Banter and general comments, page-38776

Same thesis as before. Mining at the very bottom of an open pit in the wet season is extremely difficult if not impossible. GM may have had little choice but the mining plan he was implementing had Core mining the very bottom of the existing open pit in the peak of the wet season (Jan / Feb 2024). He had little choice but to pause mining but rather than own it and say "I'm a poor scheduler and now need to do all this bottom of the pit work at the peak of the wet season." he looked for external factors to blame and along came price.

There is perhaps 2M bcm of mixed ore and waste rock to mine out of Grants that will deliver somewhere between 1.3Mt and 1.5Mt of ore to the ROM pad. The ROM pad holds <0.5Mt. Lucas mines at 2M bcm per quarter. Lucas was going to deliver 1.5Mt to the ROM pad over the next 6 months (assuming a mining pause of a couple of months). Yep production would run down the 289Mt by June but adding 1.5Mt onto a pad for <0.5Mt doesn't work. Sure Core could have probably stored the ROM somewhere else onsite, but the mining had to pause because it was running ahead of the capacity of the DMS to process. GM could have said "I've stuffed up the ROM pad / mining schedule and need to pause mining due to my stuff-up" be he didn't want to say that so he blamed something external - price and reduced the capacity that Lucas had onsite. Lucas kept the gear around for a while because to them the sensible plan was to blitz the remainder of Grant's ore and get it up onto the ROM pad and temporary storage areas. This would take the wet season out of play and mean they finished the job and could take all the open pit gear away until the next big open pit operation Core planned. Core didn't say restart on these new T&C's as they expected.

Core has a mining plan with extremely strip ratios and therefore high prices at the start that get progressively cheaper as the gap between the pit walls reduces. The overall project strip ratio is ok. Core looked at the intelligence of all the comments they were receiving through emails and their customer relations function and decided it wasn't going to work to say, were high cost but its ok, costs will reduce because of these technical factors. They decided it was going to be more effective to get all the costs they could into the Dec23 half year, have a gap to flush through all remaining accruals and then restart with the new lower cost structure later in 2024. This aligned nicely with the need to pause mining for the wet season and the need to pause mining for ROM build issues.

With the decline in prices the strategy morphed from allocating the stripping asset earlier than makes sense from a financial cost equalisation viewpoint to a massive across the board write-down into the Dec 2023 accounts so that almost no legacy costs remained to impact on the new lower cost structure. This is your classic big corporate write-down, restructure, recovery scenario. The problem is GM used all his experience at Rio Tinto to suggest to the board that while it might cause a temporary modest hit to the share price the market would quickly bounce back. He got that massively wrong as events spiral and he got the boot before being able to implement his recovery plan.

The restructure element of the plan has involved getting a new and improved cost structure for DMS processing. Recent comments about were road train ore movements are occurring indicate it may also involve changing which port is used to export ore. Because the write-down's were done at half year but the auditor doesn't signoff on them until year end, Core has needed to keep good news about future profitability to a minimum so as to enable the write-downs to be signed off. The BP33 case was pulled because it showed too much profitability for the world is ending view being told to the auditor.

Core decided not to respond to all the high cost commentary because they knew they had a low cost operation they would be relaunching and also because all this high cost commentary aligned with their objective of getting the Auditor to sign off on all the writedown's. An example of the worst possible instances of running a company by financial reporting imperatives rather than sensible operational decisions. Mr Brown has come in and been briefed on the whole strategy and decided its best to talk to key stakeholders (Government, customers in China) and wait until at least July (the new financial year) before providing anything meaningful to the market.

The restarting announcement recently was lame because if they put all the good jucy bits in around low costs it would stuff up getting the auditor signoff for all the writedown's management put into the December accounts. The recovery element of the plan is being prepared but having taken all the share price pain, Core appears to have decided to wait until the objective of signing off the accounts is complete.