OZ Minerals Ltd

ASX:OZL

Earnings Call Transcript 2019-Q2

[Andrew Cole, MD, CEO & Director]

Good morning and welcome to the OZ Minerals' second quarter report. It's only been a couple of weeks since we provided the market with an update on the Brazil strategy, so thank you for joining us again today. With me this morning is Warrick Ranson, our Chief Financial Officer. As usual, we will have a number of detailed disclaimers and compliant statements in the following couple of slides, and you can review these on the presentation which is located on our website.So I'm going to start off with a few comments on our company strategy this morning. This strategy guided us on both what we do and how we create value for our 5 stakeholder groups. And our stakeholder groups include our community, our employees, our suppliers, our governments and, of course, our shareholders. We're already past the halfway mark of 2019, but I think we can say we've made good progress across all aspects of our pipeline of opportunities in the implementation of our growth strategy. We've been able to progress many projects in parallel because of our devolved model and our agile approach to work. Our focus on the short-term delivery as well as the long-term provincial potential has helped us create not only base cases for each province but also upside cases that are all actively being defined and worked. Our pipeline is now well developed with multiple projects at every stage of maturity, which allows us to allocate capital and resources to the most value accretive activities. This maturity also helps us build and maintain capability within our business to cover all stages of exploration through development and operations.In growing OZ Minerals, we rigorously apply our lean and agile approach across the business, including to our exploration projects where we either exit quickly or we earn into a majority position. So there have been 3 changes to the exploration section of our opportunity pipeline in this map since our last update. These 3 include our refined relationship with Minotaur in the Cloncurry area with the establishment of a separate joint venture around the Jericho discovery, and I'll touch a bit more on this a little later on. And consistent with our province approach, we've entered into a second earn-in agreement with private explorers in northern Sweden, and again, I'll come back to this one a little bit later on the presentation. And just after the close of this last quarter, we signed a new earn-in agreement with Investigator Resources to explore their Maslins project, which is about 50 kilometers south of Carrapateena on the trend.Turning now to our more advanced projects. We have updated the timeline for this again this quarter as illustrated in the asset timeline chart, which you've got on your screen. We've also added the resource and reserves of each asset to this slide, so you have a single page snapshot of our major projects and their potential. What's changed since the first quarter report is the inclusion of the indicative project milestones around our recent Brazil operational update, which outlined our strategy to realize value in the Carajás and the Gurupi provinces through our low-risk modest capital outlay hub strategy. And again, to be clear, this timeline is dynamic, and it will change as each project progresses and as we reallocate capital resources to the most value-accretive opportunities.So now I'm just going to capture the highlights from the last few months before we go into a bit more detail on a few of these elements. So I'm pleased to say both Prominent Hill and Carrapateena are tracking to plan. It's been another solid quarter for both of these assets. Prominent Hill's production is on track to achieve guidance as we continue to progress the ramp-up of the underground mining operation. And within the Prom Hill province or what we would consider within brownfield tracking distance to Prom Hill, our crowdsourcing Explorer Challenge proved very successful with many very innovative approaches taken. These not only generated new exploration targets that we will drill test later this year but also new methodologies that we'll look to apply to our other exploration programs.At Carrapateena, we remain on schedule for first concentrate in quarter 4 this year. And to support this, we now have about 46,000-odd tonnes of development ore on stockpile to enable plant commissioning later this year. Stringing of the electricity transmission line is now complete, and just yesterday, I believe, they energized the power lines to site. The West Musgrave Pre-Feasibility Study has continued, and we now have anchored on a base case of 10 million tonnes per annum. We'll provide an update on the PFS later this quarter.In the Carajás, we plan to take a low-risk modest capital hub strategy with the first planned hub to use the existing Antas operational facilities to process ore trucked from our 1 million to 1.2 million tonne per annum Pedra Branca underground mine, and we'll bring you a feasibility study progress update again later this quarter.The CentroGold Pre-Feasibility Study was completed, demonstrating the project is investable with an NPV of circa USD 200 million for a preproduction capital cost of around $150 million and an all-in sustaining cost of just over $640 per ounce. So we now remain focused on the removal of the injunction and planning for a feasibility study.We restructured our Eloise joint venture with Minotaur Exploration to turn our partnership at Jericho into a regional alliance now that we've earned our 70% share of the project. Our balance sheet remains strong with cash of $187 million and no debt following $177 million investment into Carrapateena. So I'm now going to hand over to Warrick, who can take us through our summary of financial position, please.

