OZ Minerals Ltd

ASX:OZL

Earnings Call Transcript 2019-Q1

[Andrew Cole, MD, CEO & Director]

Good morning, everybody, and thank you for joining us this morning for OZ Minerals First 2019 Quarterly production report. So this morning, I have our CFO, Warrick Ranson with me, who will cover up on the financial aspects of the report and then both Warrick and I will be available for questions at the end of our brief company overview.So please consider the disclaimer and compliance statements at the start of the slide deck that we're working through today.So let me start off on our company strategy. And this company strategy guides us on what we do, but it also guides us very strongly on how we execute our work and a big part of how for us is working safely, which is we think integral to how we work together.So I'm really only going to talk about 1 topic on our strategy and that's a very unfortunate event for us in this last quarter. We are very deeply saddened by a fatal incident that occurred near the Carrapateena project mid last month. It involved one of ElectraNet's subcontractors who's piloting a helicopter while stringing the transmission line to the site. Kieran's death has had a very profound impact on the entire company, particularly the team at Carrapateena. Air safety authority is conducting an investigation, and ElectraNet are also leading a joint investigation in parallel. So we do expect to see insights coming from these investigations that we can learn from in due course.Whilst the authorities are no longer on site and no restrictions have been put in place, ElectraNet have recommenced work but they have voluntarily started using a manual line stringing work methodology as opposed to helicopter-based line methodology going forward.So let me turn to some more positive news for the company. So the map that shows the OZ Minerals portfolio is certainly getting busier, and it's certainly more busier now than almost 3 months ago with the recent addition of the Red Metal's Alliance and its various exploration opportunities here in Australia.We did also take this Woomera exploration earn-in agreement in Northwest South Australia as a result of some exploration licensing issues they had. We do expect to see sooner than later repeatedly sales-lease exploration joint ventures as we exit the ones that don't meet our expectations, and we're bringing new opportunities to replace them.Our project time line is going to continue to remain dynamic. But nevertheless, it is a guide to the various projects, schedules and milestones looking forward over the next few years. The only change to this slide from the last quarter is the timing of the release of the West Musgrave study update. This phase of the study work will be completed at very late Q2 -- or early Q3 with the update now expected to be released in Q3. This new timing is a result of our agile work methodology, which saw a few new scope options introduced following internal and external challenge sessions that we think are worthy of exploration. So we're quite excited to see those challenge sessions undertaken and new options emerge from them. So we think this is a good result. We are conducting a very inclusive process with our stakeholders at West Musgrave as we work through the options, and I'll talk a little bit more about that as we get to the West Musgrave section.So let me summarize first. I think we had a good strong start to the year. We're very pleased to see that Carrapateena underground development reached first ore just yesterday afternoon in line with our plan. So the team is obviously very excited to be part of such a significant milestone it has been in the making for a number of years. We also released the Carrapateena Block Cave Expansion study, which has now progressed to prefeasibility and the Life of Province Plan to scoping study. Prominent Hill is on track for guidance and the Explorer Challenge is attracting a lot of interest, and I'll touch on that a little later.Today, we released an update on the West Musgrave resource and have now reached 70% ownership of project. Drilling and studies are continuing in the Carajás and the Gurupi provinces in Brazil with update scheduled for later this quarter.Our cash balance was $342 million with receivables up nearly $50 million after $116 million investment into Carra and payment of $48 million in dividends. So looking ahead, there are a few key milestones coming up, and they include the Prominent Hill gold trial review, which is expected to be completed by mid this year. Our West Musgrave market update in Q3 and some Brazil project update this quarter, which includes the Antas Mineral Resource and Ore Reserve update, Pedra Branca Resource update and CentroGold PFS study.At Prominent Hill, copper and gold production is on track for annual guidance. Underground production was 742,000 tonnes of ore at 1.92% copper. The underground ramp-up slowed during the quarter due to a few manning and equipment availability issues, but actions have already been taken to address these, and we expect to see this trend reverse going forward.Plant throughput was marginally lower with a shut in the quarter, a couple of unscheduled maintenance items and some downtime as a result of planning for the gold trial, but good progress was made on preparation for construction of the Malu Paste Plant. The gold plant trials were completed with data analysis and the interpretation now underway.On the Prominent Hill underground expansion study, diamond drill platforms are now in place. And in the quarter, we drilled just under 3 kilometers of drilling into the Inferred resource part of the orebody. Looking forward, we're going to continue the underground expansion drilling program and analysis of the ore haulage options.So now I'm going to hand across to Warrick to take us through Prominent Hill cost performance please.

