MAC Copper (MTAL) Q2 2025 Earnings Call July 23, 2025 07:00 PM ET Speaker0I would now like to hand the conference over to Mr. Mick McMullen, CEO.Please go ahead.Speaker1Thank 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 twenty twenty five quarterly presentation. Obviously, there's the usual disclaime ...

Financial Performance & Liquidity - Q2 2025 saw record quarterly operational free cash flow (FCF) of approximately US$42 million[18] - Cash and cash equivalents were approximately US$102 million at the end of Q2 2025[14, 18, 54] - Liquidity of approximately US$196 million was available, including an undrawn revolving facility of approximately US$59 million[13, 54] - C1 costs achieved for Q2 2025 was US$1.48/lb, with June 2025 achieving US$0.94/lb[18] - Total cash cost was US$2.17/lb[18] Production & Operations - Copper production increased by 23% quarter-over-quarter (QoQ) to 10,587 tonnes in Q2 2025[18, 34] - Copper grade was 4.4% for Q2 2025, an increase of 8% QoQ[18] - Record daily copper production of 385 tonnes was achieved under MAC ownership[18] - Capital expenditure increased in Q2 with higher capitalised development driven by a 46% increase in capital development meters compared to previous quarter combined with delivery of new operational drills[49] Growth Projects & Future Targets - The company is targeting copper equivalent production of over 50ktpa by 2026[13] - The ventilation project is progressing, targeting completion by Q3 2026[14, 19, 72] - First ore from the new Merrin Mine is targeted for Q4 2025[14, 19, 64] Harmony Transaction - MAC entered into Restructure Documents regarding the Harmony Transaction[19, 29] - The transaction is subject to shareholder and regulatory approvals[32]

High Grade, Long Life Copper Exposure in a Tier 1 Jurisdiction Investor Presentation April 2024 This presentation has been prepared by MAC and while believed to be accurate and reliable, MAC, nor any of its related bodies corporate, their respective directors, partners, employees or advisers or any other person (Relevant Parties), do not make any representations, warranties or undertakings, express or implied, as to the fairness, currency, accuracy, completeness or correctness of such information or any fur ...

Company Performance & Strategy - MAC aims to become a +50 ktpa copper producer by 2026[10] - The company has repaid approximately US$168 million in interest-bearing liabilities since acquiring CSA on June 16, 2023[58] - Q3 2024 copper production reached 10,159 tonnes at 4% Cu[58] - The company is on track to meet its full-year 2024 production guidance of 38-43 kt[58] - The company's strategy includes delivering operationally at CSA, executing on an organic growth plan for +50ktpa within two years, and continuing to de-lever and improve the balance sheet[97] Financial Highlights - The company's enterprise value is approximately US$1.3 billion[57] - Pro-Forma Liquidity is approximately US$226 million[58] - The company achieved a 50% Underlying EBITDA Margin in 1H24[58] - The company's Q3 2024 C1 Cash Costs were US$1.90/lb, a 6% decrease compared to Q2 2024[58] CSA Copper Mine - Current copper reserves base is +102% larger than 2015 despite c362kt Cu produced[85]

Financial Performance & Liquidity - MAC Copper maintained its 2025 copper production guidance of 43-48kt [18] - The company achieved a realized copper price of US$4.04/lb in Q1 2025 [18] - Liquidity stands at approximately US$153 million, including an undrawn revolving facility of around US$59 million [13, 65] - Refinancing resulted in interest cash savings of approximately US$14 million per annum and reduced repayments by approximately US$123 million until 2027 [14, 61] Operational Highlights - Q1 2025 copper production was 8,644 tonnes [18, 28] - C1 cost was US$1.91/lb and total cash cost was US$2.47/lb in Q1 2025 [18] - The company is targeting copper production of over 50kt per annum by 2026 [13, 37] - Ventilation project is progressing, targeting completion by Q3 2026, aiming for an increased production rate of 1.7mt p/a [13, 36, 42] Growth Projects - Merrin Mine development is underway, targeting first ore production by Q4 2025 [14, 19, 36, 43] - US$4.1 million was invested in the Merrin Mine development in Q1 2025 [19]