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

Thanks, Andrew, and good morning, everyone. Our total working capital position reduced by $26 million during the quarter with a continued drawdown of open-cut stockpiles, offset by a higher concentrate inventory balance at quarter end. Off-market settlement continues to override the fundamentals. The demand for concentrate is favoring the second half of this year with factors such as the increased scrap importations into China pre- the new restrictions, the timing of some smelter maintenance and several new smelters approaching commissioning over the remainder of 2019 as key drivers. This trend has also been supported by the additional infrastructure investment arising from China's policy easing early in the first half, which is now taking effect.Expenditure in Carrapateena continues to progress to schedule and drew down cash reserves further as expected. With most of the project expenditure now sitting in committed project funds at the end of June, we've seen a strong progression of underground construction activities, completion of the group power transmission infrastructure and the erection of the stockpile feed conveyor as examples of the project's continued advancement to achieving first concentrate in quarter 4.There's no change this quarter to our project capitalization assessment, and we saw an uplift in drilling activity across our exploration portfolio after the impact of the adverse weather in the first quarter. The tax payments continued on a monthly PAYG installment basis, noting, however, that net earnings in Brazil are not an attributable component to our Australian tax position. Thanks, Andrew.

[Andrew Cole, MD, CEO & Director]

Thanks, Warrick. So I'm now going to step through each of the provinces in our first half with Prom Hill. The Prom Hill team continued to perform lively this quarter, with production on track to achieve full year guidance. We progressed the ramp-up of the underground and achieved a haulage run rate of about 3.7 million tonnes per annum in May. So the team's focus is now on maintaining a consistent underground mining rate. So pleasingly, the analysis of the results of the Prom Hill gold ore processing trial, which we undertook earlier this year, shows that the preliminary analysis gives us an improvement in gold recovery over that which we've previously reported. And we'll talk more about that in the upcoming quarter. Looking forward, as part of Prom Hill expansion project to get the underground mine above 4 million tonnes per annum, we anticipate completing the haulage component of the feasibility study later this quarter, which we'll then update you on. Resource drilling to inform the study has continued through this period and will likely continue through the rest of this year.Also, looking ahead, the Department of Defense have flagged that they may require a short green zone closure, which may impact Prom Hill in late Q3, but we do not currently anticipate that it will have a material impact on us. We have good working relationship with the Department of Defense, and they do their best to minimize their impact on operations like ours as they conduct their activities from time-to-time.Turning to the provincial brownfields. As a result of the crowdsourcing Explorer Challenge, we've now identified new drill targets within the Mount Woods area around Prom Hill, which we're planning to drill test a bit later on this year. So just to recap, this crowdsourcing initiative saw participants from over 60 countries interrogate all of our exploration data around Prom Hill to generate new exploration methodologies and targets. So the winning team, Team Guru, employed interpretable machine learning models for mineral exploration using geochem, geophysics, and surface geology. As a result of very impressive and innovative methods that emerged from the initiative, we are now considering how to apply these approaches to other projects within our portfolio. So again, I'm just going to hand back to Warrick quickly to take us through Prom Hill's cost.

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

Thanks again, Andrew. So as previously flagged, we had a number of timing issues favorably impacting last quarter's C1 cost performance at Prom Hill, and those are now trending back towards guidance over the remainder of the year. The most significant item, of course, was the additional offset in Q1 from gold by-product credits following completion of the gold ore processing trial. Mining costs increased marginally over our quarter 1 performance, with increased levels of underground ore and more operational development activity, but at a lower grade with the deferral of 2 higher-grade Malu stopes until later in the year and after developing a number of high-grade Ankarta stopes during quarter 1.However, also recall that costs in quarter 1 were impacted by the lower production levels for mine tonnes and the reduced attributable cost base. Higher average concentrate grades in the second quarter aligned with customer specifications resulted in lower treatment charges and reduced freight on a per pound basis. Lower sustaining capital spend continues to flow through to the all-in sustaining cost performance result. Operational activities continue to favor the waning of sustained capital projects in the second half of the year, which will take us back towards our guidance level.