[Warrick R. J. Ranson, Chief Financial Officer]

Thanks, Andrew, and good morning, everyone. Although we have marginally lower ore production from the underground this quarter given some of the operational constraints that Andrew mentioned, it was actually another good quarter of cost focus at Prominent Hill. The resulting lower absolute costs and an improved C1 performance were primarily attributable to lower underground mining expenditure and lower net customer and transport charges for the period. Gold byproduct credits were lower quarter-on-quarter with lower comparative gold production after the strong finish to last year.Mining cost performance related primarily to less stope filling activity. However, these gains were largely offset by comparatively higher processing costs as a result of the scheduled shutdown, which included the reline of the SAG mill and replacement of the drive gearbox at Prominent Hill. A number of these items are timing-related in terms of current activities, and we expect to see our C1 cost profile trend back towards guidance over the remainder of the year.Lower sustaining capital spend also reduced the result in all-in sustaining costs for the quarter. And the weighting of sustaining capital projects does favor the second half of this year for us.Moving to Slide 11, cash. So quarter 1 generally reflects a slower concentrate buying period in the market with the usual destocking in January after opportunistic buying at the end of 2018. All Indian, Asian and European smelters are currently well stocked, and this has been reflected somewhat in our cash and working capital movements, with market activity picking up towards the end of the quarter as anticipated.Payment of the 2018 final dividend occurred in March, and expenditure at Carrapateena ramped up as expected with underground development rates increasing and the mineral processing plants and non-process infrastructure construction progressing to schedule. This expenditure will continue to improve through to the end of the year and will be reflected in the ongoing drawdown of current cash reserves. The open pit stockpiles again supplemented underground fleet for the quarter, contributing $39 million to the working capital performance.Pleasingly, we are able to finalize our general-purpose credit facility arrangements and entered into a new 3-year Syndicated Facilities Agreement at the beginning of this month. This now provides us with access to a $300 million revolving cash advance facility for general corporate purposes and replaces the company's previous $100 million revolver and increases our involvement with a number of international and Australian banks as part of our ongoing capital management strategy. Andrew?

[Andrew Cole, MD, CEO & Director]