Financial Data and Key Metrics Changes - The company reported an enterprise value of approximately USD 940 million and plans to produce over 50,000 tonnes of copper annually in the near future [3] - The company achieved a C1 cash cost of USD 1.91 per pound and total cash costs of about USD 2.47 per pound, with a realized price of USD 4.4 per pound for the quarter [6][7] - The net gearing ratio was reduced to under 20%, reflecting a significant deleveraging of the balance sheet [4][34] Business Line Data and Key Metrics Changes - The first quarter is typically the softest for the company, with production trends down due to seasonal weather impacts and a strong previous quarter [5][11] - The company maintained guidance for copper production between 43,000 to 48,000 tonnes for the year, with a copper grade of approximately 3.84% [7][8] - Growth capital expenditures (CapEx) are projected to be between USD 20 million to USD 25 million, while sustaining CapEx is estimated at USD 40 million to USD 50 million [8] Market Data and Key Metrics Changes - The company noted positive tailwinds from exchange rates and treatment charges, with spot copper treatment charges at negative USD 40 per tonne, indicating a favorable annual benchmark settlement [8] - The company has seen a strong grade profile during Q1, with head grades over 4% copper expected to continue [11] Company Strategy and Development Direction - The company is focused on two key growth projects: the ventilation project and the Merin mine, which is expected to enhance production and reduce operational volatility [4][31] - The Merin mine is anticipated to contribute significantly to production, with potential for high-grade copper and zinc extraction [20][30] - The company aims to maintain consistent, low-cost copper production while advancing its projects to achieve targeted annual production above 50,000 tonnes [41] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second quarter based on the production profile and the potential of the Merin mine to smooth out production volatility [44][62] - The company has not encountered significant supply chain issues or cost impacts from tariffs, maintaining a strong liquidity position post-refinancing [93][94] - Management highlighted the importance of the Merin mine for future growth and its ability to provide a stable production profile [46][62] Other Important Information - The company completed a refinancing of its debt structure, significantly reducing net gearing and interest costs, with annual cash interest savings of approximately USD 14 million [34][36] - The company reported a healthy liquidity position of USD 153 million, providing flexibility for future operations [40] Q&A Session Summary Question: Can you confirm that production and sales are aligned from a cash flow perspective? - Yes, the company aims to align production with sales on a quarterly basis, ensuring cash reflects production costs [51][52] Question: Will there be any development ore from the Merin mine? - Yes, the company has already extracted high-grade zinc lead mineralization during development and plans to be opportunistic in extracting valuable ore [54] Question: What tonnage would be considered a success for 2026? - The company anticipates mining around 50,000 tonnes at 6% copper and potentially 100,000 to 150,000 tonnes of medium-grade copper at 2.5% [57][58] Question: Is there a pathway to greater than 50 kilotonnes of copper equivalent production? - The company feels comfortable with the potential for upside risk in production forecasts, especially with the Merin mine's contributions [70][71] Question: Are the costs for the ventilation project still on track? - Yes, the costs for the ventilation project remain on track, with a reduction in the cost per meter of development noted [75][78] Question: What is the outlook for shaft production this year? - The company expects to maintain grades around 4% and aims to optimize production efficiency [82] Question: Are there any issues with supply chain or consumables? - Currently, there are no significant issues, and the company has a strong liquidity position to weather market uncertainties [93][94]

