20974 29Metals AR23 WEB V1 - Flipbook - Page 110
29Metals 2023 Annual Report
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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
29Metals utilises contractors to plan and execute its current and future mineral exploration and mining operations activities, including for the
performance of specialised services (such as drilling and specialised maintenance) and for the supply of equipment, infrastructure and parts
(for example, ventilation assets). otably, 29Metals has also deployed contract mining at both its operating sites.
29Metals relies on these contractors and suppliers to provide the equipment and human resources to execute the contracted activities.
ontractors and suppliers are also subject to labour market pressures (impacting the ability to attract and retain suitably skilled and
experienced personnel), supply chain risks (impacting on the availability of equipment) and costs inflation as 29Metals, which contractors and
suppliers may seek to pass on to 29Metals, including via contractual rise and fall terms. If 29Metals cannot pass on price increases from its
suppliers to its customers, 29Metals’ profitability and margin may be adversely impacted which, in turn, may result in a failure to meet
forecasts, and adversely affect 29Metals’ share price, financial performance and prospects. In addition, any renewal on unfavourable terms,
or any failure to renew or other early termination, of material contracts may have an adverse impact on 29Metals’ operating and financial
performance.
ustomers
29Metals relies on its customers performing their obligations under 29Metals’ concentrate offtake arrangements. In the period 2 2 ‑2 2
(inclusive) the majority of 29Metals’ mineral concentrate products are committed to a single contractual counterparty, Trafigura Pte td
(‘dƌĂĨŝŐƵƌĂ’). iven this significant level of customer concentration, if Trafigura were to terminate its existing offtake arrangements, this may
have a significant adverse impact on 29Metals’ financial performance and prospects.
Any renewal on unfavourable terms, or any failure to renew or other early termination, of 29Metals’ concentrate sales contracts could have
an adverse impact on 29Metals’ operating and financial performance. Further, 29Metals is exposed to credit risk in relation to its customers.
If amounts due to 29Metals under its sales contracts are not paid in a timely manner or at all, it may have adverse consequences for 29Metals’
cashflow and broader financial position.
ĐĐĞƐƐƚŽĐĂƉŝƚĂůĂŶĚ
ĐĂƉŝƚĂůŵĂŶĂŐĞŵĞŶƚ
To maintain operations and meet its growth objectives, 29Metals may, in the future, require access to debt and or equity capital markets.
Access to capital markets may be impacted by a variety of factors, including 29Metals’ existing levels of financial indebtedness, general changes
in global capital markets and changes in lending criteria in relation to sustainability and
performance. Many of these factors are outside
of 29Metals’ control, and an inability to access additional funding, either through debt or equity capital markets, may limit 29Metals’ flexibility
in planning for, or reacting to, changes in 29Metals’ industry, increase its vulnerability to general adverse economic, industry and regulatory
conditions, limit its ability to fund future working capital, capital expenditure, general corporate requirements, to engage in future
development activities, or place 29Metals at a competitive disadvantage compared to its competitors that have less debt or fewer financial
commitments. The occurrence of any of the above factors may have a material adverse effect on the financial and operating performance of
29Metals
ĞďƚĨĂĐŝůŝƚŝĞƐĂŶĚĨƵƚƵƌĞ
ĐŽǀĞŶĂŶƚƐ
29Metals’ ability to service its debt depends upon its financial position, performance and cashflows which are subject to factors beyond the
control of 29Metals. If 29Metals is unable to meet its repayment obligations, it may face additional financial penalties, higher interest rates
or difficulty obtaining further funding in the future. There is also a risk that any covenants related to financial performance and position may
be breached and the facility may be repayable sooner than anticipated.
29Metals has been granted certain covenant waivers. If, for any reason, 29Metals requires further covenant waivers in the future there is no
guarantee that any covenant waivers which may be requested by 29Metals in the future will be granted.
29Metals is also subject to the risk that it may not be able to refinance its debt facilities when they fall due or that the terms (including in
relation to pricing) on refinancing will be less favourable than the existing terms. If there is a deterioration in the level of debt market liquidity,
this may prevent 29Metals from being able to refinance some or all of its debt.
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ůŝŵĂƚĞŚĂŶŐĞ
limate hange exposes 29Metals to a range of risks, as well as opportunities associated with the global transition to a greener economy.
isks to 29Metals as a direct or indirect result of limate hange may include
▪
increases in the frequency or severity of extreme weather events or natural disasters (refer above regarding the risk and potential
impact of extreme weather events)
▪
changes to the regulatory environment for 29Metals’ business, including the inclusion of limate hange considerations in regulatory
approvals, and the imposition of tariffs and other imposts on cross border supply chains and
▪
changes to the availability and accessibility of debt capital and insurance.
irect impacts of limate hange may vary geographically, and may include one or more of changes in rainfall patterns, drought‑induced
water shortages, increases in the occurrence and intensity of extreme weather events (including bushfires, storms and floods), and rising
temperatures. The occurrence of such events, or an increase in the frequency and severity of such events, could result in damage to 29Metals’
mine sites and equipment, interruptions to critical infrastructure such as transport, water and power supply, or loss of productivity, and
increased competition for, and the regulation of, limited resources (such as power and water). ach of the above events, either individually
or in combination, may have a material adverse effect on 29Metals’ operational condition and financial performance.
&ŝƌƐƚWĞŽƉůĞƐ͕ŚŽƐƚ
ĐŽŵŵƵŶŝƚŝĞƐĂŶĚŽƚŚĞƌ
ƐƚĂŬĞŚŽůĚĞƌƐ
29Metals’ relationships with the community and other stakeholders, including First Peoples and regulatory authorities, are critical to the
continuation and long term success of 29Metals’ business. Fostering and maintaining a social licence to operate in respect of a mining project
is a key component of sustainability
, without which it can be very difficult to, among other things, secure necessary permits or arrange
financing. Although 29Metals is committed to building and maintaining positive relationships with the communities near its mines, it may
engage in activities that have, or are perceived to have, adverse impacts on local communities and other stakeholders, cultural heritage,
human rights, and the environment, which may delay or prevent 29Metals from acquiring the relevant permits and approvals to comply with
its regulatory obligations. Any failure to acquire the relevant approvals may result in suspension or delay in mining operations which would
adversely affect 29Metals’ operational and financial performance (refer above for further information regarding risks associated with
regulatory approvals).
In addition, 29Metals’ current operating assets are mature assets with long operating histories. Perceptions and expectations of stakeholders
may change over time, including changes in aspirations and the expectations of local communities with respect to 29Metals’ contributions to
employee health and safety, infrastructure, community development, and environmental management. In turn, community and other
stakeholder attitudes to 29Metals’ business and operations may have an impact on 29Metals’ ability to secure and maintain regulatory
approvals, which may subsequently adversely affect 29Metals’ operational and financial performance.
ƵůƚƵƌĂůŚĞƌŝƚĂŐĞ
29Metals must ensure that its operations do not interfere with or impact upon identified sites of cultural significance to First Peoples.
Following the events at uukan orge in estern Australia, the risk to projects associated with Aboriginal heritage and cultural values has
increased. hile changes to Aboriginal cultural heritage legislation in estern Australia have been repealed, there remains a risk of changes
