Good morning, and welcome to the Analyst Call for OZ Minerals' First Quarter Report for 2016. My name is Damon Hunt, and I'm the Head of Corporate Affairs.

This morning, my CEO and Managing Director, Andrew Cole, will provide you with an overview of the Q1 results. Our Group CFO, Luke Anderson; and COO, Bob Fulker, are also joining us on the call this morning.

I will now hand over to Andrew.

All right. Good morning to everybody on the call.

Thank you, Damon, for the introduction. As you will have noticed in the releases we've made this morning, OZ Minerals has had a solid start to the quarter and a solid start to the year.

It has been a solid start, but it certainly hasn't been an easy start. So I'm going to talk you through some of the challenges we've had in this first quarter.

But I think one of the key takeaways for us is despite some of these challenges, as I'll make clear during the next 0.5 hour or so, we have still delivered to guidance, which I'm very pleased about. Today, I'm going to take you through a number of sections.

The first thing I'm going to talk about is a little a bit of a reflection on the past year. So on the 20th of April, 2015, we launched the new OZ Minerals strategy.

So I think it's timely to reflect on the things we've done over this past year. It's an important process, I think, because it does help us set up and organize how we move forward.

We focus on the things we've done really well to sustain them, and we focus on the things that we haven't done so well so we can focus on improving them. So I'd just like to share with you very briefly some of the summary of that reflection.

Then, I'm going to take you through the quarterly performance, a very brief update on Carrapateena and a brief update on the exploration. And on each area, I'll talk a little bit about what we're doing next.

So there are a number of disclaimer slides here. I'll leave you to read them in your own time.

So firstly, let me talk about the OZ Minerals strategy 1 year on. And I'm not going to read through all of the material on the slide.

I will leave you to do this. But as I've said before, I think it is important to reflect, and one of the key reflections, I think, from this past year is it has been about establishing a solid foundation for the company to move forward.

It's about getting our fundamentals right, instilling a sense of operating discipline. And as the strategy will sort of suggest here, it's about getting a lean business in place.

We've done a lot of work focusing on our customers. And of course, all of this is being done to generate value for our shareholders, and of course, other groups and stakeholders like our employees and our communities and governments and the like.

So just a couple of highlights in the achievements. One of the first things we did, of course, was to consolidate our offices.

So we had a couple of offices. We consolidated those into one, which is now located in Adelaide.

One of the things I'm probably most proud of, though, and this is particularly driven by the leadership team at Prominent Hill, is the safety performance improvement over the past year. So we've seen more than a 30% reduction in injuries at the Prominent Hill site, which I think is fantastic.

It does mean 1/3 less people end up in hospital or doctors. And I think the symbolism of this is enormous, of course, for individuals and families, but it goes much well beyond that.

It's indicative of the quality of the leadership, the improvement in the leadership team, which will see and generate benefits in business metrics like financial returns and productivities and efficiencies. And I think we're seeing that playing out through the rest of the performance at Prominent Hill.

A number of output measures from the finance perspective. We increased our cash balance by $334 million.

We saw our C1 cash cost reduced, so we're now well and truly in the bottom quarter of the cost curve. Solid financial performance overall, with an NPAT increase of over 160% and EBITDA increase of over 40%, and a cost of goods sold reduced by over 15%.

And all of that was on the back of a record production year for 2015. We took out a lot of costs out of the business last year.

We have another $20 million of annualized costs already locked in for coming years, and we have another $25 million of opportunity in our pipeline as a result of renegotiating agreements with suppliers and service companies. We signed 3 exploration joint ventures, and I'll touch on these a little bit later on in the presentation.

But they are indicative of the types of agreements we would like to be doing as a company going forward. And of course, Carrapateena.

I think Carrapateena is a very exciting project in the current shape, and I'll touch on that a little bit later on. So it's been a very busy year.

I'd like to think it's been a successful year, and we're now going to build on the solid foundation moving forward. So now let me turn to a summary of the quarter 1 performance.

And I opened this by saying that it was a very solid quarter but certainly not without challenges. We did deliver copper on guidance.

So over 31,000 tonnes, which is certainly in line with our annual guidance of 115,000 tonnes to 125,000 tonnes of copper. Our C1 costs were at $0.75 per pound, which is in the middle of guidance, notwithstanding that our gold was down at 27,000 ounces of gold.

The run rate for the gold delivery was down for the year. We do expect in our internal budget actually to have gold weighted towards the back end of the year, but notwithstanding that gold was down a little.

So I want to talk a little bit about some of challenges we've had this last quarter. The first and probably the most prominent issue that we had at the Prominent Hill site this last quarter was an incident we had in the underground mine.

So that incident involved one of our development faces, one of our development headings when a rock fell off the face and hit one of our underground operators. It was a serious incident, of course.

