, where there’s a number of key drivers to keep in mind that impacted the cash flow over the June quarter.

Firstly, we had another record for the quarter on the MAC ownership, as Mick mentioned, relating to free cash flow from operations. And that’s obviously after sustaining CapEx, which amounted to around USD 42 million for the quarter. This was mainly driven by that 23% increase in production. The 8% increase in grade obviously made a big difference as well. And then there’s a 3% increase in realized copper price over the quarter that added to that number. Secondly, as you can see, our interest costs have significantly reduced over the quarter, and that’s after the refinancing was completed at the end of March, where we are starting to see the benefits of reducing that average weighted interest cost by more than 30% through that refinancing, and we’re definitely well on our way to realize that USD 14 million of interest savings per annum.

Then moving to growth capital which incorporates the vent project in Merrin Mine, as I said before, and then exploration as well. This ramped up for the quarter, a total cash spend of USD 30 million, which drove that development which was driven by that record development meters done in the quarter as well. Our senior facility still sits at USD 159 million, and we maintained a drawdown on the revolving facility of USD 66 million as well with USD 102 million bank — cash bank at the end of June, which leaves us with that net debt figure of USD 123 million. And as Mick said, that’s way under 20%. So we’re just over 17% at the moment in terms of that net gearing ratio. We also had a very healthy USD 196 million in liquidity, that’s almost AUD 300 million available to us at the end of the quarter, and that consisted of that undrawn revolving facility of USD 59 million.

Outstanding QP receipts of USD 11 million, unsold concentrate at 30 June of USD 18.5 million. And then that investment in Polymetals of around USD 5.5 million that’s still doing great for us. Finally, on the contingent copper payments to Glencore, we currently anticipate that based on the average daily LME closing price over the last 18-month period leading up to June, that the condition of the payment — for the first contingent payment will be met around that August of this year, as Mick has previously mentioned. So under the terms of the Share Sale Agreement with Glencore and Intercreditor Deed, that obligation to make that payment is deferred until the earlier of the payment being permitted by the current debt arrangements and the 3-year anniversary of when MAC actually acquired the CSA Copper Mine.

So we, therefore, expect that the first contingent payment, as Mick has mentioned, will become payable on the 17th of June 2026. Given MAC’s current liquidity position, the company expects to be able to fully cash settle this obligation when it becomes payable. So overall, a very strong and healthy balance sheet position at the end of the quarter with that circa USD 102 million of cash at bank and USD 196 million of liquidity available to us. And with that, I’ll hand back to Mick.

Michael James W. McMullen: Thanks, Morne. And yes, as I sort of showed on that photo, we had even more concentrate last week sitting at the mine. And so we have a significant amount of liquidity over and above what’s actually that USD 196 million as well. So again, we’ve shown this before. Really, there’s — we’re sort of on track to moving towards that 50,000 tonne mark or greater than those key projects, obviously, the capital vent project and the Merrin Mine, that’s where our growth capital comes in. And you can see, clearly, we’re doing a lot more meters of development. We’re buying more equipment for those projects. And therefore, that’s why the capital spend is going up in those. And again, that’s consistent with what our guidance is.

So we are delivering on those things. And then the Merrin Mine, we are moving fairly quickly on development out there now. The exploration team have also — have continued to sort of close out the drilling out of QTS South Upper that we’re, I guess, about halfway across a bit more than halfway across. And they’ve drilled at Pink Panther, which has got some other material that is potential to be mined as well, lower grade than QTS South Upper, but still — but is still there. And this area of the mine has independent firing. So the development rates in this, as you can see from the previous graphs are materially faster than what we get at the bottom of the mine, just basic is so much easier, and it’s — we can fire independently from the rest of the mine.

So it’s progressing quite rapidly there now. You can see that little schematic there where we are, and you can see the sort of the ore body just on the very left of that thing there. So additional ventilation is going in. We are well on track for this. Again, we sort of said it’s very slow to get started on it because you’re interacting with the existing mine up until you get to independent firing. And now that we’ve got that, now we can go much, much faster. So that seems to be going pretty well up there. And not only do we have that sort of QTS South Upper stuff that we’re developing out to, but there’s a series of zinc stopes that are being planned and some copper areas there that are not currently in resource, and we’re sort of in the process of drilling that stuff out and sort of getting a plan around going to mine that stuff.

So during the quarter, you’d have noticed Polymetals has announced they’ve recommissioned their concentrator during the month so that sort of — that is up and running to provide the processing route for the zinc ore. We still think it will be towards the end of the year before we would be ready to send some material to them, but we are certainly making plans to do so. Ventilation project. Again, we are starting to spend a fair bit more money on this thing of part of your capital budget. If you want to get your project done, you need to spend your money. And we’re not that far away from starting the vertical raise boring works on that as well, which will be the next sort of key phase of that project. Finally, exploration. We don’t really talk about exploration much anymore.

No one sort of seems to give us much value for exploration. The exploration team are quite excited. They’ve sort of done an EM survey about 15 kilometers north of the mine. It has picked up a very strong anomaly that looks quite similar to what we have at the CSA mine. So we have very quickly moved to drill rigs onto that, and we are currently drilling that, and we shouldn’t be far away from hitting the target zone on that. So we think that’s quite an exciting area for us to go and try and explore if we can find a CSA style ore body, that could be pretty interesting. So we’ll come back to the market if we find something material on it, certainly ahead of the vote date so that everybody has the full amount of information. So closing off just in terms of our goals for this year that we’ve sort of been pretty consistent about.

We are accelerating our work on many of these projects. I think we’re having near enough to AUD 300 million of liquidity on the balance sheet for a company our size. We definitely tick the box for a strong balance sheet. I think the fact that we managed to get the C1 in the quarter down to USD 1.48 a pound, but clearly, June at USD 0.94 was pretty good. And if we produce more copper in July, well, I guess it’s going to be even better. And then there’s been a large amount of documentation required for this Harmony transaction. And so we’ve now managed to get that out of the way. And now we’re moving forward through to getting organized for the vote. So with that, that’s really the summary of the second quarter. I think overall, it was a great result from a safety point of view, good result from a production and cost point of view.

And as I said, July has been quite exceptional as well. And so we think given where we started the year at the end of Q1, where obviously we’re a bit behind where we needed to be. We’ve now caught up and gotten a bit ahead of where we need to be. And that’s always a good spot to be in as you’re coming into the end of the year. So with that, I’m going to open up the floor to questions, if anyone’s got some.

Operator: [Operator Instructions] There are no questions at this time. I’ll now hand back to Mr. Mick McMullen for closing remarks.

Michael James W. McMullen: Okay. Well, look, I appreciate everyone taking the time to dial in. Thank you very much, and we will be back to you as we progress the transaction. Bye.

Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.