Banter and general comments, page-30283

Some thoughts:

FY25 comments
Like others, I have also been struggling to understand this but have come up with one theory that might explain it. On the Core's Bio page it noted Gareth had the position "GM sustaining capital". In that position I suspect he would have been monitoring projects that had a low remaining life and recommending/approving actions to extend that life through the investment of sustaining capital. Given Rio's size there would be a large internal team working on these extending life projects so his normal expectation would be work gets completed when its needed. Given the sort of projects Rio has, a mine plan under 5 years would probably be amber and anything under two years would be red (but I'm just guessing on this). Fast forward and he is presented the situation of Grants at inception having a 2.1Mt reserve (open pit) and 0.3Mt reserve (underground). The scoping work for Grants underground is incomplete. The BP33's study is incomplete. The mining plan for Grants was to deliver 1.1Mt/yr so that 2.1Mt will go really quickly. Somewhere around 150-200kt of ore has probably been mined so that 2.1Mt mine plan is now about 1.9Mt and falling.

On a reserve basis, Grants is now under 2 years life on its planned, but not possibly being achieved, mining rates. In his previous job he would be giving regular warning to those further up the food chain in this situation and also looking to approve or get approved works to improve the length remaining in the mining plan. On a good timeline BP33 scoping plans for a FID should have been being developed as Grants was being built and substantially complete as Grants came into first production. Clearly that hasn't happened so the commissioning of this work was massively late/under resourced (sorry another cross mark re SB). Gareth must be frustrated by this and the FY25 comments may be a result of this &/or confusing advising superiors and recommending/implementing solutions (his old job) and advising the board / shareholders while running the shop (his new job).

So what are the solutions - As noted in the quarterly, complete the review of Grants underground which might help a little. This should be complete but clearly isn't. Clearly progress BP33 as quickly as possible and in doing that the risks of approving early works before the FID have been accepted. This isn't an ideal situation so there's clearly a recognition BP33's plan is behind schedule. Another phrase used in the quarterly is "assessment of the potential to recover ore currently not in the Grants mine plan." Grants has a JORC of 2.9Mt and there may be areas where drilling could extend this slightly. The underground bit is not in the current mining plan so that's an option. A 3rd option would be altering the pit size so as to capture more of the 2.9Mt resource than is done with the current plan which includes 2.1Mt open pit. Back when Grants pit was first designed Spod prices were well under $800/t and the mine design will (with any errors) have reflected this. Ore that cost $1,000/t-$1,500/t to extract and process would be planned to be left in the ground, with some of that extracted by the "underground" 0.3Mt reserve. Its unclear the extent to which the pit design has been modified for the higher cost ore that is now profitable. Some other open pit mines are now being designed around $1,500/t spod. Their average cost will be lower, but that's the highest marginal cost ore explicitly targeted. Reworking these assumptions may allow a bigger pit that then enables the 2.1Mt to move close to the 2.9Mt. This would increase C1 costs, but it would still increase profits if you dig and process at $1,500/t to then sell at $2,500-$4,000/t. This would put more ore into the FY25 and FY26 grants mining plan. Gareth's problem is that this work and what options are chosen isn't complete or approved by the Board. He can't give specifics on something still being developed.

The cynics would say he should have realised the problems earlier and that's a fair call but it doesn't change the current situation.

Fines
As noted by a few posters, you are never going to get 70% overall recovery rates if 30%+ of the material is fines and not even making it into the DMS to be a potential recovery. While the processing cost of fines is higher, its not that much higher (LTR has a good projected C1 cost). When you already have the ore out of the ground the incremental cost isn't too bad (even without knowing precise numbers). Its sensible to get one shipment of fines away to China because that will test/confirm the market for the product, any logistical issues and customers will have a chance to see how the ore performs. Beyond that there could be a case for stockpiling fines for a future smallish flotation plant. Just because Core didn't originally plan flotation doesn't mean it isn't now optimal to add it to the flowsheet. 95kt of fines at A$200/t is A$19m of revenue. If flotation gave a 70% recovery that 95kt of fines would be about 12k of SC5.5 [95kt*(1%/5.5%)*70%=12k]. If this was sold at even US$2,500/t its about A$43m of revenue (and at US$4,000/t its nearer A$69m). If Core were to be processing 1Mt with 30% fines then you could multiply this $24m-$50m gap by 3 so a flotation circuit might add A$150m in revenue. I'm not sure what the cost of a flotation circuit is, but if there was A$150m of extra revenue available each year from it, its got to be a fairly quick payback. The problem is this solution would take 2+ years and therefore won't resolve Grants recovery issues. Revised Met test work is needed on BP33 and also on Carlton / Hang Gong (and others) to get an idea of the fines they may generate and therefore the sort of size plant that would be optimal - assuming this back-of-hand calculation is confirmed in more accurate calculations.