He is fine; no issues with the person. But it did flag for us the potential in underground faces and underground developments.

So we put in place an immediate control to mesh all development heading faces. And that has caused us some challenges, of course.

It incurred us some extra costs. It slowed down our cycle times and a few other challenges.

So what that also resulted in is mesh coming through our crushing system, and we ended up with quite a bit of downtime at our primary crusher. And I think as an example, in March, we lost 13% of our available time simply to having mesh caught up in our crusher.

All of these are temporary issues and measures we've got from the operation. We are now putting in place a more permanent solution to prevent reoccurrence of the incident.

So we're not going to see these types of symptoms display going forward. And as an example, this month, April month to date, we haven't seen any mesh come through the system, and we're only going to be meshing some of the higher-risk development faces, which will reduce the impact of this going forward.

But as you'll understand, the most important thing for us was to look after people's safety, which we took seriously. And I think on top of that, we had 3.5 days lost due to wet weather, and we had a significant increase in lightning events, which cause us to shut the entire operation.

So you put all of those things together, and I think the Prominent Hill site had quite a tough quarter. But [indiscernible] on all of the guidance metrics with one exception of gold.

So I'm quite pleased with the performance of Prominent Hill. And I think the issues that they had in this last quarter are not going to repeat themselves going forward.

So we're quite confident to say that we are going to meet and exceed guidance throughout the rest of this year. The Prominent Hill declines that we are constructing is actually ahead of schedule, so currently 6% ahead of the schedule that we had in place.

We did undertake some resource drilling as we announced a little earlier in the quarter, and I'll talk about that in a little while. The Carrapateena studies are on track.

In fact, they're slightly ahead of track, and I can now say that we'll be able to come to you in May and define what the final scope of work for Carrapateena will be going into the PFS. Cost reduction work is going well.

So we're steadily working through the agreements with our suppliers and service companies, which allowed us to lock in $20 million of annualized savings already, and we have in our pipeline another $25 million of opportunity, which we're currently in negotiation on. Turning to exploration at Eloise, probably a more exciting and immediate project.

We've got some very good targets there, which we're going to accelerate drilling on, and I'll touch on those in a moment as well. So that's the summary of the performance for the quarter.

So let me walk through some of the details now. So I've already touched on safety, that the incident in the underground was serious.

It's the most serious incident we had for the quarter. Unfortunately, our total recordable injury frequency rate did increase slightly by 9%.

However, fortunately, all -- nearly all of those incidents were minor strain and sprains. So we saw a drop of over 20% in our severity rate.

So lots of -- an increased number of minor injuries resulting in an increase in TRIFR, but the severity rate came down, which is pleasing to see and probably the only positive takeaway from that. We have rolled out a number of new life-saving behaviors across the site.

We have also seen our closeout rates incidents significantly improved. And I think it's that system improvement which is an important indicator for the future.

It's getting in control of incidents, making sure that they are investigated quickly in a timely manner and actions taken appropriately. We have -- or are also about to roll out a complete new isolation system for the site to ensure that everybody on-site completely understands hazardous energies, what isolation means, why it's being done and how it's being done.

So that's a process that's currently in hand. So I'm now going to hand over to Luke to talk a little bit about cash generation.

So one of the pieces of feedback that we've had from people over the last number of months is whether we could report cash more frequently. Now we haven't done this historically, but we are going to do it based on the feedback we've had.

So please remember, this is unaudited, but I'll hand over to Luke now to talk about cash.

Yes, thanks, Andrew, and good morning to everyone on the call. From a financial perspective, we achieved another solid performance for the quarter.

Our unaudited cash balance at the end of the quarter was $533 million, a reduction of $20 million from the prior quarter. I'd like to explain a couple of the significant items which resulted in this reduction, which was despite the strong operating performance.

Firstly, there was a payment of the final dividend of $0.14 per share, which totaled $43 million, and this was paid in March. And secondly, there was an $81 million increase in unaudited working capital.

So the 2 significant components of the working capital increase were $63 million increase in ore inventory as we continue to accelerate mining the open pit and stockpiling ore and a $30 million increase in concentrate stocks due to a timing of the shipments. Concentrate stocks were reduced in early April following a shipment of 10,000 tonne, dry metric tonne of concentrate worth approximately $40 million.

So stocks then returned to more normal levels. As announced last quarter, we pursued our program to convert a majority of our cash balance to Australian dollars and maintain U.S.

dollars only to meet U.S. dollar commitments.

USD 278 million have been converted at an average rate of $0.72. And that is now generating higher Australian dollar interest income.

We've been unable to commence our share buyback program announced in February to this point due to a number of blackout restrictions. This program will commence once we believe these blackout restrictions cease.

