20974 29Metals AR23 WEB V1 - Flipbook - Page 108
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29Metals 2023 Annual Report
Directors’ Report continued
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29Metals Appendix 4E and Annual Financial Report for 29Metals Limited and its Controlled Entities for the year ended 31 December 2023
Directors’ Report
Operating and Financial Review
Material business risk
Discussion
approvals are not obtained prior to full utilisation of existing tailings storage capacity, 29Metals may need to place Capricorn Copper into a
state of care and maintenance.
DĞƚĂůƉƌŝĐĞƐ
29Metals’ revenue is dependent upon the market prices for the metals that 29Metals produces from its mining operations (in the form of
mineral concentrates). Market prices for metals are subject to fluctuation, including material fluctuations, due to a range of factors outside of
29Metals’ control, including changes in the current or forecast supply and demand for relevant metals, the availability and cost of substitute
products, currency exchange rates, inventory levels maintained by users, the cyclicality of consumption, actions of other participants in
commodities markets, adverse weather incidents and operational challenges which affect supply, general global, regional and local economic
activity, and other international macroeconomic and geopolitical events.
Metals price fluctuations may have an adverse impact on the operating performance and financial condition of 29Metals.
29Metals’ exposure to commodity prices may be exacerbated by:
▪
the nature of contractual arrangements for the sale of mineral concentrates, which typically apply a quotational periods concept where
the price received by 29Metals is determined as the price prevailing in the months (typically to 3 months) following shipment. s a
result, the realised metal price for 29Metals’ products will generally differ (potentially materially) from the market price for the relevant
metals at the time of production out turn and shipment and
▪
links between the charges that 29Metals pays for the treatment and refining of mineral concentrates (‘dZƐ’) and underlying
commodity prices, whereby, if underlying commodity prices increase, the price paid for C Cs may also increase.
hŶĚĞƌŐƌŽƵŶĚŵŝŶŝŶŐƌŝƐŬƐ 29Metals undertakes mining operations by applying underground mining techniques. nderground mining operations are subject to various
risks, including geotechnical risks and seismicity, factors affecting productivity (including ventilation) and maintaining development rates to
provide access to ore for mineral processing.
eotechnical risks
29Metals is subject to geotechnical risks which arise from changes in the stresses, seismicity and or stability of the rock formations that
surround ore and waste material once that material has been extracted by mining, along with general seismicity risks which may result in
sudden movement of underground workings. eotechnical conditions can be unpredictable and failures in current or historic mined areas, in
the form of the material collapsing into stopes or development voids, may occur without warning. hese events are beyond the control of
29Metals, and the occurrence of one or more of these events may result in property or equipment damage, injury to employees, major
operational disruptions, the incurring of additional costs to restore access to affected areas and financial or regulatory penalties.
roductivity risks
roductivity in underground mining operations is subject to various factors, including labour and equipment availability. n addition, to
maintain productivity, 29Metals must extend and expand infrastructure to support underground mining operations, notably ventilation
infrastructure to ensure that temperature and air quality in the underground mining operations are suitable for human health and safety.
Maintaining adequate ventilation infrastructure to support 29Metals’ underground mining operations, particularly as development and
mining activity progresses to greater depths, is, in turn, dependent on the availability and timely supply of ventilation assets by suppliers, and
the ability to successfully operate ventilation assets to meet 29Metals’ requirements. n inability to maintain adequate ventilation may
adversely impact 29Metals’ ability to continue its underground mining operations, or to continue underground mining at planned mining
rates, and accordingly impact its revenue, operational performance and financial condition as a result.
evelopment rate risks
29Metals’ underground mining operations rely upon development activities to progressively access new production areas in accordance with
the mine plan and schedule. 29Metals’ ability to execute planned development activities is dependent upon a number of factors, including
labour availability, the performance of mining equipment and the availability and performance of mining contractors. f 29Metals is unable to
access new production areas, it may require adjustments to the mine plan and schedule which may impact 29Metals’ ability to meet its
production estimates and adversely affect its future financial performance.
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džƚƌĞŵĞǁĞĂƚŚĞƌĞǀĞŶƚƐ
he frequency and severity of extreme weather or natural environmental disasters, such as heavy rainfall and flooding, including as a result
of Climate Change, are difficult to predict. xtreme weather events may impact 29Metals operations directly or indirectly, adversely impacting
29Metals’ operating and financial performance. For example, an extreme weather event in March 2023 at Capricorn Copper resulted in
flooding of the speran a outh sub level cave underground mine and caused major damage to key site infrastructure such as the workshop,
warehouse and water treatment plant, as well as a significant increase in mine affected water inventory held on site, resulting in the
suspension of mining activities and significant additional costs to reduce accumulated water inventory on site and reinstate affected
infrastructure. xtreme weather events such as the Capricorn Copper event, or other extreme weather events of a different nature which may
occur in the future, may have a material adverse effect on 29Metals’ cash flow, operating performance and financial condition.
ZĞŐƵůĂƚŽƌLJĐŽŵƉůŝĂŶĐĞ
29Metals’ business activities are subject to complex regulatory compliance and reporting requirements, including regulation covering
environmental matters, native title, mining permitting and licensing, workers compensation, health and safety matters, and corporate
reporting. he regulatory requirements applying to 29Metals vary between the jurisdictions in which 29Metals conducts its business and are
subject to change as a result of a number of factors, including changes in government, changes in government policy and interpretation, and
community expectations. ny failure to comply with regulatory requirements may damage 29Metals’ reputation and brand, including through
negative publicity and disputes, which may require costly remediation and adversely affect its financial performance and share price.
n addition to the financial and reputational consequences of non compliance, there are material costs associated with the increasingly
complex compliance requirements, including compliance costs associated with addressing long term compliance challenges that are a result
of long term mining operations. ignificant increases in compliance costs may be difficult to absorb for 29Metals and may adversely affect its
operational and financial performance.
KƉĞƌĂƚŝŶŐĐŽƐƚƐĂŶĚ
ĐĂƉŝƚĂůĞdžƉĞŶĚŝƚƵƌĞ
29Metals’ business, operating performance and financial performance may vary according to a variety of factors, including the cost of key
production inputs and factors specific to each mine site (such as changing ore characteristics, metallurgy and geotechnical conditions). Many
of these factors are beyond the control of 29Metals. he price of key production inputs is driven by changes in international markets (including
commodity prices, exchange rate movements and capital markets conditions) and domestic markets (including wage increases and general
cost escalation) and are outside of 29Metals’ control. For example, demand for key production inputs and consumables or general cost
inflation of such inputs may result in price increases for which impacts may include:
▪
changes in operating plans to reduce production input and consumable requirements
▪
delays to development projects and or deferral of investment decisions by 29Metals
