20974 29Metals AR23 WEB V1 - Flipbook - Page 109
2023 key
results
30
Chair letter and
CEO report
About
29Metals
Our
assets
Sustainability
& ESG Report
Mineral Resources
and Ore Reserves
Annual
Financial Report
105
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
changes to the economic assumptions underpinning 29Metals Ore Reserves and Mineral Resources estimates which, in turn, may result
in an adverse revision of mineral inventory; and
▪
review of the carrying value of its assets, which may result in impairment charges.
As such, macroeconomic factors influencing demand for key production inputs mean that 29Metals could face higher operating and capital
costs in the future, which could adversely impact its profitability.
If 29Metals’ operating costs and capital expenditure exceed budgeted amounts this could adversely impact its financial position and its
reputation.
▪
hŶĞdžƉĞĐƚĞĚĨĂŝůƵƌĞŽĨ
ĞƋƵŝƉŵĞŶƚ
29Metals’ mines and associated processing plant and equipment are subject to general risks arising from incidents such as critical mechanical
failures, fire, damage via corrosion of aged infrastructure, loss of power supply, failure to meet contractual specifications (including in relation
to performance and difficulties during commissioning. The occurrence of any such incident could interrupt 29Metals’ operations and
adversely affect 29Metals’ operating and financial performance.
The impact of equipment failure is also influenced by the availability and performance of specialised suppliers and contractors to repair or
replace damaged equipment, including lead times, as well as 29Metals’ ability to exercise its contractual rights (which is subject to the liquidity
and financial strength of its counterparties . Unexpected costs or delays in replacing or repairing the specialised equipment used by 29Metals
may impact 29Metals’ ability to meet its forecasts and profitability and may have a material adverse effect on 29Metals’ financial performance,
general prospects and competitive position.
DŝŶĞƌĂůĞdžƉůŽƌĂƚŝŽŶĂŶĚ
ƉƌŽũĞĐƚĚĞǀĞůŽƉŵĞŶƚ
29Metals aims to grow its production and extend mine life through its pipeline of organic growth opportunities. The time between discovery
of economically viable deposits to commercial production is highly variable and has been extending in recent years as a result of various
factors, including capital requirements, changes to regulatory approval requirements and the complexity and depth of target deposits.
Expansion of existing operations and development of new projects are capital intensive and often involve significant expenditure prior to a
final decision to proceed, including significant investment in studies and regulatory approval requirements. hile the exploration and
development phases of a project are both time and capital intensive, there is no guarantee that an investment by 29Metals in mineral
exploration and project development will result in a profitable mining operation.
The actual costs to expand operations or develop a new project, along with the operating performance once brought into commercial
production, may also vary significantly from estimates, reflecting the duration of the period between an estimate and commencing commercial
production, and changes in material considerations (for example, changes in market conditions, commodity prices and capital costs over that
period. Cost overruns and delays in the project development phase may adversely affect 29Metals’ profitability, operational performance and
financial position.
DŝŶĞƌĂůZĞƐŽƵƌĐĞƐĂŶĚ
KƌĞZĞƐĞƌǀĞƐĞƐƚŝŵĂƚĞƐ
The estimation of Mineral Resources and Ore Reserves is imprecise and involves
▪
interpretation of geological data obtained through exploration drilling and other exploration activities;
▪
the exercise of technical judgement and material assumptions regarding (among other things future commodity prices, operating costs,
and capital costs, orebody characteristics and metallurgical recovery performance; and
▪
statistical and other analyses.
There can be no guarantee that 29Metals’ Mineral Resources estimates will be converted to Ore Reserves, or that material included in
29Metals’ Ore Reserves estimates will be successfully produced. Nor can there be any guarantee that 29Metals’ exploration activities will
result in the discovery of new material, or reclassification of material previously discovered, to be included in Mineral Resources and Ore
Reserves estimates.
In addition, changes in factors outside of 29Metals’ control, such as adverse changes to long term forecasts of commodity prices, may result
in an adverse change to 29Metals’ Mineral Resources and Ore Reserves estimates.
ŚĂŶŐĞƐŝŶĐƵƌƌĞŶĐLJ
ĨŽƌĞŝŐŶĞdžĐŚĂŶŐĞƌĂƚĞƐ
29Metals’ mineral concentrate products are priced in US dollars while its operating costs are primarily Australian dollar costs. In addition,
29Metals has debt facilities denominated in US dollars and its cash reserves comprise a combination of Australian and US dollars. As a result,
29Metals’ financial performance is exposed to relative movements in the US dollar to Australian dollar exchange rate and any adverse
movements may therefore adversely affect the operational performance and financial condition of 29Metals.
29Metals’ business is dependent upon 29Metals’ ability to attract and retain a workforce with the appropriate skills and experience to execute
ƚƚƌĂĐƚŝŶŐĂŶĚƌĞƚĂŝŶŝŶŐ
ƋƵĂůŝĨŝĞĚĂŶĚĞdžƉĞƌŝĞŶĐĞĚ 29Metals’ business plans and ensure 29Metals meets its obligations. The market for personnel with the requisite skills and experience is highly
competitive, particularly in estern Australia, and is subject to general labour market conditions and other factors, such as changes in
ǁŽƌŬĨŽƌĐĞ
Government policy regarding skilled migration, which are outside of 29Metals’ control. Tight general labour market conditions are expected
to remain in the nearer term.
Impacts associated with attracting and retaining a suitably skilled and experienced workforce include
▪
changes to 29Metals’ operating plans to manage available human resources;
▪
risks associated with staff turnover, including additional costs to train new personnel and the potential for health and safety incidents
as a result of new personnel being unfamiliar with the specific environment and risks at 29Metals’ operating sites; and
▪
incurring additional costs to implement attraction and retention strategies in the competitive landscape.
Each of the above factors may adversely affect 29Metals’ operational performance, margin or otherwise affect its overall financial condition.
KĐĐƵƉĂƚŝŽŶĂůŚĞĂůƚŚĂŶĚ
ƐĂĨĞƚLJ
Site safety and occupational health and safety outcomes are critical to 29Metals’ reputation and its ability to retain necessary regulatory
approvals. Certain events (including accidents, seismic events and underground fires may be outside the control of 29Metals, and a serious
site incident could have adverse operational and financial impacts upon 29Metals’ business, as well as its personnel and reputation.
In addition, 29Metals’ business is subject to various OH&S legislative and regulatory requirements, which may become more stringent or the
subject of stricter interpretation or enforcement. If 29Metals fails to comply with these requirements, it could result in fines, penalties and
compensation for damages as well as reputational damage to 29Metals, and possible suspension of operations.
ZĞůŝĂŶĐĞŽŶĐŽŶƚƌĂĐƚƵĂů
ĐŽƵŶƚĞƌƉĂƌƚŝĞƐ
29Metals is reliant upon contractual counterparties, both in the delivery of 29Metals’ operating and business plans, and the sale of 29Metals’
mineral concentrate products.
Contractors and suppliers
30