The renegotiation of our USD 200 million undrawn debt facility has been completed, realizing annualized savings of $2.1 million in reduced commitment fees at lower margins. Given our large cash balance, the facility is being reduced to AUD 100 million with an accordion feature for an uncommitted amount of AUD 300 million.

So this facility was renegotiated with our existing bankers and provides us ongoing access to available credit and flexibility more aligned to our requirements and also at lower cost. The term of the facility was 3 years.

Now I hand back to Andrew.

Okay. Thanks so much, Luke.

So I'm now going to turn to Prominent Hill. But perhaps, before I get into some of the detail, I just want to let you know that last night, we attended an award -- the state awards dinner with the Treasurer, the Minister for Mining and a number of other key business representatives.

And I'm just -- I'm pleased to announce that Prominent Hill received an award for the work that they are doing with the Antakirinja people in helping build business. So there is a new business that's been created in partnership between the Prominent Hill site team and the Antakirinja people.

And this is a bit of a first for the group. Antakirinja is very excited about this, of course.

We are very excited about this. It's going exceptionally well.

And I think it acts as a role model, if you like, not just for OZ Minerals but for the state. So I'm very pleased to attend that last night and accept that on behalf of the team.

So I'd like to turn now to the open pit performance. The open pit is continuing to perform well.

We mined 4.5 million tonnes of ore and 5.9 million tonnes of waste. As we flagged earlier in the year, we were demobilizing a large proportion of the open pit mining fleet this last quarter.

That has all been completed and it was done successfully. It was done well.

I think the team on-site did a good job at helping people through that transition. It is a difficult transition because it involved over 110 people leaving Prominent Hill.

It also included obviously an excavator, 14 trucks and 4 support pieces of equipment. Now as an example of what the implications of that are on the open pit itself.

The challenge with having 2 excavators in that deep pit meant that the productivity to the excavators was starting to drop. So in February, our productivity excavator -- our excavator productivity was just over 1,100 BCM per hour.

In March, post-transition, the productivity stepped up to 1,260 BCM per hour. So that's the real impact of demobilizing half of the fleet.

It opens space. It allows the pit to run much more efficiently.

It allows the pit to -- for us to move more material per hour, which is the key driver for performance in the open pit and the contract we have. Our waste to ore stripping ratio continued to decline.

So for the quarter, it was at 1.3:1. And as you can see by the chart in the bottom left, it's going to continue decreasing through to the end of the open pit mine life in early 2018.

De-risking initiatives in the open pit continued. I can now confirm that we've completed all of the horizontal depressurization drilling.

So that has gone well. So these are horizontal holes going out into the overburden to allow us to dewater the overburden.

What that does is takes pressure off the overburden itself and helps prevent failure of overburden sequence. So we are now removing 12.5 mega liters of water per week from our wells.

This is up significantly from something around 3.5 mega liters per week prior to drilling. So it's a substantial improvement, and that directly correlates to the stability of the wall rocks.

We track the stability of the open pit by our prism systems and radar systems, and we track this every day and every week in the senior leadership team. And I'm comfortable and confident to say that the walls in the open pit now are moving far less than they ever have before.

Move to underground performance. So the underground is in line with our mining schedule.

We mined just under 500,000 tonnes of ore at just over 2% copper. So 500,000 tonnes puts us right at the bottom end of our guidance range -- annual guidance range of 2 million to 2.2 million tonnes per year.

In our internal plans, we do see the back end of the year weighted more towards ore tonnes and the front-end weighted more towards development tonnes. One thing that we have started in the underground operation on the back of last year's resource and reserve statement is the implementation of a detailed reconciliation process.

So we were doing some very basic reconciliation prior to this that's nowhere near detailed enough to understand what the drivers of reconciliation are. So whilst it's early, what we are seeing in the reconciliation process is a positive reconciliation for copper.

The numbers are fairly [indiscernible] there and fairly hard to determine, but we're seeing numbers in the order of 5% positive reconciliation. So we will continue to push drive the reconciliation process and monitor this over the coming months.

And then, we'll build the results of course into our resource and reserve statement later on this year. Our annualized haulage rate, inclusive of waste for the quarter, is about the same as the prior quarter, at 2.8 million to 2.9 million tonnes per annum, and that demonstrates the capability of the single decline.

The second decline is ahead of schedule, as I said before, so 6% ahead of schedule. The decline is a larger profile, as you can probably imagine, compared to many of our other development headings, so it does involve more waste.

So this is positive news. And as you can see on the bottom left-hand chart, we have now got our backfill up to about design capacity, and which is where it needs to be going forward.

So this is very good news because it demonstrates that we can scale our underground operation and maintain backfill rates at the desired level. If we move to the processing plant performance.

The processing plant has had a challenging quarter because on top of some of the issues that I mentioned before, they also had a major scheduled shutdown and a SAG mill reline, and they had a few other minor plant issues, which took the plant out for about 6% of the quarter. They were all completed successfully and safely, which is positive.