Thanks, Warrick. Now with Carrapateena. I'd say the highlights for us has certainly been reaching first ore at Carrapateena in line with our plan. It's really exciting time for the team to reach a milestone that really only occurs once in an orebody and certainly for many people, once in a lifetime. Development rates have really increased, as you can see in the chart on the slide, as additional work areas have become available. Total decline development has now reached over 12 kilometers, nearly 4 kilometers from surface to the face of the Tjati decline at a vertical depth of about 575 meters. Primary ventilation systems are progressing well with 2 surface vent rises and the first internal rise now complete. The team has also installed over 3,000 bolts in the second underground decline ready to hang the conveyor.Above ground, the minerals processing plant and non-processing infrastructure construction has continued on schedule. The mill bearing house, SAG shell and tailings thickener bridge were installed, construction at the new site offices nearing completion, and warehouse and workshops commenced. The power line is now over 65% complete, with transmission lines stringing underway. And the tailing storage facility construction is progressing to schedule.Upcoming activities included an increased focus on planning for commissioning, Civils for the primary vent fans to start, underground infrastructure design expected to be completed and completion of the Southern Access Road upgrade.During the last quarter, as you also know, we released the Carrapateena Block Cave Expansion study, and this showed that replacing the lower half of the sub-level cave with the block cave and expanding the annual throughput rates from 4.25 million tonnes per annum up to 10 million to 12 million tonnes per annum from 2026 has the potential to create significantly more value than a sub-level cave development alone. The study outlined the potential to increase average life of mine copper production from about 65,000 tonnes per annum up to 105,000 to 125,000 tonnes per annum from '26 onwards, with the reduction in life of mine all-in sustaining costs to $0.90 to $0.95 per pound. Importantly, the study also provided a high-level view of how a block cave could be constructed without impeding operations of the Carrapateena sub-level cave currently in construction all without rework of current construction plans. A block cave in the lower part of the sub-level cave has the potential to unlock the Carrapateena Life of Province in a methodical and incremental way that manages risk and capital expenditure. This block cave expansion study has now moved to prefeasibility, which is expected to be completed in mid-2020.As you would have seen this morning at West Musgrave, we've released the resource update for the Nebo and Babel deposits. Through this work, confidence in the resource has materially increased as a result of the successful conversion of Inferred resources to the higher confidence Indicated category. Inferred resource conversion has resulted in a 26% increase in Indicated Resource to 141 million tonnes. Indicated Resource is now comprised 59% for the total Nebo-Babel resource.During the quarter, we focused on developing core mining and processing concepts and investigating the opportunities to add further value to the project. As part of this, the team is working together with the local community to co-design elements of the project to maximize community value where possible. A recent community consultation workshop we held on site together with Cassini Resources. So over 150 community members turned up to learn more about us and discussed their aspirations for their community.Looking ahead, we will provide an update in Q3, once we complete the current phase of work, which includes determining the optimal mining cut-off grade and plant throughput rate, the mine design, mining operations optimization, process plant flowsheet design and investigation of off-grid renewable power solutions. We will also continue progressing the infill drilling program and community and regulatory consultation.Turning to Brazil now, we saw Antas produce just under 1,900 tonnes of copper and just over 1,700 ounces of gold during the quarter. Mining volumes were affected by a few things, including the cut-back, which is underway, heavy rain and lower equipment availability, which directly reduced volumes mined and increased mining costs. We have since rectified the equipment issues, and the cut-back will continue through this year. Pleasingly, our focus on operational processing plant improvements at Antas saw the team achieve record hourly plant throughput and plant ore tonnes milled during the quarter, partially offsetting the lower mill grades. A review of the updated Antas open pit mineral resource estimate continues with internal and independent external review underway. We are also running in parallel an updated review of the associated mine plan.At Pedra Branca, we progressed preliminary mine optimization studies to identify the best value proposition, the mine scale and design. The team also adopted improvements in ramp design, now with a preference for longitudinal stopping, all of which helped reduce size, cost, dilution and backfill.In the Gurupi province, we completed resource delineation drilling into the Contact Deposit and progressed the planned prefeasibility study Hill of Value optimization exercise to identify the optimal scale for the project.Drilling will continue into Q2 at Blanket as the team remains focused on continuing the process to lift the injunction and complete the prefeasibility study. So later this quarter, we expect to release an updated Antas resource estimate and 2019 copper and gold guidance for Antas, an updated Pedra Branca mineral resource estimate and a CentroGold prefeasibility study.So onto exploration and growth pipeline, some of which I've already talked about. We've built momentum by taking a province approach to our operations and projects, and because of this, we'd become a slightly larger company with added complexity. But our innovation, our agility and our devolved operations model has set us up strongly to manage this growth through leveraging a strong culture.Throughout this, we've stayed true to our strategy of exiting the projects quickly if they don't meet our goals, and we'll continue to do so. We have as such terminated the earn-in agreement with Woomera Mining Ltd during the quarter as a result of some of their exploration license renewal issues. You may have heard about our Explorer Challenge, which is a global online crowdsourcing competition where geologists and data scientists worldwide have been invited to develop new approaches to identify new exploration targets at our Mount Woods tailings that surround Prominent Hill in the northern part of South Australia. We've had an excellent takeout with over 1,000 participants from over 60 countries and a range -- with a range of background spanning international universities, geoscientists, data scientists and AI specialists. We've taken this approach because we think we need to look at expanding the traditional borders of our companies to include people with different skills or perspectives from around the world, including accessing the significant digital talent that's building globally. Partnering and accessing as many sectors as possible means we see ideas from outside our industry, things we might have never considered when looked at through our own lenses. We've also just announced the judging panel comprising experts from data science, geologies and generalist backgrounds. In line with this thinking differently on how we approach exploration, we've recently embarked on a new multisite exploration greenfields discovery alliance with Red Metal Limited, and this has significantly increased our exploration footprint in Australia. Red Metal is a highly respected explorer with strong technical ability. The alliance gives us a 2-year option to fund a series of mutually agreed proof-of-concept work programs on 6 Red Metal early stage projects across Western Australia and Queensland. We have started planning works on the Nullarbor and the Mount Skipper projects with fieldwork consisting of geophysical surveys later this quarter and drilling planned for the second half of this year. In line with our exploration approach, we control withdrawal from individual projects within the alliance if they do not meet our value expectations.I'm not going to linger too long on the key milestones coming up as we've covered most of these already. But as you can see from the table, we have a number of key things coming up this quarter with most of our projects having key milestones due in the next few months. So one thing I'd like to call out notably, the current phase of work for the West Musgrave Project will likely be complete in late Q2 or early Q3. And we will then, therefore, provide an update on this in the third quarter of this year.So on the guidance, just to play it again, the production and cost guidance metrics provided for 2019 are on track for delivery. They do not include guidance for Antas, which we'll be releasing later this quarter. So to quickly summarize key takeaways from the quarterly today, Prominent Hill is on track to guidance, and the Explorer Challenge is attracting a lot of interest. We're very pleased to see the Carra underground development reached first ore yesterday afternoon in line with plan. We released the Carra Block Cave Expansion study, which has now progressed to prefeasibility study. Today, we released an update on the West Musgrave resource and have now reached 70% ownership of the project. Drilling and studies are continuing in the Carajás and Gurupi provinces in Brazil with updates on most of those projects scheduled later this quarter.Our cash balance was $342 million with receivables up $49 million after a $116 million investment into Carra and a payment of $48 million in dividends. So looking ahead this quarter, we had a number of key milestones which will trigger releases to the market and provide you with milestones over the following 3 months.So that brings us to the end of the formal part of the presentation. So as a reminder, we have Warrick here, our CFO, who is happy to take as many questions as you got for him. So operator, I'd like that if you could remind people on how to ask questions please?

