Operator: Thank you for standing by and Welcome to the Aurelia Metals Limited September 2026 Quarter Report. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Steve Badenhorst, Managing Director and Chief Executive Officer. Please go ahead.
Steve Badenhorst: Thank you, Mel, and good morning, everybody, and thank you for joining us for the first quarterly meeting for the new financial year for Aurelia Metals. I am joined today by Martin Cummings, Andrew Graham, and Angus Wyllie. It is also my first quarterly review, so I will use a very short moment to give a brief overview of who I am. As announced at the beginning, I am Steve Badenhorst. I have taken the reins recently as the managing director and chief executive officer for Aurelia. Most recently, I have been with Rio Tinto and a few other tier one mining organizations.
Steve Badenhorst: My career as a mining engineer has largely been in operational leadership roles in everything from bulk commodities to base metals in both surface and underground operations in multi-mining jurisdictions. I have a strong passion for operational excellence, which we will cover later.
Steve Badenhorst: Enough about me, though, and I would now like to hand to Martin and the team to share the great news on our first quarterly performance, which he and the team delivered over the period from Bryan's departure to my start a few weeks ago. Martin.
Martin Cummings: Thanks, Steve. I will be talking to the presentation that we released on the ASX this morning. Turning to slide three, the key highlights this quarter is that our production growth is translating into stronger cash generation. Our copper, gold, and zinc production was higher, and our lead production was in line with the last quarter. It is that higher production that has again driven Cobar regional operating cash flow to the highest quarterly outcome since 2018, and in turn, took our cash and liquidity to over AUD 200 million. Our growth projects are on track, and we now have our leadership in place with Steve's commencement this month. Holistically, our operating performance and our balance sheet really sets us up well for our next chapter under Steve's leadership.
Martin Cummings: Turning to slide four, as I said, a strong start to the year, setting us up well against our production, cost, and capital guidance, which we have also reaffirmed. Our gold production of 16,200oz was supported by continued access to high-grade gold ore from the Peak South mine. This amount represents close to 30% of the midpoint of our full-year production guidance after just the first quarter. Our copper production increased to 1,3 thousand tons, which was 43% of the midpoint of our FY27 guidance. We did process proportionately more copper ore this quarter than we will in future quarters, and grades were strong, but it sets us up well for copper production guidance for the year.
Martin Cummings: Our zinc production of 8.3 thousand tons was the highest quarterly result for zinc since FY22, and our lead production of 5.2 thousand tons was largely in line with last quarter, but importantly remains on track against guidance. Group operating costs were lower this quarter at just under AUD 90 million, noting that in the prior quarter, we were reporting rehab costs for Dargues that are now being reported separately. The main decrease in our operating costs this quarter was a greater proportion of costs being capitalized at Federation for mine development and some lower corporate costs. Our operating costs will vary quarter on quarter with movements in the amount of mine development completed, but we remain on track relative to our guidance. Just a side note on diesel, given everyone's interest.
Martin Cummings: We have not seen any issues this quarter with deliveries continuing uninterrupted, nor are we aware of any issues on the horizon in terms of future supply. For capital, sustaining capital was AUD 13.2 million, and growth capital was AUD 11.7 million. For sustaining, we do have some investments in fleet in Q2 that are expected to increase the spend next quarter, and that will result in a spend profile more closely aligned to the full year guidance. Our exploration expenditure increased to AUD 4 million, which was based on accelerated across our regional and underground programs. You saw some excellent results yesterday that Andrew will talk to later in the pack. Moving on to slide 5, the key message here is that our mines are continuing to build the ore availability needed to support our planned production growth.
Martin Cummings: Our Peak mine development continues to track above 1,500 meters per quarter, and ore mined was 148,000 tons. It was down slightly after a very strong June quarter, but is slightly ahead of our plan year to date. The investment I talked about last quarter in production drilling capacity has continued to benefit our mining rates. Drilled stopes increased from around 25,000 tons at the end of June to more than 70,000 tons at the end of September, with those additional drilling contractors now demobilized from site. At Federation, 97,000 tons of ore mined. We did have some issues with production drilling and loader downtime and also some operator shortages in July. But pleasingly, our mining rates have returned to plan in August and September.