The plant recovery, they remained fairly robust at 88% for copper and 73% for gold. And the concentrate output remained high at just over 50%.

The water recovery from our tailings dam has improved significantly, and we now have a tailings dam engineer, who has done a fantastic job on the dam itself. And he's in a very stable symmetrical pattern, so we're quite confident in the stability, and we're quite confident that we can continue to raise that tailings dam as needed to take the remaining tails from our current life of mine plan.

Going forward, we are going to continue improving our consumable trial. So the trial itself was successful.

So we are going to execute on that trial and change our consumable products. We're going to be integrating those into the processing plant.

So I'm now going to hand over to Luke, who's going to talk a little bit about costs for the quarter.

Thanks, Andrew. So turning to cost performance.

It's pleasing to report that our ongoing lean focus to improve production efficiency and reduce costs is continuing to yield results. Our C1 cost for the quarter was USD 0.753 per pound, which is in the middle of our annual guidance range of USD 0.70 to USD 0.80 per pound.

The increase over the prior quarter, as shown in the waterfall chart, was a result of lower gold by-product credits and a little less copper production and higher unit mining costs due to lower volumes mined. Importantly, we continue to remain in the bottom cost quartile of copper producers.

Open pit mining unit cash costs in quarter 1 were $5.83 per tonne mined. It was slightly higher than quarter 4 last year, reflecting the removal of the digger fleet at the beginning of March.

And going forward, we expect open pit unit mining costs will rise due to less volume mined and longer haul distances. However, we remain on track to meet the full year guidance of $6.40 to $6.60 per tonne mined.

Operating costs of $60 per tonne mined for the underground in quarter 1 were higher than quarter 4 last year, with lower ore hauled in line with the mining schedule and more operating activity performed, primarily with the increase in stope filling with CHF in place [ph] and grade control activity. Our processing costs were higher this quarter versus the previous quarter, mainly due to the plant shutdown.

We obviously didn't have a shutdown in the quarter 4 last year. There were a number of other challenges for the processing plant that Andrew has already talked to.

The shutdown was completed, though, on schedule. As announced recently and as mentioned by Andrew already, our cost-savings initiatives have already locked in $20 million in annual savings.

Important to remember, these will be realized over the next 12 months, and it will take a little bit of time for those to start flowing through, but we have another $25 million in annualized savings against that in the pipeline going forward. Also going forward, we expect that total cash cost will continue to improve, with the full realization of the fleet demobilization, lower mining volumes and expected improvements in our underground operations.

So with that, I'll hand over to Andrew.

Thanks, Luke. So just to wrap up on Prominent Hill, I just want to draw your attention to the long section we've got here through the Prominent Hill resource.

So we flagged earlier this year that in 2016, we're going to spend about $4 million to increase the confidence level of existing inferred mineral resource to a very good depth of about 700 meters, and in some areas, target new resource. So a bit earlier this year, we were very pleased to release the first set of results from some of that drilling.

And that drilling was completed in the Stage 3 area on the right-hand side of this chart after we completed the 7 drill holes. The highlight, I guess, of that drilling was that we intercepted over 60 meters at over 3% copper, and that was outside the current resource.

So to me that just highlighted how little we know about this resource. There are still very substantial intersections that this one evidences that can be drilled and found in -- around Prominent Hill.

So we are now moving to the Stage 1 area. So we are currently drilling in that area to try and convert resource through to reserve to allow us to build that into the mine schedule.

So turning to Carrapateena. I mentioned earlier that we went to an awards night last night at which Prominent Hill received an award.

I'm also pleased to say that Carrapateena was awarded the -- an innovation award for the development of hydromet. So that was a very fantastic outcome.

So Adelaide is a very innovative place. And for OZ Minerals to receive an innovation award around the development of hydromet for Carrapateena I thought was fantastic.

So it does really represent the quality of the work that's being done in that space. The judging panel was completely independent and drawn from a whole raft of industries and academic institutions.

So the Carrapateena project, to take that award out, was very pleasing. So the next slide really just draws your attention to what we already announced.

When we announced the scoping study results for Carrapateena, there were 4 things that we said we were going to do. The first thing was to accelerate and complete the PFS, leveraging a lot of the work that had been done historically.

The second one was to explore the opportunity to increase our throughput up to -- from 2.8 million tonnes, and we said we would do that by the middle of this year. We said that we were going to start drilling 4 new holes to upgrade the mineral resource we measured and to get more core metallurgical testing, again, by the middle of this year.

And we said that we would finalize the scope costing and supply selection for long-lead items and the decline, which we said again will be done by the middle of this year. So I'm going to take you through these.