[Operator]

[Operator Instructions] Your first question comes from Michael Slifirski from Crédit Suisse.

[Michael Slifirski, Managing Director]

I've got a few quickies, if I may please. First of all, the Prom Hill underground, just interested in all of the sort of factors there. You talk about manning challenges, equipment availability. You talk about less stope fill. Was it all those combinations that constrained production? Or it was -- was it, sorry, throughput? Or is that -- was that the plan? And particularly, the manning issue, is that sort of a structural thing to do with industry strength? Or was it something more site-based?

[Andrew Cole, MD, CEO & Director]

Yes. Michael, look, now it's actually more site-based. So our absenteeism rate over the 3 -- over Christmas, New Year and into the first part of this year was pretty high, and we didn't have the manning factors to allow us to operate all the equipment we had, so -- but now have changed that to ensure we've got appropriate skills. I'll say, it's just planning and foresight, to be honest. At Prom Hill, it wasn't about a more systemic issue with the industry. And look, I would say, equipment was partly a result of that, but we had a number of issues mainly with loaders. Yes, so loader availability through the first couple of months was pretty poor. So the teams on site have fixed that, and they've made some changes with the assistance of [ Branca ]. So I don't expect that to be a systemic issue for Prom Hill going forward.

[Michael Slifirski, Managing Director]

Great. And I couldn't see a number for the underground mining cost. Is that something you're no longer going to report?

[Andrew Cole, MD, CEO & Director]

Warrick?

[Warrick R. J. Ranson, Chief Financial Officer]

Yes. No, Michael, we're not going to publish that going forward. That's -- yes. So we changed our structure there.

[Michael Slifirski, Managing Director]

Okay. The issue with working capital. I'm interested in, I guess, the extent to which that maybe reflects some of the North Queensland floods' challenges are getting concentrated to Mount Isa. And if that is one of the factors, how long before that resolves, whether it has any impact on the year or whether all gets resolved pretty quickly? Is there catch-up capacity there for the con that has to go up that way?

[Andrew Cole, MD, CEO & Director]

So firstly, Michael, we don't disclose our customer base, but there are no issues on any of our transport rigs to any of our customers currently.

[Michael Slifirski, Managing Director]

Okay. And the Carrapateena first ore intersection, just interested, is that -- was that way you expected? Was there anything you could see that changed your view or sort of interpretation? Or is it just too early to have a view as to what you've hit and where you've hit it?

[Andrew Cole, MD, CEO & Director]

Look, it was where we expected to hit. It came in on plan. Look, I'd tell you, it's too early, I think the guys are just celebrating the fact that they got a bucketful of ore coming out from the declines, to be honest. So it's a little bit too premature to say whether there's anything different or adverse to what we expected. But the fact that it was exactly what we're expecting it to be, and I think, is the most important piece of this. We'll obviously get a lot more information over the coming few months as we get more headings, more development headings going into the orebody as we start to build out the first sublevel.