Financial Data and Key Metrics Changes - The company reported an enterprise value of approximately USD 940 million and plans to produce over 50,000 tonnes of copper annually in the near future [3] - The company achieved a C1 cash cost of USD 1.91 per pound and total cash costs of about USD 2.47 per pound, with a realized price of USD 4.4 per pound for the quarter [6][7] - The net gearing ratio was reduced to under 20%, reflecting a significant deleveraging of the balance sheet [34][41] Business Line Data and Key Metrics Changes - The company is targeting copper production guidance of 43,000 to 48,000 tonnes for the year, with a copper grade of approximately 3.84% [7] - Growth capital expenditure (CapEx) is estimated to be between USD 20 million to USD 25 million, while sustaining CapEx is projected at USD 40 million to USD 50 million [8] Market Data and Key Metrics Changes - Spot copper treatment charges have been observed at negative USD 40 per tonne, indicating a favorable annual benchmark settlement for the upcoming year [9] - The company has seen a positive impact from exchange rates and treatment charges, contributing to improved cash costs [8] Company Strategy and Development Direction - The company is focused on two key growth projects: the ventilation project and the Merin mine, which are expected to enhance production capabilities [4][40] - The Merin mine is anticipated to add significant production capacity, with the potential for high-grade mineralization being identified [19][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a strong second quarter based on the production profile and ongoing projects [43] - The company is optimistic about the Merin mine's potential to smooth out production volatility and enhance profitability [63] Other Important Information - The company has successfully refinanced its debt structure, significantly reducing its average weighted cost of debt by over 30% [36] - The company reported a healthy liquidity position of approximately USD 245 million, including undrawn facilities and cash reserves [39] Q&A Session Summary Question: Can you confirm that from a cash flow perspective, production and sales are aligned? - Yes, the company aims to align cash flow with production, ensuring consistency in reporting [51][52] Question: Will you get any development ore from the Merin mine? - Yes, the company has already extracted high-grade zinc lead mineralization during development and plans to be opportunistic in mining [54] Question: What tonnage would be considered a success for 2026? - The company anticipates mining around 50,000 tonnes at 6% copper and potentially 100,000 to 150,000 tonnes at 2.5% copper from the Merin mine [58][59] Question: Is the mine breakeven at 35,000 tonnes per annum? - The breakeven point is likely lower, possibly in the high 20,000 to 30,000 tonnes range [66] Question: How should we interpret the guidance for copper production in 2026? - There is no real change; the company is planning for both copper and zinc production, with potential upside in forecasts [71][72] Question: Are the costs for the ventilation project still on track? - Yes, the costs are still within the expected range, with a reduction in the cost per meter of development noted [75][79] Question: Are there any supply chain issues anticipated? - Currently, there are no significant issues with supply chain or consumables, although general market uncertainty exists [101][102]

Core Viewpoint - MAC Copper Limited (MTAL) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive outlook based on rising earnings estimates, which are a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system tracks the Zacks Consensus Estimate, which reflects EPS estimates from sell-side analysts, and changes in these estimates are strongly correlated with near-term stock price movements [4][6]. - For MAC Copper Limited, the earnings estimate for the fiscal year ending December 2025 is projected at $0.92 per share, representing a 193.9% increase from the previous year [8]. Institutional Investor Influence - Institutional investors utilize earnings estimates to determine the fair value of stocks, and their buying or selling activities based on these estimates can lead to significant price movements [4]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a proven track record of Zacks Rank 1 stocks generating an average annual return of +25% since 1988 [7]. - The upgrade of MAC Copper Limited to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].