But before I do, I just want to draw your attention to some benchmarking work that we have done. So the slide here with 3 charts on it contains data that we have extracted from WoodMac and SNL to generate hopefully a transparent and comparable data set of resources from around the world that are either in development or have just been developed to demonstrate where Carrapateena sits compared to its peers.

And when I looked at this for the first time, I thought it's quite a good news story. This is for, of course, the 2.8 million tonnes per year base case.

As we continue to refine the scope of work for Carrapateena, we will bring this chart back to you to demonstrate the changes that we make to the scope by benchmarking it to our peers. So now in terms of dilution.

So you may recall that the single biggest technical risk that we flagged with the new 2.8 million tonne base case was that of dilution. So sublevel caving has many strengths, but one of the key questions around sublevel caving in this resource was how much would the cover sequence dilute the ore body?

So I am pleased to say that we've done some work on this. So the assumption that we took at the time during our scoping study was that we targeted a cutoff NSR of $125 per tonne.

And of the mineralization contained within that $125 per tonne envelope, we assumed 85% of the metal would be recovered from 110% of the tonnes. So what we've done over the last few months here is we engaged Gavin Power of Power Geotechnical.

And I think Gavin is a nationally recognized expert in all things caving. And I suspect if he's not, he has been or will be working for every operation in Australia that does some form of caving.

So Gavin has run a series of models, and he's examined the sensitivity of dilution at Carrapateena by simulating various rates of dilution movement. And we're very pleased to say that he has confirmed via these models that scoping study assumptions are reasonable.

So what this finding does is it mitigates the most significant technical uncertainty that we flagged during the scoping study phase. What this does is allows us to lock in sublevel caving as our preferred mining method, which is very good news, of course.

In terms of drilling, we started drilling the 4 new drill holes just about a week after we announced the scoping study results. We committed to drill 5,000 meters to test the margin of the high-grade resource, and the intention, as I said, was to convert -- start converting to measured status and get more samples of metallurgical testing.

We've now drilled over 2,000 meters. Both of the drill holes are currently within the high-grade resource and the robustness of our resource model in this location has now been confirmed.

So the program is due for completion in the middle of this year. I think it's about June.

So pleasingly, we've had no surprises. So in terms of timeline and going forward, I can confirm that we're ahead of schedule on defining the final scope for the Carrapateena PFS.

The PFS scope, which we are now -- we'll be able to bring to you next month, will include a final annual throughput rate, which will be somewhere between 2.8 million tonnes and 4.8 million tonnes. It will include the results of a haulage study, primarily whether we use a conveyer or a shaft if it goes above 2.8 million tonnes.

It will include a power study to match the project scale, and it will include an update on the hydromet system. And of course, it will also include -- it will be output financial metrics, including capital operating costs, NPV, IRR, payback, et cetera.

So these will determine the final Carrapateena base case, which will then push into PFS. I can also confirm that we received the initial 7 tender provisions to construct the decline.

We have now shortlisted these 7 down to 4 preferred companies, and we expect to be able to make the decision on the decline after we have the results of the final PFS scope and the above-mentioned financial metrics and we have a final supplier selected. We of course now are currently in commercial discussions with the 4 preferred partners.

So just to reiterate the key message from that. We will be bringing to you the final scope of work for Carrapateena in May.

So just very quickly on exploration and growth. There is a summary slide in here which outlines the various projects we are working on.

The one I -- perhaps the one I want to draw your attention in this slide is the Mount Woods joint venture. This is a program of work that we are working on with Minotaur around Prominent Hill.

So Minotaur are nearly complete in analyzing the exploration data and information we've given them for identification of new targets to test around Prominent Hill. And I'm hopeful that, that work will finish in the coming weeks, after which, we will bring you a summary of the targets they have found in our drill program and our work program going forward.

On Jamaica. Jamaica is on track to be -- to make a decision as to whether we progress or stop work in Jamaica generally.

The work we've done there has highlighted a number of quite exciting exploration targets, although it's still very early phase. Over the next couple of months, we have a number of IP surveys planned, and we have a raft of drilling also scheduled.

And of course, if we find interesting things in Jamaica or commercially interesting things, we will bring them to you when we get those results. Perhaps the most exciting thing we've got on our table at the moment from an exploration perspective is in the -- in Queensland next to the Eloise mine, so in our Eloise joint venture partnership with Minotaur.

There's a whole raft of exploration targets in this belt, both focused on Cannington-style mineralization and Eloise-style mineralization. This belt of rocks, of course, is host to many local world-class mining operations already.

So it's the right jurisdiction; it's got the right [indiscernible]. Two of the very early anomalies which we have now packaged together, which we are fast-tracking drilling on are the Olympus target and the Bullwinkle target.

Olympus has a coincident IP chargeability anomaly with a surface gossan and rock geochemistry that ranges from 2.7% to 7% copper and gold. It's not very common in the exploration industry where you have coincident anomalism with these types of indicators.