Martin Cummings: From a development perspective, we did have to actively manage water on the surface with our water management dam and our TSF at Hera reaching levels that required us to slow down our mine dewatering. This resulted in the need to store water underground until additional capacity in the dams was created. Our water management infrastructure was upgraded with the purchase of two large evaporator fans and the rental of a second reverse osmosis plant. Pleasingly, these efforts have resulted in water levels dropping in both dams. But as a result, our mine development was lower at 1,147 meters for the quarter, with the impact primarily relating to the inability to advance the decline deeper. Our current focus this quarter is to dewater the remainder of the water in the decline and reestablish services, which is on track.
Martin Cummings: We expect the normal development rates from Q3 of this year. Importantly, we don't expect this situation to impact our FY27 metal production guidance. Turning to slide 6, the plant continued to perform strongly, processing 226,000 tons, close to the record of 230,000 that we achieved in the June quarter. For production, the key driver was grade, with higher gold grade and higher copper grade in our copper ore, and also for our lead zinc ore, an increased proportion of Federation ore in the mill feed, resulting in higher zinc and lead grades. Pleasingly, recoveries continued to perform well to maximize metal production. Just as important is the mining performance I covered on the previous slide enabled us to build our ROM stocks, notwithstanding the strong plant throughput.
Martin Cummings: The combined Peak and Federation ROM stockpile is now 123,000 tons at the end of September, which provides additional feed as the expanded plant processing capacity becomes available through Q2 FY27. Moving on to slide 7 with the expansion projects, the tailings and process water management project is now complete. The existing tailings thickener has been repurposed as a second leach feed thickener, and the new tailings thickener was commissioned in June. This project will support higher copper and zinc recoveries and lower our cyanide consumption. The tertiary ball mill and the new cyclone cluster have also been installed and tied in.
Martin Cummings: This week, the mill's actually been running on both water and slurry as part of the commissioning plan, and we'll look to complete that commissioning this quarter, with the expanded plant capacity expected to be fully available from Q3. As we announced in August, the regulatory approval to operate the plant at the expanded rate has also now been received. Moving on to slide 8 and Great Cobar, the project continues to advance in line with plan. Mine development increased to 506 meters for the quarter, up from 438 meters in June, which takes total project development to 2,380 meters of the approximately 4 kilometers to be completed. Our underground development is currently being prioritized towards the location of the fresh air raise, which represents the next major development milestone.
Martin Cummings: On surface, the concrete foundation collar for the raise bore rig's been completed. You will see a photo of the pour of that collar back on slide 3. The mobilization of the raise bore rig is planned for November, with the pilot hole expected to commence during this quarter. Design work's also progressing for the electrical and dewatering infrastructure, the grid connection arrangements, and the heavy vehicle haul road intersection. The project, as I said, remains on budget and schedule with first ore on track for FY28. Great Cobar, as you know, will become an important source of high-grade copper and gold ore and forms a central part of our strategy to increase production through the expanded processing plant at Peak. I'll now hand the call over to Andrew to take you through exploration.
Andrew Graham: Thanks, Martin. Our exploration team's been extremely busy through the quarter, as was summarized in the quarterly. Just touching on a few of those items, work on New Cobar Federation, as well as regional targets that we're waiting on assays for, and processing those results. Our intention is to be able to bring you updates on both the Federation exploration programs as well as the New Cobar mine exploration programs before Christmas, and then hopefully an additional Peak South mine exploration update in due course. We have also been busy at Peak South mine, and as Martin alluded to, we did put out a release yesterday on that work. I thought today rather than run through all the things we've been doing for the quarter, to which we're still working on the results, I'll run through those Peak South mine results.
Andrew Graham: There's four items to touch on. They're covered on slide 9 of the pack that went out today. Firstly, in the Peak Kairos gap, I suppose, so between the Peak Western lead zinc lens and the Kairos Eastern copper lens, there's an area that was poorly constrained by drilling. You'll recall that we tied in that development between Kairos and Peak a little while back. It's given us platforms to drill from, and drilling from that, we did intersect what is nothing short of stellar grades. There's 1 meter at 1,120 gram per tonne gold that we released yesterday, part of a broader zone of 10 meters, 113 grams gold, 1.3% copper, and that's in hole 224, which you can see on the image.