Financial Position and Debt - The company incurred a significant amount of debt in connection with the Business Combination, which may limit available funds and operational flexibility [52]. - The company expects to require additional financing or refinancing to sustain future capital cost overruns, which may be necessary due to unanticipated costs or delays [73]. - The company incurred approximately $393 million in aggregate principal amount of indebtedness under the Senior Facilities and the Mezz Facility, secured by substantially all of its assets [152]. - As of December 31, 2024, the aggregate principal amount of indebtedness under the Debt Facilities was approximately $304 million [152]. - The company is required to use a portion of cash flows from operations to pay interest and principal on its indebtedness, which limits available funds for working capital and expansion plans [153]. - Financial covenants require the company to maintain a debt-service coverage ratio of not less than 1.20 and a net debt to EBITDA ratio of not more than 2.5 [154]. - The company may face adverse effects on its operations if it defaults under its debt arrangements, potentially requiring immediate repayment or refinancing [155]. Operational Risks - Reliance on a single customer, GIAG, for all production from the CSA Copper Mine may significantly impact cash flow and financial position [49]. - The CSA Copper Mine's operations are subject to geotechnical risks that could adversely impact ore recoveries and mining efficiencies [61]. - Future project expansion and exploration success may not be achieved, impacting long-term economic viability [52]. - The company faces risks related to fluctuations in demand for and prices of copper, which could adversely affect business operations [52]. - The CSA Copper Mine is at risk of equipment failures, which could adversely impact operations and financial performance [103]. - Severe weather events and natural disasters could disrupt operations and affect the timely export of products from the CSA Copper Mine [97]. - The company faces competition for skilled labor in the mining sector, which may lead to higher costs or operational delays if personnel cannot be secured [96]. - Future pandemics could adversely affect operations, including labor availability and regulatory approvals, similar to the impacts seen during COVID-19 [95]. - The company may incur significant costs due to premature mine closure or maintenance, adversely affecting financial condition [130]. Environmental and Regulatory Compliance - Compliance with environmental laws may lead to increased costs and potential liabilities, affecting overall business operations [110]. - Future changes in environmental regulations may necessitate additional capital expenditures to comply, impacting financial results [115]. - The company faces complex regulatory requirements that could result in higher expenses and limit operational flexibility [114]. - New native title claims could result in higher operational costs and impact the ability to operate effectively [106]. - Environmental rehabilitation liabilities are recognized costs, and actual future costs may exceed current provisions due to various influencing factors [98]. - The company has security deposits with the New South Wales Government to cover rehabilitation liabilities, which may increase based on regulatory assessments [99]. Internal Controls and Governance - The company identified material weaknesses in internal control over financial reporting, which could affect the accuracy of financial results [52]. - Material weaknesses in internal control over financial reporting have been identified, which could affect the accuracy of financial results and timely reporting [176]. - The company has initiated steps to improve internal controls, including hiring experienced accountants and engaging external consultants for risk assessment and control documentation [180]. - A remediation plan is in place, focusing on enhancing entity-level controls, IT general controls, and segregation of duties in financial processes [181]. - The company acknowledges that remediation efforts may not be sufficient to prevent future material weaknesses or restatements of financial results [183]. Market and Economic Factors - The company is highly dependent on strong demand for copper, with fluctuations in demand and prices significantly affecting profitability [133]. - General cost inflation, particularly in energy prices, may increase production costs beyond expectations, affecting operating profits [105]. - Changes in international trade policies and potential tariffs could increase operational costs and adversely affect the company's financial condition [145][146]. - The volatility of copper and silver TCRC may adversely affect the company's results of operations and reduce margins [149]. - Appreciation of the Australian dollar against the U.S. dollar could increase the CSA Copper Mine's cost of production, reducing margins [137]. Shareholder and Market Considerations - The company has 82,438,431 Ordinary Shares outstanding as of December 31, 2024, and substantial sales of these shares could cause market price declines [166]. - The company completed a placement of 8,333,334 new CDIs in October 2024, which could lead to dilution for existing shareholders [191]. - Future dividend payments will depend on various factors, including financial covenants and capital expenditure requirements, with no current plans to pay cash dividends [165]. Production and Resource Estimates - The CSA Copper Mine produced 161,405 kt of concentrate grading 3.9% copper, containing 41,128 kt of copper in 2024 [215]. - The mineral resource has increased by 67% since the Company took ownership in June 2023, extending the mine life to 2036 [225]. - The CSA Copper Mine's current estimated Mineral Reserves support operations until the end of 2036 [216]. - As of December 31, 2024, total Mineral Resources for the CSA Copper Mine are estimated at 8.6 Mt with a copper grade of 5.4%, containing 464 kt of copper and 5.1 Moz of silver [233]. - The Mineral Reserve for the CSA Copper Mine as of December 31, 2024, is 15.9 Mt with a copper grade of 3.4%, containing 545 kt of copper and 6.8 Moz of silver [242]. - The Mineral Reserve estimate reflects an increase from 14.6 Mt in 2023 to 15.9 Mt in 2024, with a notable increase in Proven reserves from 8.4 Mt to 11.4 Mt [242]. - New geological information from drilling has contributed to the net increase in resources, particularly in the O Lens in QTS North [237]. - The company has also provided a new Mineral Resource estimate for the Zn mineralization in the Merrin Mine, totaling 2.4 Mt at 7.3% Zn, containing 173.6 kt of zinc and 1.8 Moz of silver [239].