[Andrew Cole, MD, CEO & Director]

Okay. Moving on to Carrapateena, which I'm very pleased to say remains on schedule for first concentrate in Q4 this year. Just going to list off a few highlights for you. So we now have about 46,000 tonnes of development ore stockpiled on surface. The team achieved about 3 kilometers of decline development in the quarter, which takes total decline development to over 15 kilometers and the vertical depth of 630 meters. The ventilation circuit to the first productional level is now in place. Over 4 kilometers of high-voltage cable has been installed underground. Above ground, construction of the minerals processing plant NPI is about 80% complete, and the commissioning teams are now on site to prepare for the stage commissioning process. The power lines of site is now in place and is energized pending commissioning by our surface infrastructure team.It's certainly impressive to see how much the site in Carra has transformed since the early days. While there is still work to be done, I would like to quickly acknowledge the efforts of our partners to date. It's by drawing on each other's strengths and working towards having true partnerships that we can get today's outcomes. We do hope to leverage partnering much, much more in the future like we have done with Carrapateena. One of the other ways we've recently done so is through a trial of the 250-kilowatt hybrid energy solution facility, which we'll be in construction at Carrapateena site in an area separate from the operating plants and mine, demarcated for piloting and prototyping. This trial is part of an energy and mining collaboration, a collaborative initiative we've led with a number of commercial and research partners to develop renewable energy solutions for a variable demand-driven off-grid environment.Exploration-wise, just after the close of the last quarter, we signed a new earn-in agreement with Investigator Resources on their Maslins project. This is within trucking distance, just 50-odd kilometers south of Carrapateena. And we expect to move these drill targets in -- to test these drill targets early next year.As we provided you with our Brazil update on the Carajás and the Gurupi provinces just a couple of weeks ago, I'm only going to recap a few highlights on the next 2 slides. In summary, our confidence in the potential for both these provinces in Brazil to add value to our overall company performance has increased. We will be adopting a low-risk, modest capital hub strategy with processing infrastructure serving multiple small to midscale high-grade mines, creating a development path commensurate with Brazil's scale relative to OZ Minerals' water portfolio. To recap, the Antas open pit mine is planned to close in 2021. After which, the site infrastructure will become the first Carajás province hub. Our advised Pedra Banca Pre-Feasibility Study base case sees a roughly 1 million to 1.2 million tonne per annum underground mine with ore being processed at the Antas processing hub taking shape. We currently expect to bring an update on the Pedra Branca feasibility study later this quarter. This sets the base case for the Carajás province and now enables us to create value by turning our attention to the upside opportunities, including Pedra Branca resource extensions, Antas near-mine mineralization and exploration targets within the province, and we'll bring you updates on these activities as results warrant.In the Gurupi province, the potential has strengthened on the completion of the CentroGold PFS that shows the project generates an NPV of about USD 200 million for a minimum 10-year operating mine life, requiring a modest USD 150-or-so million of preproduction capital, which we'll be able to be operated in the bottom half of the cost curve. This PFS does not include the Chega Tudo reposit resource just 8 kilometers to the west, which will remain as short-term upside for the project. Similar to the Carajás, we expect CentroGold to become a Gurupi processing hub servicing nearby deposits like Chega Tudo. Our focus now is on low-cost activities such as permitting and village relocation activities with the feasibility study and further regional exploration to begin after the injunction has been removed, which we still believe will occur later this year.To solidify our position in the province, earlier this year, we acquired the Jiboia exploration tenements to the north of CentroGold, expanding our total land package held to about 23,000 square kilometers, spanning 85 kilometers of the prospective Greenstone Belt along strike.Moving now to West Musgrave. The completed mining Hill of Value study has confirmed that 10 million tonnes per annum is the optimized processing plant throughput rate. We have also confirmed via pilot plant testing that our base case will use a Bulk Separation flowsheet as compared to the previous Sequential flowsheet. PFS level work through the period continue to address new opportunities in mine scheduling, mine waste management, mine automation, workforce planning and power supply. The team also ran a workshop hub