Andrew Graham: Even if you take out the effect of the nuggety hit, it is still a very broad, very good grade intercept of gold and copper between Kairos and Peak. The view now that we have is that those two lenses are actually joined in a single lens. So it gives us plenty of opportunity to continue to target that from drilling. The other pieces we put out, we released results from drilling of the Kairos Eastern copper lens, which extended mineralization 100 meters to the north, as well as 80 meters down dip. Then the third item of good news that we put out was drilling at Perseverance Zone A. We had a hit there that included 2.8 meters of almost 4% copper within 11 meters at 1.4% copper.
Andrew Graham: Similar to Kairos Eastern copper, that extended along strike about 30 meters, and I am not even mentioning as a whole, which we did not highlight, 9.7 meters at 2.1% copper. So some great hits there to the north of Perseverance Zone A. Finally, if you are looking at the image, or if you saw the image in yesterday's release, you can see a drill hole trace from surface to below Kairos, hole 217.
Andrew Graham: We drilled from surface so that we did not get impacted by acute drilling angles and talc that has made underground drilling of Kairos extensions problematic. That hole is now in place. The intention is to drill a series of wedges, so daughter holes off that parent hole. Those who recall Federation some years ago, that technique was used to great effect, significantly reducing the cost of drilling.
Andrew Graham: The intention through this financial year is we come back and put a series of daughter holes off that Kairos hole. So all up, we have been very busy on exploration. It was great to be able to bring you the Peak South mine results yesterday, and talk through those just now, and we look forward to bringing Federation and New Cobar exploration updates to you shortly. Back to you, Martin.
Martin Cummings: Thanks, Andrew. I will now turn to slide 10. It really just shows that the operating performance this quarter has translated into meaningful increase in cash and liquidity. So you can see the chart there on the left shows the increase in operating cash flow after sustaining capital for our Cobar region, now up to AUD 65.3 million for the quarter, which was once again the highest quarterly result since 2018. Key to this really is the strong production, and sales that I covered earlier. In addition, this funded our growth capital of AUD 11.7 million, which is on track with spend primarily for Great Cobar and the Peak plant expansion, and we also invested a further AUD 4 million into exploration.
Martin Cummings: Just the other point to note on the cash flow chart on the right, you will see a working capital outflow of AUD 23 million for the quarter. There are three main things that make that up. The first is we did build higher concentrate receivables at quarter end, so we do take receivables through our operating cash flow and then recognize the actual cash receipt in working capital. So those receivables did build up at quarter end. We also did unwind some of our trade payables from the costs from the June quarter primarily. So trade payables are lower with an outflow through cash. Finally, September is when we pay our annual incentives. So we have been accruing costs throughout the year, and paid our annual incentive to employees in September.
Martin Cummings: But after these movements, our net cash increased to AUD 160.7, up from AUD 143.9. As I said earlier, takes our liquidity with our undrawn revolver above AUD 200 million. One other comment on cash. Most of you will know at the post the quarter end, we paid our AUD 0.01 fully franked dividend that we announced in August. That was paid on 8 October for a total of AUD 17.2 million. So that is all. I will hand you back now to Steve for closing comments.
Steve Badenhorst: Thank you, Martin, and thank you, Andrew, for that exploration update as well. I would now like to focus on the last slide 11, on some key focus areas based on initial observations and conversations I have had with many of you over the recent weeks that I have been with the organization.
Steve Badenhorst: Firstly, I think it is really important we deliver safe, predictable operating performance, which is aligned to the next point on driving productivity and cost improvement. Planned work and correctly scheduled and correctly executed work is far safer. It is more cost-effective, and it is cheaper. It is more sustainable, it is good for our customers, it is really good for our investors, and it is good being in a winning team. Importantly, if we can get the cost base reduced, we have access to a lot more ore in the Cobar ore bodies, which will be reduced if we cannot get the cut-off values low enough.
Steve Badenhorst: The other one is to complete our growth projects. As touched on by Martin, we are progressing really well, with the tie-ins at the Peak processing plant. To get that completed to achieve the full 1.2 million tonnes of operating capacity annually is a really important commissioning stage, and we hope to take significant steps in that direction over Q2.
Steve Badenhorst: Great Cobar developments, I had the opportunity of being down there a few weeks ago, and that one is progressing really well. The developments at that area, where we will be intercepting the new raisebore shaft is progressing extremely well. There is a lot of excitement in that area about the copper development that will come with Cobar. An area I have a passion for is to embed asset management fundamentals. We are an asset-intensive business with fixed and mobile assets.
