Develop Global Limited (DVP) Earnings Call Transcript

Thank you for standing by, and welcome to the Develop December 2025 Quarterly Report Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Bill Beament, Managing Director. Please go ahead.

Good morning, and thanks for joining us on the call today. We have myself and our Chief Financial Officer, Ben MacKinnon. It's 4.5 years since I did my last con call for a quarterly, so it's good to engage the activity again and might be a little bit rusty. So, go easy on me, please. Today's strong results show that we are well on track to meet the key growth targets set out in our five-year business plan. This is due in part to the highly successful production ramp-up that is underway at Woodlawn, where we are set to reach nameplate capacity of 850,000 tonnes per annum in the March quarter. It also reflects the rapid progress at our Sulphur Springs project during the quarter and the mining services contract we recently secured with OceanaGold in New Zealand. We are two years into our five-year business plan, and we are set to reach our goal of producing 500,000 tonnes of copper equivalent a year on or ahead of schedule. The business plan also sets out a goal of having two to three mining services contracts, and we now already have two. And finally, the sharp recovery in lithium prices means we will also stand to achieve the goal on that front as well, and I'll talk more about that later. I will now provide some detail on the key points in the quarterly that I can elaborate on and then ask our CFO, Ben MacKinnon, to provide insights on financials as we take questions. So I'll start with some key points that we put out today. So our Woodlawn restart continues to perform strongly with commissioning and ramp-up on schedule, and we really are putting that project on track for steady-state production as we've identified and told the market last year for the March quarter. This is demonstrated by a record 59,000 tonnes processed in the month of December, which really gives us a great exit rate at Woodlawn to reach nameplate capacity of 850,000 tonnes per annum in this quarter. Pleasing to see our quarterly concentrate revenue was up 98.5% to $39.1 million from 9,500 tonnes of sales. And this was driven by increases of 36% in copper con and 43% in zinc con compared to the September quarter. And that was really driven by the introduction and the increase of high-grade production from our main Kate lens. One of the things that should be noted in the base metal sector is there's substantial ongoing falls in treatment and refining costs that we get charged from our offtakers called TCs and RCs. They are delivering significant gains to the Woodlawn financial outlook for this calendar year. As of 1 January, developed now reverts to spot market indices for treatment and refining with copper and lead trading well into the negatives and zinc is really at historical lows for treatment charges. Also, if we look at just the new treatment and refining costs and today's spot commodity prices, our increase in net smelter return revenue, that's our revenue per tonne that we look after our offtaker costs and transport costs that has increased 40% to now AUD 470 a tonne from our published restart in August '24. So a huge uptick in revenue per tonne. The other thing is we only just recently started our drilling at Woodlawn. We did nearly 10,000 meters, and that was actually just grade control drilling. Our second drill doesn't start until later this quarter, and that's the one that we've put in there to grow our mine plan from 10 to 15 years at Woodlawn, but that hasn't started yet. But our grade control drilling actually hit another lens called the N lens. And we've got some fantastic results that we've just published that are outside resources, and that is going to be a near-term mining area that will come into the plan in the next three to six months. And we also have got a number of intercepts in the I&D lens that are outside resources as well. So the grade control drilling. As we thought, as we further drill into this ore body, we're finding more and more mineralization. Sulphur Springs has been rapidly progressed during the last quarter. We did an updated DFS in the December quarter and produced a pretax NPV value of $921 million. That was a substantial 76% increase on the previous one done in June '23. What I would like to point out is that since we put that out in October, the spot prices of copper and silver are up 20% and 150% higher than what we assumed in the DFS and the zinc price is around about the same. It's probably about USD 100 higher at the moment. And the thing that I want to emphasize on this as well is when we start talking and looking at ratios of commodities and where they sit in the current form. And it's interesting people talk about gold and silver ratios and a lot of people doing that at the moment. Silver is coming up to historical sort of levels in that. But the interest thing we look at is the zinc and copper ratio and the zinc and aluminum ratio are at historical lows. So zinc has not had the rally like other commodities are having, but they are sitting at -- and I'll give you an example, less than 10 years ago, the zinc and copper ratio was about 0.5. It's now sitting at 0.25. So either copper is coming down or zinc is going up, and I don't