process within the WA government in Perth with attendees from 10 different government departments in attendance. The intent of the hub was to introduce OZ Minerals, Cassini Resources and the project to the government and to explore opportunities on where and how we can work together to add value for the region, the local communities and the state. It was a very successful event with many good opportunities created.Infill resource drilling continued through the quarter to help us increase the percent of Indicated Resources to underpin an ore reserve on completion of the PFS. We plan to provide a progress report on the PFS later this quarter.In terms of people, we strengthened the capability on this project and in the company with the appointment of experienced mining executive, Steve McClare, as OZ Minerals' Chief Technical Officer and West Musgrave Operations GM. Steve most recently held the position of Managing Director and CEO at Hillgrove Resources and has over 28 years of experience across all facets of mining from exploration through closure.Now just to a couple of the exploration projects. Consistent with our province approach, we have significantly increased our footprint in the Cloncurry District of northwest Queensland through formation of the Cloncurry Regional Alliance with Minotaur. And this is to leverage and, hopefully, replicate our success at Jericho. As part of this, and to support Minotaur, we've created a new additional joint venture specifically for the Jericho project that will have them loan carried from the 1st of April 2019 in return for an 80% beneficial interest in the project.In Sweden, we expanded our partnership with our Lannavaara JV partners and have signed a new earn-in agreement with them on the Painirova project in north Sweden. Painirova is located in Sweden's most prolific mining belt. And we've included a more detailed map in the appendix, so you can have a closer look at this.As you can see in our growth pipeline, we've continued to build a healthy set of organic projects all at different stages of maturity. This pipeline has come a long way over the last few years with resources and reserves now shaping up in a number of provinces. It is this pipeline of options that will allow us to allocate capital in a responsible way. Through the second half of this year, we expect to see this pipeline continue to mature and change as most of these projects have material milestones approaching. The deposits on the left will either move to the right as projects mature and move into study phase or they will exit our portfolio as we exit earnings. Similarly, the bubbles on the right will continue to move to yellow and to green and end up in the very right column in operations or they will exit our portfolio when we choose not to invest. This growth pipeline will become more dynamic now that we have a healthy set of opportunities and the internal capability to progress them.So looking ahead to the immediate quarter, we expect to provide updates on the Prom Hill haulage feasibility study as part of the expansion project at Prom Hill. We also expect to provide a progress report on West Musgrave Pre-Feasibility Study, which is underway. And we also expect to provide an update on the Pedra Branca feasibility study and next steps. On guidance. Our production cost guidance metrics for 2019 now include guidance for Antas. We've updated this following the recent completion of the Antas mineral resource and mine plan revision. All other metrics remain unchanged.So now just quickly, I'm going to summarize the key takeaways before we move on to questions. This quarter has seen both Carra and Prom Hill production tracking to plan. Prom Hill is on track for guidance, and we have new drill targets as identified through the Explorer Challenge. Carra is on schedule for the first concentrate in Q4 with about 46,000 tonnes of development ore now stockpiled, aboveground infrastructure approaching completion and stringing of the -- and the electrification of the electricity transmission lines to site now complete. We're going to provide an update on the West Musgrave Pre-Feasibility Study in Q3 now that we've confirmed 10 million tonne per annum at the optimized processing rate. We've demonstrated CentroGold project generates a circa USD 200 million NPV at PFS level, with Chega Tudo remaining as a short-term upside. We've defined the low-risk modest capital Carajás hub strategy that has 1 million to 1.2 million tonne per annum Pedra Branca underground mine, having ore processed at Antas with an update due later this quarter. Exploration-wise, we've implemented the Eloise joint venture restructure and new earn-in agreements have been signed in Carrapateena and in Sweden. And finally, our cash balance stands at about $187-odd million with no debt.So this brings us to the end of the formal part of the presentation. As a reminder, I've got Warrick here, and he's happy to answer questions. I'm now going to hand back to the operator. Operator, if you can remind people how to ask questions, please. We'd be happy to answer as many as we can.