Steve Badenhorst: If correctly maintained, these assets will deliver the desired performance and reliability the organization requires. This means asset criticality must be assessed, work is correctly planned, resourced, and executed, and work management indicators will give us the necessary satisfaction that the work is being done correctly. If achieved, our supply chains can be optimized, and the cost benefits are significant. Unplanned work is roughly 4x the cost of planned work. Increasing our ore body knowledge is really important, and we have termed it there, the continue advancing our ore body knowledge. There is a lot of information we have generated in the Cobar Basin over recent years. The more we know about our ore bodies, the better we can make longer-term decisions regarding investments, growth, optionality, et cetera.
Steve Badenhorst: We have access to an attractive collection of tenements in the Cobar Basin, and it is an important copper producer in the future, especially around the Great Cobar project. How we understand this ore body is really important. As we know, in the Cobar region, many of the ore bodies we have access to, as recently discussed by Andrew, are open at depth. When we get into the underground areas, we get the opportunity of doing more infill drilling to explore that opportunity.
Steve Badenhorst: Finally, an area I have a passion for as well is to attract, develop, and retain a high-performing workforce. I have been impressed with the people I have interacted with in the past few weeks. The knowledge, the experience, and their commitment to achieve our results is really impressive. We need to align to our key objectives.
Steve Badenhorst: We need to achieve our aspirations, and people being part of a winning team is just a natural passion that I think most people have. You enjoy being with a team where you are achieving results. We are working on options to solve some of the long-standing accommodation challenges in Cobar and working with many community members to solve that. Finally, we need a culture of inclusivity, where everyone comes to work every day and gets the opportunity to contribute to our aspirations. Mel, I would close with that and hand back to you for any questions online.
Operator: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Adam Baker with Macquarie. Please go ahead.
Adam Baker: Hey, morning team, and welcome Steve. Not a bad quarter to be joining the company. Maybe just starting at strategy, is there any changes in strategy that you would like to make compared to the prior management team? Or, do you view the business is on a pretty even keel at this stage? Thank you.
Steve Badenhorst: Yeah. I will probably take that question quickly. You used the word keel. I think the ship is floating and this quarter, the results reflect the good performance from the operation. If anything, I think it is minor adjustments to the course that we need to make to get more sustainable operating improvement. As I touched on, one of the areas that I think is an opportunity is to get the asset management fundamentals working. We need to have the fixed and mobile assets that we have access to achieving the necessary performance objectives. That is really fundamental and then also at the right functional availability. I do not think it is a change in strategy. If anything, it is a course correction. A minor course correction to get more sustainable improvement.
Steve Badenhorst: If I tie it back to the very first point, if we can do that and we can reduce our cost base, I think there is opportunity for us to improve the access to the reserves, or the resources that we have in the Cobar Basin.
Adam Baker: Okay. Thanks for that color. Just one on Federation, if I may. You mentioned the intersection of more water. Just wondering, is this related to a new aquifer that you might have intersected as you have been declining down? Or has the water been more related to surface water storage facilities on surface and, I guess, a capacity from that side? Just trying to understand the issue on this side of things. Thank you.
Steve Badenhorst: Thank you. I will pass that question to Angus, who is at Cobar and probably in a better position than I am.
Angus Wyllie: Yeah. No, the increased water flow is certainly related to underground. We have seen increased water flows increasing underground and just expanding our surface infrastructure capacity and an ability to deal with that water. We have seen positive progress through the quarter with the installation of new evaporators and additional RO plants that we are now able to manage that volume of water and get back on top of it.
Adam Baker: Okay, thank you. Just maybe following up on the expansion of the new mill or Peak plant expansion. Obviously, got a few tie-ins happening this quarter relating to the tertiary ball mill and new cyclone cluster. Are we expecting any downtime from this side of things?
Steve Badenhorst: Angus?
Angus Wyllie: Yeah. We have just recently completed a five-day shutdown to complete those tie-ins. We have got the new cyclone cluster up and running and have ball mill turning and loaded with balls this week. So, actively commissioning the tertiary ball mill at this point.
Adam Baker: Yeah. Okay. Thanks, guys. I might leave it there and hand it on. Thanks for your time.