Financial Data and Key Metrics Changes - The enterprise value of the company is just over $1 billion, with copper production exceeding 41,000 tons at a grade of 3.9% [2] - Operational cash flows were approximately $117 million, with liquidity at the end of the year amounting to $213 million, primarily in cash [2][6] - The EBITDA margin is just under 50%, with a conversion rate of about 74% to free cash flow [2][7] - Net gearing improved significantly from 41% to around 15%, indicating a strong balance sheet [9][23] - Cash and cash equivalents increased from $32 million to $172 million, reflecting a substantial improvement in liquidity [19][24] Business Line Data and Key Metrics Changes - In Q4, the company produced 11,320 tons of copper at a grade of 4.1%, exceeding the midpoint of guidance [5] - The C1 cash cost for the quarter was reported at $1.66 per pound, with total cash costs averaging around $2.31 per pound [5][15] - The company achieved record copper production and maintained a strong focus on cost reduction and operational efficiency [9][15] Market Data and Key Metrics Changes - The company benefited from a lower exchange rate, which is expected to positively impact 2025 results [6] - Approximately 80% of the company's costs are in Australian dollars, providing a favorable exchange rate environment [16] Company Strategy and Development Direction - The company aims to increase copper production to over 50,000 tons by 2026, with ongoing growth projects such as the Vent project and QTS South Upper [8][10] - There is a focus on organic growth opportunities, with plans to optimize the balance sheet and reduce debt [11][28] - The company is exploring additional high-grade ore bodies and has identified potential for further production increases at QTS South Upper [50][56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational performance and growth potential, highlighting the best production quarter and balance sheet position in the company's history [38][69] - The company is focused on delivering operationally, executing organic growth, and considering shareholder returns once the balance sheet is further optimized [68][70] Other Important Information - The company has successfully reduced its senior debt and is in the process of refinancing to improve terms and flexibility [26][112] - Safety performance improved, with the Total Recordable Injury Frequency Rate (TRIFR) decreasing from about 14 to just under 11 [35] Q&A Session Summary Question: What is the key driver for achieving production outcomes in 2025? - Management indicated that the key driver will be more tonnes mined rather than grade, emphasizing the importance of consistency in production [73][74] Question: What should be expected for the March quarter in terms of mined tonnes? - Management suggested that overall for the year, an increase in tonnes is expected, with guidance to be provided in about three weeks [78] Question: What areas are in scope for the resource reserve update? - The update will include QTS North, QTS Central, East, West, QTS South, and QTS South Upper, with ongoing drilling to expand resources [79][80] Question: What is the timeline for the balance sheet restructuring? - The refinancing process is expected to take another six to eight weeks to finalize [112] Question: What is the medium-term philosophy around overall throughput with the plant capacity? - The plant can handle about 1.7 to 2 million tonnes per year, with a focus on high-grade material to optimize throughput [118][120]