[Operator]

[Operator Instructions] Your first question today comes from the line of Hayden Bairstow from Macquarie.

[Hayden Bairstow, Analyst]

Andrew, just on the study update, just want to get an understanding of what we can expect similar to what PV was. I mean, is this sort of an interim feasibility update for underground at Prom Hill and also West Musgrave? And that work you're doing on changing sort of how you're producing the concentrate at West Musgrave, is that suggesting that we could see further improvements on the recovery rates that was previously indicated?

[Andrew Cole, MD, CEO & Director]

Yes. Go ahead. So there's a few different updates coming up here. On Pedra Branca, we'll be providing -- it won't be a complete feasibility study, but it will be an update on the feasibility study. We had to -- we revised the base case of Pedra Branca scope a number of months ago as we optimize Pedra Branca and the Antas asset. So later this quarter, we'll be bringing you an update on what we think the scope of the Pedra Branca development will be. We'll also be looking at whether we should be investing in any early works like an early decline, for example. So that work is just concluding now. It won't be a full PFS, but it will be an update on the PFS. West Musgrave will be similar. West Musgrave will not be a completed Pre-Feasibility Study this Q, this quarter. It will be an update on a Pre-Feasibility Study, where we will outline for you what the base case of that scope is starting to look like and what remaining work needs to be done through the course of the PFS. And the remaining work is mostly to chase down opportunities that we've identified to continue improving the economics and in a couple of cases, work that we need to do to protect or remove the threats from the project. So that's what we'll be bringing a little bit further on this quarter.In terms of the base case, as we've mentioned today, we've now included the Bulk Processing flowsheet in our base case. And that's the result of a number of pilot plant trials we've done over the last several months taking bulk samples through both the Bulk and the Sequential flowsheet designs. And the Bulk flowsheet shows a superior recovery and performance. So that's why we've included it. So we'll be able to give you a bit more detail, Hayden, on the types of numbers in terms of recoveries, et cetera, that we're seeing from those flowsheets when we come out with the PFS update a bit later this quarter.

[Hayden Bairstow, Analyst]

Great. And just finally on Carrapateena. I mean is it safe to assume the process plant is effectively the critical path on there? The underground looks like it's going amazingly well.

[Andrew Cole, MD, CEO & Director]

Yes. Look, Hayden, I -- the underground is going exceptionally well. There's no doubt about that. They're doing very well, underground infrastructure, underground development rates. The processing plant, I don't think any of the surface infrastructure really is critical path. As I've mentioned a couple of times before, even if the surface infrastructure is delayed by any amount of time, because the underground mine takes 18 months to ramp up, we can recoup any delays the surface infrastructure delays relatively quickly next year without much impact on value at all. So yes, we've got a lot of focus on the surface infrastructure. Now that they've energized the power lines of site, it's all about site activity and final construction and commissioning, but I would still say for the next 18 months to 2 years, the critical path activity is underground development and getting the cave propagating through to surface.

[Operator]

Your next question comes from the line of Paul Young from Goldman Sachs.

[Paul Young, Equity Analyst]

A few questions on Prominent Hill to begin with. Andrew, it says here that you achieved 3.7 million tonne run rate in May. Just curious, have you been able to maintain that level through June? And then also what your forecast is for underground production for the year? Second question is on gold recoveries. I noticed they dropped quite a lot. In fact, I think it's probably lowest gold recovery probably for 5 years, sort of flat. Was that a result of the gold trial? And is that the new recovery, the 68% -- 65% to 70% what we should be modeling going forward? And then a question for Warrick, actually, just on exploration and development. I think it was $20 million for the first half that's cash exploration. What are we looking for in the second half on exploration and project studies development in cash outflows?

[Andrew Cole, MD, CEO & Director]

Do you want to answer the last question first?

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

Yes. Good day, Paul. So probably around about the same, we would expect for the second half as the first.

[Andrew Cole, MD, CEO & Director]

The exploration -- yes, exploration guidance is $30 million to $35 million. And we're not changing that, Paul, so we're still -- we're planning to stay within that guidance range for the full year.

[Paul Young, Equity Analyst]

Okay. And Warrick, while I've got you, just on the 75 to 80 of project studies, what percentage of that is actually capitalized?

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

Just the West Musgrave expenditure on that one. So for the half that was -- well, for the quarter, that was just under $8 million.

[Paul Young, Equity Analyst]

Right. So a very small percentage of the 75 to 80 is capitalized this year?

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

Correct.

[Andrew Cole, MD, CEO & Director]

So Paul, let me come back to the first couple of questions. So the Prom Hill team hit 3.7 million tonne per annum run rate for May from underground mining operations, which is great. They didn't quite sustain that in June. They came backwards a bit, and that's why the focus is on sustaining that run rate. So they've absolutely got the capability and capacity and equipment and a number of headings, et cetera, to do that. It's just about getting their systems managed, I would say, well and consistently enough to continue hitting that run rate. They've certainly hit higher run rates than that over shorter periods of time, but it's about getting that system variability out. So that's their current focus. So we know that they can do it, it's just about holding the line. In terms of gold recovery, no, the gold recovery that you saw in the last quarter is not going to be indicative of upcoming gold recovery. I would say it's more an anomaly just based on sequencing and where they are in the stopes. In fact, it's a bit the opposite to that. The gold processing trials we ran earlier this year shows a better-than-planned recovery of gold from stockpiles. So that work is still being analyzed and fully understood and verified, but we'll expect to see an increase in gold recovery from our stockpiles, which we'll bring to you once we finish the analysis.