So we are going to fast-track drilling in this area, and we plan to test them in the coming weeks. Bullwinkle is another quite interesting anomaly.

Bullwinkle is an anomaly that looks like it's an extension of the Artemis and Sandy Creek polymetallic mineralization zones, where Minotaur have previously drilled and intersected up to 3% copper over multiple drill holes. So it looks like the system is bigger than we first thought, so we will also be accelerating drilling in that area to further test some of the extensions.

So look, I'm going to wrap up the presentation here and come to a probably perhaps the more important piece and field questions that people may have on this call. So as a reminder, I've got Luke Anderson here.

He's very happy to answer questions on a financial nature. I've got Bob Fulker here, the Chief Operating Officer, who looks after Prominent Hill and Carrapateena.

So I'll be directing technical questions or specific questions for those 2 assets to Bob. Operator, if you could please remind people how to ask questions, that would be great.

Thank you.

I've got 3 questions from my side, please. First of all, the discussion around Carrapateena, the potential for up to 4.8 million tonnes per annum throughput.

Does that change your cutoff assumptions? So does it increase the mine ore inventory or is it just the plan potentially to mine it faster?

I'm going to hand to Bob on the first piece of this question. But Michael, on the second one, when we did the scoping study, you will remember that we are in the -- there were several scenarios that we looked at.

2.8 million tonnes assumes a single decline with trucking ore. And it's effectively capped by the efficiency of a single decline to carry your truck fleet effectively.

What we are looking at, of course, is whether you add a conveyor system, be it in that decline or a second decline, or a shaft in a way that sort of will allow you to expand the throughput rate. So that's 1/2 of the question.

If you add an alternate haulage method, you can simply go faster on the current resource. So I'm going to check to Bob now to talk a little bit about the kind of cutoff grade and size of the cave because that also comes into play.

So another part of the question, Michael, is some of the work we're doing in the PFS will be around determining exactly what the cutoff grade strategy should be through the operation. And as you can imagine, if we're actually mining it via a shaft or via a conveyor as opposed to via a trucking system, it's going to actually change the underlying costs assumptions as well.

So that will affect whether it's a 1 25 or a 1 10 or something in between from an NSR perspective. So the simple answer is at the moment, everything that was in the original 2.8 million tonnes is being mined.

But we're looking to see if we can actually increase that with the additional resources from the broader global resource that's actually here at Carrapateena.

Terrific. Secondly, with respect to the cost guidance, the open pit guidance maintained at $6.40 to $6.60 for the year.

Big tonnes mined in the first quarter at $5.83. So do we just volumetrically weight that cost to imply what the end of the year cost might look like?

So Michael, given -- one of the things we're doing consciously in the open pit is accelerating our open pit mining sequence. And the reason we're doing it is because of the structure of the contract.

So the fixed costs do not scale linearly with our variable cost, which has been almost the sole reason for accelerating our mining of the open pit. So the guidance that we've set for the year still holds.

You cannot linearly extrapolate quarter 1 costs out for the rest of the year because it's not linear. I hope that makes sense.

But this is why we're accelerating the open pit is because the fixed costs stay pretty fixed unfortunately. So you can't just take quarter 1 and extrapolate, because in quarter 1 we had 2 months with 2 excavators in the full fleet, and for 1 month in the quarter, we had one excavator and half the fleet and half the people.

Unfortunately, the fixed cost is going to come down the same way, though.

Yes, that was really the essence of my question. If I take your -- the mid-point of your guidance and multiply it by your tonnage guidance for the year to get $1 million [ph] expectation and deduct from that first quarter costs times tonnes moved to get a revenue [ph] of $1 million [ph] cost and divide that by the remaining tonnes to be mined, is that a fair way to get an idea of what the remainder -- the balance of the year looks like?

Yes, look, so I'm looking at my management accountant here and he's saying yes, that's a fair approximation.

That's all right, Michael.

Okay. What I'd really just sort of clarify too, the Page 13 chart, where you talked about that cost performance and say it's consistent in your bullet point with the fleet demobilization.

But in your other chart for the green dot, you say it's favorable to guidance. So was it actually favorable to guidance or is it consistent with guidance?

The green dot means we will deliver guidance, Michael. If I -- if we do not think we can meet guidance, it will have a red dot and we'll have to reset guidance.

So green dot is purely there to tell you that we are confident we can deliver guidance.

Okay. And then finally, with respect to the $20 million and then the $25 million of cost-outs planned for this year and then beyond.

That's over and above the scale reduction cost-outs that you achieve naturally, isn't it? So if we look at the reduced tonnage and whatever the cost impact is on the higher unit cost, the additional $45 million is over and above what you're getting from reduced activity levels.

Yes, Michael. That's correct.