Steve Badenhorst: Yep.
Operator: Thank you. Your next question comes from Peter Kormendy with Shaw and Partners. Please go ahead.
Peter Kormendy: Thanks for taking the question. Perhaps another question directed at Steve. Liquidity is well over AUD 200 million. The business is self-funding, so it is fabulous time to join the business. Can you just give us some high-level thoughts about your priorities, and perhaps spreading those between Great Cobar or New Occidental, or even further exploration or Peak South?
Steve Badenhorst: Yeah. The liquidity obviously is an interesting one. If you look at our working capital, we require roughly AUD 100 million for the ebbs and flows that happen in the organization anyway. So yes, it is a great liquidity position and it is really attractive to join an organization at this sort of stage.
Steve Badenhorst: I am not sure we are ready to make any major decisions on how we are going to adjust our direction at this point. I do not think we are going to be deviating from the planned exploration this year or the planned expansion of the plant. Our growth projects we have locked in and they are running to schedule. So I do not think we are going to be using that capital at this stage. In the next few months, I will be working with our board and early next year, strategizing with the board.
Steve Badenhorst: At that stage, I think we will be in a better position, probably end of Q2 to early Q3, to make a decision if there will be any direction change. I cannot foresee that at this point.
Peter Kormendy: Okay. Thank you. If I ask another one just about the gold-heavy mix. September quarter annualizes to a rate well over current guidance. Just how sustainable you see the gold mix that we saw in the September quarter or is there going to be a step down in the H2 of the year?
Steve Badenhorst: Angus, could you take that?
Angus Wyllie: The current quarterly plan for this coming quarter does have lower gold production. We have had some very high-grade stopes last quarter. There is slightly lower gold production through this next quarter. We remain on track and looking at the upper end of guidance.
Peter Kormendy: Yeah. Okay. Thank you. Is it a commitment
Steve Badenhorst: I guess, Peter, in my comments, I talked about we had a lot of that gold, the copper ore that we processed this quarter.
Peter Kormendy: Yeah.
Steve Badenhorst: We do have a fair amount of Federation ore sitting on the ROM that has that lower gold grade because it has the high zinc and lead. If you are thinking about just how if you are filling the cup on each of the guidances, gold and copper are quite strong at the moment. As that plant capacity increases and we put more of that fed material through, that is how those metals will sort of top up. That is sort of how the year looks.
Peter Kormendy: Okay. Thanks very much.
Steve Badenhorst: Yep.
Operator: Thank you. Your next question comes from Paul Kaner with Ord Minnett. Please go ahead.
Paul Kaner: Yeah. Thanks. Morning, Steve, Martin, Andrew, and Angus. Thanks for taking my questions. First one, just on those exploration results around Peak and Kairos. Does that change how you are thinking around, I guess, the mine plan over the next three years? Does that change your outlook for Peak?
Steve Badenhorst: Andrew, could you take that?
Andrew Graham: Yeah, absolutely. Morning, Paul. Good to hear from you. Look, no, it does not change our plan. So, through last year, we talked a bit about the fact that, particularly the gold price, there was more inventory in Peak South mine. This only adds to that. So effectively, we are getting certainly the stuff above Kairos, below Peak, that bridge area. It is great. It is additional inventory. It is very close to development. All the extensional drilling, we are able to extend mineralization along strike, is again, very close to development. So those tons will come through. So what it does effectively is what we are already doing, which is to be in South mine a little bit longer, buys us some optionality, particularly as Great Cobar starts to come on, but does not fundamentally change our plan.
Paul Kaner: Yep. No, that is clear. Thanks, Andrew. Then just following on from Peter Kormendy's question, just on guidance, and you sort of touched on tracking at the top end of the parameter for gold and potentially copper as well, but lead production, that is also tracking above expectations. I guess my question is, was this quarter better than planned, or should we expect a bit of a retracement across all the commodity suites to see you meet the midpoint of guidance, specifically for copper and lead?
Steve Badenhorst: Martin?
Martin Cummings: Well, yeah, we are pretty happy, without sort of going on a budget versus actual, Paul. We are pretty happy with the performance. Metal production is strong, and we are very comfortable with where the guidance is at. But, I guess we will get through another quarter before we consider any changes to it. But, yeah, certainly on lead is tracking at around 25% of midpoint. Zinc is around 28%, 29%. Copper is high because of that mix issue. We just processed a lot more copper ore than we will in the balance of the year, and the gold came with it.