[Paul Young, Equity Analyst]

Yes, great. And then back on the underground, sorry, on your last point on the Malu Paste Plant. Is that being delayed a little bit and will that impact underground mining rates at all in the next 12 months?

[Andrew Cole, MD, CEO & Director]

Yes, look, it's been delayed a little bit, so it will roll into early next year. But no, we don't expect it to have any delay on our scheduling. So not anticipating any issues there.

[Operator]

Your next question comes from the line of Michael Slifirski from Crédit Suisse.

[Michael Slifirski, Managing Director]

Well, 4 quick ones. First of all, so continuing on that theme of the underground mining haulage rate, I'm a little bit confused. So the guidance remains 3.7 million to 4 million tonnes. You've done 1.6-ish in the first half, so we can what the second half has implied. Is that achievable? Because the sort of second half run rate is above the top end of the guidance range anyways. I'm just trying to understand what that -- how you're thinking about that 3.7 million to 4 million and whether implicit within that is an exit rate that's above that range?

[Andrew Cole, MD, CEO & Director]

Yes, Michael. So the underground, as you will recall, over the last few years has been in ramp-up if you like. So it was only -- it wasn't that long ago, we're only seeing 1 million, 1.5 million tonnes per annum. So the last 18 months, they've been progressively ramping up the underground run rate. And that's about getting the footprint and the number of stopes that they can actually draw on to getting the development out. And I think they've pretty much got to that point now. Now it's about getting the system in control. So when you look at the control charts for underground, they are progressively increasing their underground ore mine run rate week-on-week effectively. Now it may move slightly higher than June, but when you look at individual weeks, they're actually improving. So we're quite comfortable and confident that they can deliver within that guidance range through the end of the year. Now if we weren't comfortable or confident or didn't think we have the programs in place, we'd to change the guidance range, which we're not -- we don't believe we need to do this year.

[Michael Slifirski, Managing Director]

So then what's the read-through in that -- if you've done the -- whatever number it was, 1.6 first half, it implies second half 2.1 for the bottom end of your range. So you've got a 4.2, 4.3 million tonne rate that we -- is a bare minimum for next year?

[Andrew Cole, MD, CEO & Director]

No, I'm not extrapolating that far out, Michael. I'm just -- let's just hold it at 3.7 million to 4 million for now. That's the target for this year. And we'll issue guidance for next year when we get to that point.

[Michael Slifirski, Managing Director]

Okay. With respect to cost guidance for Prom Hill, you're doing very, very well. You've got green dots against all the parameters. What is it that stops you from adjust net cost guidance? Because you seem to be well ahead. And then how does the gold hedging play within that? Specifically, I can see from your charts from the financial results, about -- I think 18,000 ounces hedge delivery per quarter for the current quarter and next quarter. Does the credit against your copper costs blend that average of a spot gold and hedged gold to achieve it? Or is that all a spot gold credit in cost guidance?

[Andrew Cole, MD, CEO & Director]

You want to take that?

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

Yes. So on the second question, Michael, it's Warrick. That's the spot gold price, so the hedging doesn't come into play in terms of that C1 performance. And I think on the first one, it's a little bit, again, a little bit too early to call as sort of being on the guidance for the full year. I think, certainly, we'll have a view over the next sort of month or so in terms of looking at guidance for -- at the end of Q3. But yes, we've certainly got a continued improvement in underground productivity, which will be a key driver to them. So...

[Michael Slifirski, Managing Director]

Okay. And then finally, Carrapateena, I've got myself a little bamboozled in terms of all the moving bits with CapEx. So are you still within your capital guidance? So I've just got myself a little bit confused as to the original budget and capital that was moved from preproduction to postproduction capital. Can you just sort of help me remember how that all works? And where you are with respect to the sort of revised preproduction capital number, please?

[Andrew Cole, MD, CEO & Director]

Sure. So the original preproduction capital number for Carrapateena we set for a couple of years ago, Michael, was AUD 916 million, preproduction. I think when you add the inflation into that, it turns to about AUD 920 million. A year ago, with some adjustments to scope and capital timing, we adjusted the all-in sustaining cost for Carrapateena up slightly which takes account of any delays or any extra capital we moved into the operating cost now as a result of a number of things. So we are still holding our guidance for the preproduction at $916 million or $920 million if you inflate it for using -- if you add the inflation into it. And we're not changing that this year. We still believe that we're on track to deliver to the preproduction number. We also believe we're on track to deliver the all-in sustaining cost number, which we revised to $1.5 by -- I think it was.