It will take a little bit of time for the cost savings to come through. Obviously, you need to put new contracts in place, and it will take a little bit of time for the balance of the year for the dollars to be realized, but they are locked in.

It's just on the exploration potential at Prominent Hill that you ran through. Is that -- from a production level, would that see increases in production towards the latter half of the project's life?

Or do you see that extending the project's life? That's my first question.

The second question is just on the cost, just expanding on Michael's questioning. You talked about the unit cost increasing because of haulage, but your overall costs declining.

Is that -- the major driver of the decline going forward, is that due to these cost savings or is there another driver in there?

Okay. I'm going to answer the first question.

So if you don't mind, I'd refer to Luke to answer the second question. So the exploration partnership that we've got with Minotaur around Prominent Hill, we drew a ring around Prominent Hill.

I'm trying to remember what the distance was. Is it?

40 kilometers or something thereabout. I can't remember exactly.

But it was based on trucking distance to the current asset effectively. So what we have done is purposely targeted the area around Prominent Hill that if we were successful in finding something of economic grade, you wouldn't have to reconstruct the plant, et cetera.

You would just truck, run a mine material through Prominent Hill. So there is -- we've got plenty of time, of course, to make a discovery at Prominent Hill today and then optimize and drill it out, get into that resource and build it into our current mine plan at Prominent Hill.

So right now, Prominent Hill is at full capacity to 2022. And if you make a discovery near Prominent Hill, you're not talking about much surface infrastructure.

It's really just about underground infrastructure. So if we did make a discovery at Prominent Hill, this would absolutely be integrated into the Prominent Hill mine plan.

We need to make a discovery, of course, first. But there are some interesting targets around Prominent Hill.

And I think we have to treat it as a brownfield district. So we cannot leave interesting untested targets around that district.

Does that answer your question?

It does. But just in regard, though, to the second decline, you're saying that Prominent Hill was at full capacity to 2022.

So if you were to find something of substantial nature, you're saying that you would have to go into the mill post-2022. That second decline and any potential movement in the underground capacity wouldn't see that feed coming in prior to that?

Look, probably yes, I think, is the answer to that because we're talking about stockpiles here and we're talking about it's a very low-cost option we've got. So we've already spent all the money to construct the stockpile, so it's pretty low cost.

The only caveat to that is it will depend on the grade of the material that we find underground. So if we extend our drilling profile underground and find some very high-grade material, we'd need to do the economics, of course, to determine whether you should mine the underground material first or feed the stockpile material.

But I think it's a reasonable assumption that the stockpile material would get fed first and that any underground extensions would tack [ph] on from 2022 on. I think that's safe given the stockpile material is such a low-cost source of feed.

Okay, great. And then just on the costs?

Yes. On the costs, look, so in total terms, we've removed a fleet, that will impact -- lower our cost going forward, but we will be -- have lower volumes.

So in terms of unit cost, that will be impacted by that. And we do have a changing profile as in decreasing profile in the stripping ratio.

So we will have more ore going forward versus waste.

I just wanted to ask about the caving dilution study at Carrapateena. Just wanted to be clear.

You're saying that the outcome of the study shows that previously modeled dilution rates are appropriate, so we can't -- we couldn't really expect an improvement of that 2.1 copper equivalent grade that's part of the PFS for the sublevel cave versus the higher-grade resource, I think at about 2.9 copper equivalent. Or is there a scope for an increase in that head grade?

So I'll throw to Bob a couple of technical pieces of this, Stefan. But I think as Bob alluded to in his answer to Michael previously, if we change the 2.8 million tonne base case, the head grade could change as well, depending on what we use as a cutoff and what the sublevel cave footprint is going to look like.

So there are a number of drivers here between the head grade, not just dilution. So if you keep that in mind, I'll now hand to Bob to talk a little bit about the dilution study work that's being done and what our assumptions are going to the PFS.

Thanks, Stefan. I guess, the dilution study was all around trying to validate our assumptions of the original scoping study.

And what we asked was, is it reasonable what we actually are putting to the scoping study to determine whether the dilution from a sublevel cave is roundabout where we had planned? What we planned for was 85% of the metal with 110% of the ore extracted, which if you multiply out and you use normal sort of figures, that gets to that sort of 20% dilution that you normally use in a sublevel cave.

What Gavin turned up with was that 85% and 110% is a reasonable assumption to use in our ore body. The propagation of the overburden through the actual cave material does not accelerate to the level that actually increases that dramatically.

And therefore, what we've assumed is about right. Saying that, everything that he said is that we might get better dilution.

In other words, less dilution if we manage it differently, and that's what -- obviously, the next stage we're actually trying to identify is exactly how the cave management plan will be determined to go forward. And dilution of the cave is all around the cave management.

It's all around how you actually have the draw capability controlled and how you actually blast [ph] and move each sublevel through the sequence. I don't know if I've answered your question.