[Michael Slifirski, Managing Director]

Okay. And finally, with respect to Antas, while there's no guidance at this stage, was the production as per expectation? And if not, what was the sort of delta? Was it in grade? Was it in tonnes? Interested in really what it was compared to your plan given that we don't have any visibility of what that plan was.

[Andrew Cole, MD, CEO & Director]

Yes. Yes. Look, and I appreciate -- we're not giving any visibility, Michael, so I appreciate it's difficult to make any forecast. So look, in the absence of anything else, I'll just use this quarter as a guide for now, and we'll update that with more information going forward. There were some unexpected things during the quarter. We are in the middle of cut-back, so if that doesn't help us, got Antas to start with. We've got more rain than we're expecting which prevented access to the bottom of the pit at times. The equipment availability was pretty poor, especially in drill rigs, so we often ran out of broken stock. So the company we're using to help us there has actually added drill rigs at their cost to keep -- to improve the drill rates. So there were some unexpected things during the quarter. But look, in the absence of guidance, we've got nothing else right now, just use this quarter going forward as the -- as a rough guide.

[Operator]

Your next question comes from Hayden Bairstow from Macquarie.

[Hayden Bairstow, Analyst]

Andrew, just on West Musgrave. I mean there's obviously an overall reduction in the resource tonnes. Was there any change to any of the economic assumptions on that? And a few things too in Prominent Hill study work with the shaft, sort of how that's going. Is it sort of looking more likely that, that might be brought forward ahead of some of the Brazilian capital spend?

[Andrew Cole, MD, CEO & Director]

Yes. Got it, Hayden. So firstly, on West Musgrave, we kept the cutoff grade the same. So you can use -- that's relatively comparable to the previous resource that was released. However, there are 2 material changes to the assumptions used in this resource versus the previous resource. The previous resource had no constraint applied except for a dig RL of several hundred meters from memory. So it's effectively a global unconstrained resource whereas the new resource we've just issued uses a pit shell boundary. And that pit shell has got an NSR cutoff along with a 1.2x consensus revenue. So it is a constrained pit shell base resource, so it's a more realistic resource, if you like. So you need -- the second thing that we cut after this resource is the weathered ore, the oxide ore at the top of the orebody. So this resource is a much more, I would say, realistic conservative resource that we are using in our Hill of Value optimization. That's the main difference for West Musgrave. The -- does that answer your question, Hayden?

[Hayden Bairstow, Analyst]

That's great.

[Andrew Cole, MD, CEO & Director]

Yes. Okay. For Prom Hill, look, I wouldn't say we're pulling things forward. We're certainly drilling, as I said in the presentation. So we've got our true drill base normally drilling at the Inferred resource. That drilling is going to continue. In parallel with that, we're doing the feasibility study on ore haulage methodologies. So we will have the ore haulage methodologies at an FS level well before we've got the required resource information to actually underpin or to use for that haulage data. So the constraining factor is not going to be ore haulage methodology or costings, both capital and operating cost. It's going to be the time it takes us to drill out the Inferred resource to a level that allows us to then use that cost data, if that makes sense. So it will go into next year.

[Operator]

Your next question comes from Lyndon Fagan from JP Morgan.

[Lyndon Fagan, Analyst]

Look, my question is around Brazil. Andrew, could you please give us a refresher on the injunction at CentroGold? Just trying to sort of better understand that legal process and how, I guess, likely or what the timing is around lifting it? That was the first one.

[Andrew Cole, MD, CEO & Director]

Yes, so CentroGold, so most of that effort at CentroGold is going into the injunction removal effectively. So that's where we're putting the vast majority of our energy. The rest of the energy is going into drilling. We've only got 1 drill rig though, and that's mainly just to tidy up a few loose ends and peak tenements in good standing. And then the other work is on the desktop work to finalize the prefeasibility study, which is mostly going -- being done with a different project team, work project team. So the CentroGold injunction removal is going well, we think. I can't give you a date because I don't know what the date is, but I think it is going well and at the stage where they are getting approval for the reclassification of the land use from agricultural to mining. So that's where it's up to now, and that's progressed materially, I would say, over the last month. We need that to happen before the injunction can actually get removed. And so we should have a line of sight on that over the next month or 2. But I'm hesitant to give you a date because it's a fairly bureaucratic process, Lyndon. So I think it's going well. I expect and hope that it will be removed this year. I just can't give you a date.