[Operator]

[Operator Instructions] Your next question comes from the line of Daniel Morgan from UBS.

[Daniel Morgan, Director and Analyst]

Andrew, I just wanted to touch on the concentrate sales at Prominent Hill. They were lower than production for the second quarter in a row, and there's now quite a big stockpile of concentrate waiting to be shipped or sold. Just wondering if you could comment further on that. What are your customers doing? Is it getting more difficult to sell? Or what's the issue there? Is it a timing difference?

[Andrew Cole, MD, CEO & Director]

Yes, I'll ask Warrick to comment on this one, Daniel. It's a -- it is just timing. And I think we're seeing signs in the market that it's going to be really fairly strong second half compared to first half. Do you want to add to that?

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

I think that summarizes it very well, Andrew. So yes, no, Daniel, I think the market more generally is -- has favored certainly the second half. But I mean, we really -- the market has really picked up in the -- even in the first half of this quarter. So there's certainly no issues from our perspective. It's just a timing issue.

[Daniel Morgan, Director and Analyst]

And then maybe just a follow-up on CentroGold, I mean, on your earlier update you provided on Brazil earlier this month, you've talked about the injunction. You're confident that being lifted by the end of the year and, I think, reiterated that again today. Can you just talk a little bit further about that? And also the license position, I think, it was my understanding that it already was in a quite favorable licensing position and that it had licenses that once you lift the injunction, you should be able to move quickly. Is that understanding correct or maybe an update on that?

[Andrew Cole, MD, CEO & Director]

That's roughly correct, Daniel. So we still believe the injunction will be removed this year. And the process that the team is following in country is going well. It is bureaucratic. It's slow, but it's predictable and we believe it's reliable based on what we've seen so far. So we believe injunction will get removed later this year. Until such time as an injunction has been removed though, we are effectively only doing low-cost works and desktop-type work. Once the injunction is removed, then we will start feasibility study and open up the region for exploration. In terms of licensing, the project does have some existing licenses on it already. The scope of those licenses will need to be modified though, given we've changed the base case for the project development. Now the revision of those licenses is a smaller, a shorter task than actually having to lodge for the full license process all again. So once that injunction is removed, we will then put in the license amendment to the environmental permits, et cetera. I can't say off the top of my head how long those permits -- those licenses take, but it's months, not years.

[Operator]

Your next question comes from the line of Lyndon Fagan from JPMorgan.

[Lyndon Fagan, Analyst]

Look, just back to the Carrapateena budget, do you mind confirming how much CapEx has been moved from preproduction to postproduction?

[Andrew Cole, MD, CEO & Director]

Lyndon, we haven't given out that level of detail. We've given you the top-level numbers, which is the numbers you need to do the valuation. But I can't give you yet all of the breakdown of the moving pieces through time if you like. So the top-level numbers are the $916 million or $920 million adjusted for inflation preproduction and with the all-in sustaining cost number the $1.5 now, you've got the pieces you need if you use the Pre-Feasibility Study report that we gave you with the capital distribution charts in it.

[Lyndon Fagan, Analyst]

Okay. No worries. And then with the CapEx that was spent in the quarter, $177 million or I guess the cash that was spent in the quarter, there was $21 million that looks as though it wasn't classified as CapEx. Could you please sort of explain what that is? And how we treat that, assuming it goes through as an OpEx item?

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

No. It's just the difference between the payables. And so we've giving you the cash outflow number and then the spend, so some of it relates to the previous -- the cash outflow relates to the previous quarter payables.

[Lyndon Fagan, Analyst]

Okay. Yes. Perfect. And then just moving across to CentroGold, just to try and understand that a bit better. So with regards to the village relocation, I'm just trying to understand the materiality of that and what's exactly involved. But do you mind talking about how big a project that is, how many people are involved, whether they already know about it type thing? Just trying to understand that issue a bit more.