think many people think copper is coming down. And aluminum has gone from 1.6 to 1. So, as Trafi pointed out to me in Geneva last week, that is not the norm. So they're very bullish on zinc and where it could go to. The other part on Sulphur Springs, if we were just to put spot commodity prices, exchange rate and current treatment costs into the pretax NPV that we only put out in October, it would be up another 25% to $1.15 billion, and Ben can talk about the funding of this later on because those sort of NPVs make funding a lot easier than a couple of years ago. The other thing we just put out today was some metallurgical geotechnical drilling that we did through the ore body at Sulphur Springs, hitting exceptionally high-grade copper, zinc and silver mineralization, really reinforcing the scale and quality of this project. And I'd just like to point out 204 meters at 1.8% copper, 0.6% lead, 6.2% zinc, 21 grams per tonne silver, which is the resource grade and the mine plan grade of Sulphur Spring, and we'll probably produce over 1.2 million, 1.3 million ounces a year of silver at Sulphur Springs when it's up and running and a bit of gold. But when you start breaking the increments down, there's some really high-grade zones in there. That resource is going to grow just from that hole alone. And it's worth noting that 49 meters of that intersection at really good grades at 1.8% copper and 15% zinc and an ounce and bit of silver sits outside of the current resource, and we also hit a footwall lens in there, which has opened up a whole new horizon in that ore body. So as we knew when we start drilling this thing, it's going to grow. So we can't wait to get the drill rigs later in the year when we get the positions in the new decline to continue to drill this because this was part of our strategy as well to grow this from an 8- to 15-year mine plan. So the quality of the system is amazing. And final investment decision is targeted for June quarter 2026, which is next quarter. So, I understand we're very, very busy putting this all together. So it's coming together extremely well. Pioneer Dome, it's amazing how quick commodities can change, and that was the whole idea of putting our portfolio together over the last three or four years is we've seen a significant increase in the spodumene price. A couple of days, I think yesterday, it hit USD 2,500. It closed, I think, USD 2,420 per tonne of SC6 overnight. And also the interesting part is the reemergence of the DSO, the direct ship ore market has well and truly opened. This has created an outstanding financial opportunity at this project. Please remember, we have a fully permitted mine. We can dig a pit now, very different to a lot of other projects. We've got traditional owner agreements. We have all our mining approvals through. We can start a pit now. So it's fully permitted. It would take less than six months to deliver first DSO ore. And remind you, the capital cost of that whole project is about AUD 35 million to AUD 40 million to get up and running. And we'll talk a little bit more in Q&A on that. We've already started preliminary offtake negotiations, project financing, planning of predevelopment activities. That's been activated. We have term sheets in the inbox as we speak, and we'll get another one later on this week. That market has radically changed. On to our mining services, we got our second contract, $200 million tunneling contract with OceanaGold at the Waihi North Gold project, probably one of the best highest grade undeveloped gold projects in the world. And we really thank Oceania entrusting us to deliver that project for them. And that's a major cornerstone thing for us. And it's amazing how that has just opened up New Zealand for other opportunities in the East Coast of Australia. So there's a substantial volume of tenders currently being assessed to progress. You couldn't get a more favorable market for mining services providers. And right now, with gold sitting at USD 5,180 an ounce across the globe. You could mine the gravel in the car park at the moment and make money out of it as that bloody high. Corporately, as I said, really important. The December quarter marks our second year anniversary of our five-year business plan, under which we're targeting a 50,000 tonne copper equivalent. Based on the results today, we believe that we're well and truly tracking internal schedule, if not ahead of it. The plan also targets two or three mining services. We now have two, and I'll be surprised if we don't have three soon, potentially four. December quarter, group external revenue was a record, nearly AUD 95 million. We have a lot of discussions going on. We are growing our business, a lot of corporate opportunities in our space. And last but not least, we boosted up the team. We're growing this thing very, very rapidly. We've got a lot of new projects and a lot of opportunities. And we're great to have our highly credentialed mining executives Duncan Bradford joined the Board as Non-Exec Director, Nathan Stoitis. Anyone in the extracted hard rock metallurgy business industry knows Nathan's background as our GM of Processing and Metallurgy; and Fraser Perry has joined as our General Manager of Business Development, and he's a very busy Board. So, from that, I will now pass over to the moderator to open up for questions, please.