[Lyndon Fagan, Analyst]

Okay. Great. And then just back over to Antas. I guess you sort of mentioned that this quarter's not a bad guide for the rest of the year, but we're looking at an all-in sustaining cost which is pretty close to the copper price. Just wondering whether one of the options is actually putting this asset on care and maintenance and say it's due to close next year anyway, but whether it is still worth all the effort. Just interested in a bit of color on that.

[Andrew Cole, MD, CEO & Director]

Look, good question, Lyndon. So look, I've said right from the very outset when we brought to Branca that Antas came with the project. It wasn't the purpose of our Brazilian acquisition. But there, it generates some cash flow and it gives us capability, capacity and knowledge of the country. We are investigating all sorts of options at the moment. We're also doing this work with Pedra Branca obviously. So we're looking at Antas, Pedra Branca and Pantera as a collective. And I've said before, the way we structured ourselves is that we look at current assets as a single asset, a single operating entity. So the work that we've been doing at Antas is being done alongside the work we're doing at Pedra Branca around the feasibility study to understand what the most value-accretive next steps are. So when we do talk about our next steps for the Carajás, I suspect that we'll be talking about them collectively as opposed to separately because they are intertwined. I just can't tell you what the answer's going to be yet because we don't have the PGE auction analysis. Care and maintenance, look, that's always an option. I'm not saying we're putting it into care and maintenance. We don't think it needs to go there yet because we're still drilling out Antas itself. We're still drilling out Antas pits. Azevedo is right alongside of the pit and Antas itself. But it also has oxide ore sitting at Antas and our low-grade mineralized stockpiles. So there's lots of moving pieces and variables at Antas, which will need to be factored into. And once we've put all those pieces together into one of value-maximizing strategies for those assets, then we'll come to you and we think it will be later this quarter.

[Lyndon Fagan, Analyst]

And just one final one with the Carrapateena Block Cave study. You've obviously given us the preproduction capital. But I was wondering if you could be a bit more definitive around the capital during the 3-year ramp-up phase given it's typically a very capital-intensive part of a block cave project. If you could perhaps help us isolate that, that would be great.

[Andrew Cole, MD, CEO & Director]

Okay. Look, I'll take that question on notice and take it away whether we can or how much we can. But I'd say philosophically, I can tell you that the post-commissioning capital for block cave is much less than a sublevel cave because with a block cave, you effectively have to put your infrastructure in place before you can start extracting from your drill points, whereas sublevel cave is the other way around. So with the current base case at Carrapateena, we have considerable capital to spend post commissioning of Carrapateena, the sublevel cave, as we keep building up the crusher chambers and the production levels and the extraction levels. Whereas in block cave, you have to get right down to the bottom, build out your entire caving extraction level and then you start mining. So philosophically, Lyndon, there's much less capital involved post commissioning of the block cave.

[Lyndon Fagan, Analyst]

Yes, I realize that post full production, it's very low capital intensive to keep it going, but really just looking at that 3 years from hitting first ore to especially getting the thing into full production. But yes, if we could take that offline or online, that would be really helpful.

[Andrew Cole, MD, CEO & Director]

Yes, okay. Look, leave that with me and then we will see what we can do in future updates. I think the other thing to remember is the sub-level cave will be operating at full capacity above the block cave whilst you're ramping up the block cave. So just keep that in mind, I guess, going forward. But yes, leave that with me please and then we'll take it offline.

[Operator]

[Operator Instructions] Your next question comes from Sophie Spartalis from Merrill Lynch.

[Sophie Spartalis, Vice President and Senior Resources Analyst]

Just a quick question on the Prominent Hill cost profile through 2019. You mentioned that we've got a scheduled shutdown. Are you able to just provide some more detail in terms of which quarter that sits in and how long it lasts for?

[Andrew Cole, MD, CEO & Director]

Yes, sure. Sophie, so on Prom Hill we have a -- we have a shutdown every 17 weeks. So we had 1 shutdown start of this year. I think the next one's in May. Is that right, May this year? So every 17 weeks we will have a shutdown. Look, the operating costs at Prom Hill, as I said, will be abnormally low this quarter. So don't change your guidance numbers for Prom Hill. We expect it to move up in guidance for year-end. So do you want to add, Warrick, in terms of profile?