[Andrew Cole, MD, CEO & Director]

Yes, sure, Lyndon. So the community that lives adjacent to the CentroGold project, I think, consists of 42 families. These families are all living in -- they're fairly makeshift sort of ramshackle-type houses. They're all illegally built and sitting on -- built on land that they're not supposed to be inhabiting, but that's sort of not the point. Yes, they all know about the project. We've been working with them since last year or so since Avanco took over the CentroGold project and more intensely since we bought Avanco. So they are all very aware of the project. What we're wanting to do, and we started the whole route, the baseline studies to understand each family; the demographics, what it is they want to do with their families, whether they want to stay in the general area and work at a new mine; whether they want to move somewhere else and start a farming career or they want to move into town. And I would say overwhelmingly, there is support for the work that we're doing and the way we're going about it because it will give them a legitimacy that they currently don't have. The garimpeiros themselves which is only effectively 1 person is in a different position because they're running a business and using the rest of the community effectively as labor, which includes also the whole families effectively. So this -- the process that we are running is about helping the community because we want to support the community, help create value for them, help create pathways for kids to go to school, those types of things because it's the right thing to do. It will help the community. It will also help build our social license to operate in that local region, which will help us further into the future. So I hope that gives you a little bit more color on what it looks like. In fact, this week -- no, next week, I think, we've got our team from Australia in CentroGold, along with a number of third parties from Brazil who have done this type of work before, building out the complete strategy for the relocation activities. So perhaps once we've got a bit more detail around that, it's something we can share with you a little bit later on, maybe another update to the quarter or something or Strategy Day, Lyndon.

[Lyndon Fagan, Analyst]

Okay. So just to be clear, so do you need to build houses for these people? I assume there's over 100 people, there's 42 families. Just trying to understand the scope of work.

[Andrew Cole, MD, CEO & Director]

That's what we're working on, Lyndon. I can't tell you whether we will or won't need to build houses. Even if we do need to build houses, you're talking about rural Brazil and -- so you're not talking about $100,000 houses here. They're nowhere near that. So the cost of a program like this is not material. It's the time and getting it done correctly that is the more difficult piece.

[Operator]

[Operator Instructions] Your next question comes from the line of Sophie Spartalis from Bank of America.

[Sophie Spartalis, Vice President and Senior Resources Analyst]

Just a quick follow-up, given most of my questions have already been answered. Just in terms of the potential short closure from Woomera, can you just talk through the worst-case scenario in terms of number of days out and then how confident you are in terms of still being able to catch up that time, just in the worst-case scenario? I know you said that you don't really expect it to be an issue, but if we could just get some color, that'd be great.

[Andrew Cole, MD, CEO & Director]

Yes. Sure, Sophie. So Prom Hill, as you probably all know, sits in the green zone. This is the outer third of the Woomera federal defense area. And from time-to-time, they undertake activities, defense-related activities that requires the red, orange and sometimes green zone to be closed. So we've had a number of occasions where we can't hold concentrate to Woomera's siding, for example. Or we have to -- we can't access our ball field because that area of the Woomera defense zone is closed and we just plan around that, which is relatively straightforward. For us, we just stockpile concentrate at the siding or down at the port ahead of time. So we're quite used to working in this manner with the Department of Defense, and they're very accommodating and supportive of giving us notice.In terms of this current speculated closure, it hasn't been completely confirmed yet. But at the moment, we're thinking it's going to be a few days for half a dozen hours per day. So we're working with our teams on site and with the Department of Defense on what that time is going to look like and how we're going to manage through it. So with that type of numbers, as you can imagine, that doesn't materially change how we run the sites or any of our scheduled forecast. Our shots are much longer than that, so -- our scheduled shots. So it gives you a rough idea of the magnitude we're talking about, but it's still something that needs to be taken into account. It might not happen if the Department of Defense closes it. Or it might take longer if they come back and revise their forecast. But based on what we know today, it's going to be immaterial

[Sophie Spartalis, Vice President and Senior Resources Analyst]

Okay. That's great. And then just following up on the cost guidance question in terms of tracing the byproduct credits from spot gold prices. So Warrick, one for you, where will the gold hedging the mark-to-market sit then? Is it on the revenue line or on the cost line?

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

It's on the revenue line, Sophie.

[Sophie Spartalis, Vice President and Senior Resources Analyst]

Okay. That's great. And can you just confirm how much hedged gold you've got for calendar year 2019 remaining?

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

As per the -- it's in the -- the details of the hedging both in terms of quantum and pricing is in the annual report. There's a graphic in there that sort of covers both, but it's around about 30-odd thousand, off top of my head, to go.

[Operator]

There are no further questions at this time. I'd like to now hand the conference back to today's presenters. Please continue.

[Andrew Cole, MD, CEO & Director]

Okay. Great. Thank you very much for your time, everybody, today. As per usual, if you have any questions or want anybody to help answer, work things through, please give Tom a call and we'll get back to you. Thanks very much.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may all disconnect.