Martin Cummings: Just to explain that, as you said in the report, when we have these gold-only stopes that we are mining in the Peak South mine, we are reporting them as copper ore. So we are putting them through copper ore in the stats.
Martin Cummings: So a lot more copper ore and then a lot more lead zinc ore with Federation in the H2 or in the balance of the year. But I will just say we are feeling comfortable about metal production.
Steve Badenhorst: Paul, if I can just go back to your previous question on the expansion potential and whether that will change in the next 3 years. I think one of the things I have quickly learnt around the Peak and all of these is as we get deeper into these operations, the opportunity to do infill drilling from established platforms deeper down.
Steve Badenhorst: We know these ore bodies are open at depth, and the more we can understand them, it is great seeing the exploration potential that comes through that particular update we have given. But the more we understand from depth, I think the better we are going to be able to predict the nature of the Cobar ore bodies are probably better defined when we do infill drilling, when we get to the top. Exploratory drilling from surface gives us a very good indication where it might be.
Steve Badenhorst: But we do know these deposits go deeper. The likelihood of expansion at depth is there, but it really requires us getting into the deeper mining areas, establishing an exploration platform from which we can do this infill drilling.
Paul Kaner: No, that's great. Thanks, Steve, for that additional color there. Just last one on senior management and personnel. I see Andrew's taken another role. Just around that IP leaving AMI, thoughts on his position and who's going to take that?
Steve Badenhorst: Well, it's one of the things that I've walked into. It's unfortunate to see Andrew move on, and I wish him well for the next opportunity he's moving to. But it also gives us an opportunity to evaluate the organization structure at this stage in our development. I'll be doing that over the next few weeks. So too early to predict whether it's a direct replacement or whether it's a reorganization of sorts at this stage that could result from that. I wouldn't speculate at the moment. I think there's all options on the table. But I haven't landed on a position where we go for a direct replacement at this point. The team working for Andrew, very competent, very confident that those organizations or parts of the business are doing a great job.
Steve Badenhorst: There's an opportunity to reorganize how we have that reporting relationship, but that will come when we make the decision in the next few weeks.
Paul Kaner: Yep, too easy. No, that is it from me. Thanks, guys. Have a nice one.
Operator: Thank you. Your next question comes from Daniel Roden with Jefferies. Please go ahead.
Daniel Roden: Hey, guys. Congrats on the quarter. Maybe just getting a bit more color on a couple of things you have already spoken about, but just wanted to, I guess, dive into the Peak mining costs. On my back of the envelope, I am getting like AUD 160 per ton, which is, again, my data set is probably one of the highest on record. Just noting that the last year or 2 has been a really big focus on getting that unit cost down. Maybe just help explain what the contributors of that cost increase have been and how much of that has been, I guess, correlated to chasing higher-grade stopes that in the current commodity price, have a higher NSR. How are you guys thinking about that internally?
Daniel Roden: I guess noting that this has been a pretty big focus over the last 2 years, what are some of the strategies that, I guess, you can implement from now, and what has not worked over the past couple of years?
Steve Badenhorst: Thanks, Daniel. As I said, really passion of mine and I think the experts at the moment, I will pass to Martin.
Martin Cummings: Yeah. Good day, Dan. I will just make some opening comments, and then I will hand over to Angus for any additional color. Yes, I think we did note the 161, I think it is, in the report, Peak mining costs. I guess there is a couple of things in that. I talked about production drilling capacity, and I talked about that at the June quarter. So we did consciously make additional investments in operators primarily, and equipment to get ahead on production drilling.
Martin Cummings: So those operators did demo during September. So we consciously carried some of those costs over the June quarter and the September quarter. Diesel, obviously there is a cost inflation in that. We are not a huge consumer of diesel, but it does contribute to Peak, probably more so to Federation, given the haulage of ore up the road.
Martin Cummings: I guess the other piece, and Angus will be able to go into more detail, but just when we were going through our budgets, the nature of the stopes and the number of stopes that we are mining at Peak, the average stope size is getting a lot smaller. So what we are finding is we are going into these, the same setup and the same development to get to these smaller tonnage stopes, but with higher grade. So when you look at it on a margin basis, well worth going into them.