[Warrick R. J. Ranson, Chief Financial Officer]

No, I think that sort of covers the main. Yes.

[Andrew Cole, MD, CEO & Director]

We also completed our gold trial in Q1 so you've got a bit of a kick in gold because we purposely pushed a lot of gold ore through during the gold trial, which obviously helps reduce C1 cost slightly, but don't change your Prom Hill guidance cost numbers for this year.

[Sophie Spartalis, Vice President and Senior Resources Analyst]

Okay. So given that those manning issues have been resolved, really, the only driver of those increased costs is because of the lower production because of the shutdown. Is that the best way to read it? And then I think, Warrick, you said during your commentary that, that should basically trend back down towards guidance by the end of the year. So we should be sort of sitting at sort of that $0.65, $0.75 range by 4Q?

[Warrick R. J. Ranson, Chief Financial Officer]

Yes, that's our expectations, Sophie. So, yes.

[Operator]

Your next question comes from Peter O'Connor from Shaw and Partners.

[Peter O'Connor, Senior Analyst of Metals and Mining]

First on capital management, just take me through the numbers why it went from $100 million to $300 million, I understand 3 -- you just landed at $300 million or is there some logic? And given that everything you guys do is logical, how did you get to $300 million? Just why?

[Warrick R. J. Ranson, Chief Financial Officer]

Yes. So a couple of factors, I'd say, with that. So firstly, the timing factor. So in terms of a 3-year sort of view, as we looked at what our requirements might be across that period, we've -- as we said before, the way that we've looked at our funding requirements is that projects like West Musgrave and Brazil, we will look at separately. And as we progress ourselves through the study phases into those projects, then we'll look at the right opportunities around how we appropriately fund those projects. So there's a term there for us in terms of how we've looked at it. And really, as far as this just -- based on expectations around the fluctuations, I suppose, in terms of our capital requirements over that period. So it's not necessarily a magic number, but it's sort of broadly in line with where we might see ourselves sitting over that period. But as I said, going into the specific projects post that -- into that period, we'll look at each of those separately.

[Peter O'Connor, Senior Analyst of Metals and Mining]

Can I follow up and ask, so Prominent Hill and Carrapateena CapEx in that 3-year window is really all you're thinking about when you did that modeling?

[Warrick R. J. Ranson, Chief Financial Officer]

And they're studies...

[Peter O'Connor, Senior Analyst of Metals and Mining]

Studies up here. Okay, yes. But not the projects themselves, okay. And next, what level of demand did you have? And just thinking if you do go back, was it multiples of $300 million or was it just $300 million?

[Warrick R. J. Ranson, Chief Financial Officer]

No, we had -- I mean, we had a lot of interest, I suppose, and a lot of the lenders actually came back with probably much more than what we actually were indicating. What was more important for us was actually getting an adequate spread. And we have increased our exposure across, particularly on the international side, thinking about some of our requirements going forward and potential lender relationships across that. So we've got quite a good spread between both domestic and international banks, which is a little bit different from what we have before.

[Peter O'Connor, Senior Analyst of Metals and Mining]

Okay. And the cost of holding that facility, how many basis points is that? And can you give us a guide what the actual coupon will be when you draw down against it?

[Warrick R. J. Ranson, Chief Financial Officer]

Yes, it's around about -- without sort of quoting rates, it's sort of about a $2 million a year cost to the business.

[Peter O'Connor, Senior Analyst of Metals and Mining]

And the coupon when you draw down on it?

[Warrick R. J. Ranson, Chief Financial Officer]

We're not sort of disclosing that.

[Andrew Cole, MD, CEO & Director]

I mean, we can say it's pretty competitive, Peter, so we're pretty happy with the terms that we certainly saw, that's for sure.

[Operator]

There are no further questions at this time. I'll now hand back to Mr. Cole for closing remarks.

[Andrew Cole, MD, CEO & Director]

Okay, look, thank you very much for joining us today. We appreciate it. We released quite a bit of information this morning so if there's anything you'd like to follow up on, please get in touch with Tom Dixon, and Tom can organize for the right people to help answer your questions. Thanks very much, operator.