[Operator Instructions] Your first question comes from Joseph House from Bell Potter Securities.

Bill and Ben, congrats on a strong quarterly update. Just first one, just around head grades. Are you able to provide any commentary around how that kind of progressed during the quarter and how they compare to the September quarter for Woodlawn?

Yes, Joseph, a very good question. Yes. So, look, we'll give -- point one, we'll give a lot more granularity coming in the March quarter because we're really hitting steady state and normality there. But you can see that revenue is up 98.5% for the quarter-on-quarter. Con sales, you can see are up 36% and 43%. So I expect that the grades come up quite substantially. Otherwise, we can't get those increases in revenue and concentrate production in tonnes and metal. And lead was down a little bit, the con, I think it was down 29% but more than offset by the picks up. And it's timing of what lenses we put through. So the key thing here is there's a lot bigger contribution from the September quarter with the Kate lens coming into production, and that is expected to grow another 50% of the stope production quantum in the March quarter as we keep ramping up the main production lines.

That makes a lot of sense. And just with respect to the current silver price environment, spot being nearly $110 an ounce. Do you think any differently around the processing strategy, maybe prioritizing silver recoveries over less valuable metals? Or is that too complex?

It's a very interesting question, Joseph. So, yes, like -- and it's a good point to note that with Woodlawn up and running in steady state and throwing sulfur Springs, we'll end up doing on average 2 million ounces of silver per year. So it's a really meaningful revenue byproduct for us. So are we doing anything different? No. But the other -- we're obviously trying to maximize recoveries and get it into the respective cons because silver, you want to get into your copper and your lead con because when you're going into your zinc, as you know, your deductibilities, I think everyone is about the same. They get about a 3-ounce deductibility in zinc. So, yes, are we trying to get going into the first two cons? Absolutely before it gets to the third. And we are getting the vast chunk of our recovery into that and probably getting better con grades than we expected for silver. Probably the thing to note is when you are getting negative -- and I mean substantially negative treatment costs and refining costs for copper and lead. Just think processing-wise, more tonnes you get paid, you get paid from the smelter for the time. Expect that we're maximizing recoveries in concentrate regardless of like we're balancing that con grade and extra tonnes, but we're getting paid for the extra tonnes for the smelter. So it's a bit of a win-win for the miner and probably a lose from the smelter. But we are managing that extremely well.

It's a great position to be in from that perspective. Is the TC/RCs locked in at this stage? Or do you kind of take a spot price on those TC/RCs? Can you -- are you able to quantify the potential earnings tailwind over calendar year '26?

So, Joe, we moved to a spot-based index in calendar year '26. So in calendar year '25, we had fixed TC/RCs under our offtake contract with Trafigura. And this year, we moved to a spot-based index. So there is significant savings to be made in that. In terms of quantum, we're not articulating those yet, and we will do maybe down the track with some guidance.

Yes. No problem. And just one last question. Given the favorable backdrop for the mining services business, do you have enough bandwidth to potentially secure a third contract that's a similar size in terms of value and even term as the OceanaGold Corp. contract? Or are you looking at something maybe potentially a bit smaller?

Yes, good question. Look, we definitely have bandwidth. People haven't been an issue for us, but I can say as a sector-wide, it's extremely tight, never seen it tighter ever in my career. And as you appreciate, AUD 7,400 gold price like I say, every single open pit has an underground hanging off it now around the world. But like the big contracts aren't necessarily the most profitable, Joseph. So, quite often, the boutique smaller ones, you make way better margin and with a lot less stress and a lot less hassle. So you don't just have to pick a big contract to be -- make good margin. And -- but that said, got the bandwidth there and most importantly, got the equipment because there is no equipment. If you didn't put orders in a couple of years ago, good luck to you. You're going to the secondhand market and buying a five-year-old loader or a truck, which -- and you're going to pay the price for that. So we've got the equipment, we've got the people, we've got the management. We've got -- our DNA and we just put Duncan Bradford on the Board as a nonexecutive used to run Byrnecut Offshore. Shannon Bunn used to work offshore and run all the Byrnecut after Duncan. He's now been our CEO for 3.5 years, and my background, everyone knows is a mining contract as well. So we've got very deep expertise and networks in the people and management side of the mining services. But again, we've already got two contracts. We don't want to be big enough. There is a lot of work, and you need to be very disciplined in that space at the moment because it's -- wages are going up across industry in certain categories and the gold guys can afford to pay it. And if you want talent, they're going to have to pay for it. So we'll even change contract structures to reflect that. We'll probably start putting jump operators in as a fixed line item, so we can have a negotiation as people start jacking the rates up because they're already jacking up right now. So you just got to be really smart about what you're doing and what you target and where you go. But -- we've been very disciplined in what we're looking at. We just want to work with good projects, good people and make sure that we can make our margin and the mine owner gets what they deserve as well and then everyone succeeds.

Joe, the other thing just to be wary of that is just making sure we balance off our needs for our own contracts as well. So mining services is a great part of our business, but the true value creation in our business is in our asset ownership, so our mines. So it is just making sure that we have enough people to operate our assets as well, which we need to be particularly with potentially Pioneer Dome coming on board.

[Operator Instructions] Your next question comes from Hayden Bairstow from Argonaut.

Bill, just a question on the disclosure at Woodlawn. And obviously, this quarter, we've got concentrate tonnes. Last quarter, it was metal tonnes with some rough grades. Just keen to understand why the disclosure is not the same quarter-on-quarter. So it's just easier to follow what's going on as you ramp it up.

Yes. Look, good question. As I said, like obviously, March quarter is a steady state quarter. So we will give the full suite of tables, and we'll probably go down the lines of our Sandfire report, to be honest. I think this is probably the, I guess, the shining light of template. So that will be in from the March quarter onwards. Yes, probably the one thing we did miss is just the concentrate grades. They're exactly the same as September quarter ranges that we gave there of copper, zinc and lead. So nothing's changed from that side. That was probably just a little bit of an oversight to be honest, Hayden.

Okay. And just on the revenue result, a question for Ben, I guess, I presume there's some provisional pricing kicks on some of this stuff from the previous quarter, given everything went up pretty hard during the December quarter.