Martin Cummings: But it does mean that the mining cost to get in there on a dollar-per-ton basis is higher, just driven by the fact that we do not have these larger stopes. When we get across to Great Cobar, the average stope sizes will increase. So naturally, the per-ton metric will improve from that.
Martin Cummings: Certainly got a lot of focus of us as we are setting up our plans for this year. Angus, I might just throw to you for any other comments on that.
Angus Wyllie: No, thanks, Martin. As Martin said, that is really the key driver as we went through the budget. We are mining average stope sizes between 6,000 and 7,000 tons of stope this year. So same amount of work and effort required to set up those stopes as mining a 20,000-ton stope. So that is where some of the cost increases are coming through, and we continue to have a clear focus this year on productivity and efficiency improvements. We will hopefully see some of those results come through in the coming quarters as we work to improve those unit costs.
Daniel Roden: Yeah, no, perfect. Thanks for the color, guys. Maybe, I guess, leveraging off that, the stope size as being a big contributor, maybe as you are commissioning and ramping up the mill expansion to the 1.1.2, what areas, I guess, from the mining front are supportive of that? Federation is obviously still in its ramp up and its infancy for all intents and purposes, but it has still got a bit of a way to go there. Is the stope size at Peak South, for example, is that going to increase over the next couple of quarters to be able to underwrite and underpin a full mill post-expansion?
Steve Badenhorst: Angus?
Angus Wyllie: No, we do not see an increase in the stope size. It is really around, we are working those areas between around Peak and Kairos, closer to the crusher and the hoisting infrastructure, and really driving those stopes. Again, working on that productivity and efficiency, making sure we have got those stoping fronts. As Martin touched on earlier, we have got the production drilling, and we have carried that drilling to make sure we have got the drilled stocks ahead of us, and we have got that material available in the coming quarters as we go forward.
Daniel Roden: Yep. No, thanks for that. Thanks for the call. Maybe just one more from me, but I know you have spoken about, I guess, strategy and how you think about the business going forward and everything like that. But if I take that there was a bit of, I guess, working capital build in this quarter that might be rolled back next. Sorry, included into next quarter's cash flows. Your business is in quite good, quite rude health.
Daniel Roden: How should we think about, I guess, capital allocation beyond project selection over the next 12 months? Are you thinking about shareholder returns? How do you think about shareholder returns in light of, you have got, I think it is AUD 40 million or AUD 50 million of franking credits on the balance sheet? Are those conversations that I guess you are having at a management and board level?
Martin Cummings: Yeah. Good day, Dan. Martin again. Yeah. I think as we talked about in August, with Steve's arrival, it really gives us an opportunity to revisit the strategy work that he wants to do. The capital management framework, you saw our thoughts on that in August. Really, we do want to flesh that out for you in terms of putting a bit more meat on those bones of how we are thinking about shareholder returns versus allocations to exploration, which I know Steve has a real interest in, and also other inorganic growth. Discussion is definitely happening. Probably not ready to take you to the next level on what that means yet.
Daniel Roden: No trouble. I thought I would ask anyway, but I appreciate it, guys. Keep up the good work.
Martin Cummings: Thanks, Dan.
Steve Badenhorst: Thank you.
Operator: Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Ian Heycox, who is a retail shareholder. Please go ahead. Pardon me, Ian, your line is now live. Please ask your question.
Ian Heycox: Sorry, I did not have a question. Sorry for any confusion.
Operator: There are no further questions at this time. I will now hand back to Mr. Badenhorst for closing remarks.
Steve Badenhorst: Thanks, Mel, and thanks, everybody, for joining today. It is really great to join an organization with the sustained quarterly performance. As this quarter kicks off in the first of our FY27, it is really beneficial being part of the organization. Thank you for the questions. Before we close, I would like to wish Andrew the best of wishes in his new ventures as he will be leaving the organization in the next few weeks, and thank him for his contribution, in particular leading the exploration portfolio as one of his passions as well.
Steve Badenhorst: Thank you everybody for your contribution to the quarter. Those of you with Aurelia, thank you for your commitment to our results, and I look forward to working with all of you over the next while to see that Q2 is even better than Q1 possibly. Thank you.
Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