I think you have. Just one thing, the 2.1% copper equivalent life of mine grade that's part of the sublevel cave PFS, so that's based on this 85% metal, 100% ore extraction?

Correct.

Okay, okay. Improve on that, then we can expect that grade could potentially sort of eke [ph] closer to the total resource?

Correct.

Yes. The other piece of this, Stefan, is that we've chosen the sublevel caving as the mining method.

If we're choosing sublevel open stoping, you'd have a different head grade. So the mining method here is a fairly important choice.

So the sublevel cave takes much -- a broader footprint. So you're less selective about the material you're taking.

Whereas if we took a stoping method, we could increase our head grade, absolutely. But it would be taking a lot less material and the operating cost would go up.

So it's a trade-off between all of these things. And the scoping study work demonstrated that there is real value and increased return by taking more material with a lower head grade and losing some of that head grade, but you take a lot more stuff.

Due [ph] to the significantly lower operating cost, obviously, over the open stoping methodology.

Yes.

Just 2 questions. One is on the depreciation.

The fact that you're moving work at both [indiscernible] high depreciation charge in this quarter. Will that affect [ph] the depreciation charge [indiscernible] will go into inventory?

Is that correct? And are you still looking at depreciation similar to last year?

That's the first question. The second question relates to Carrapateena and whether or not you've dealt with the water tailing -- so the aquifer that you will be going through, which I believe the [indiscernible] dam is quite substantial.

Have you got sort of like is there dewatering holes to handle that? Or is that being part of the calculation that we draw for the performance of the sublevel cave in terms of watering, is it material?

Certainly, with the buildup in inventory, you are getting a movement of depreciation from deferred asset into the inventory number, which will reverse once we start processing the stockpiles in 2018. And we would see the generally the depreciation -- that the net depreciation number, which we included in the slide, being reasonably flat going forward.

Does that answer your question, Mike?

Yes, that's fine.

And just Mike, on the aquifer at Carrapateena. There's actually 2 aquifers we'll being going through in the overburden sequence as we get -- as we approach the actual water zone.

Both of them have been fairly well modeled to date. Both of them we believe we'll be able to handle.

Saying that, through the PFS, it will be a lot more work done around those exact aquifers and exactly what we can expect, but all the preliminary work says that it should be okay. One of the guys that was working -- or a lot of the guys that are working on the design have actually worked over there as well.

So he's very aware of the issues that they had up there, and he's also aware of the problems they had with decline access into the [indiscernible]. So all of that thinking is actually being put into our planning process.

Is there sort of other examples worldwide of -- are these very prolific aquifers? Or are they -- is it an issue?

And does it have the potential to affect the performance of the cave?

I don't believe so. Everything I've been told to date is they're not what you'd call prolific aquifers.

My question really just drilling down again on those costs. So of the $45 million total, so the $20 million you've achieved and the $25 million to come.

When can we expect to see that grade get in terms of, say, mining processing administration overheads? I appreciate you can't talk too much to exact contracts.

But where is the bulk of those savings coming from?

It's Bob speaking. The savings have come right across the board, so they're in every aspect of the business at Prominent Hill and in Adelaide.

They're looking at every individual contract, every individual supply agreement. We're looking at quantum [ph] we use as well as quality we use.

So every individual aspect is being identified of where we could potentially get improvements. So to say that it's in one specific area is probably a little bit hard.

Luke?

Yes, but the majority have been more in the operations because obviously that's where a majority of the costs are. But there is certainly -- there is some corporate savings in there as well.

And of the $25 million, I mean, that's a $25 million that we've identified that we believe is highly likely that we'll get it. But we're still in negotiations.

Whereas the $20 million was actually locked in already and that will be coming in the next 12 months.

I just had a couple of quick ones. First of all, you've mentioned the drilling results you've got at the Stage 3 drilling you're doing at the Prominent Hill, 16 [ph] measured at 3%.

Quite a nice result. Should we -- would you guys be considering release sort of, I guess, an exploration update running through some of those results that might give us a bit of an idea about the potential identifying the underground there?

Yes. Look, David, we are.

We are working on improving the quality of our presentation, if you like, of the Prominent Hill resource itself. So these long sections, they're okay but they're pretty tough to work out what the potential is around the resource.

So we're currently working on 2 things. One is being able to better represent it so to share this information.

And secondly, to be -- present this information a little more frequently. So as we undertake drilling programs, we will be making releases, if you like, on the results of those programs, so you can see where the potential is and where the potential isn't and the results of those.

So this release that we released in a couple of months or so ago was the first of those, and we will continue that as each of these phases of drilling are completed.

Okay, great. And the other question is just a quick one.

I didn't quite catch the changes made to the -- your corporate facility. Can you just mind running through that again?

Yes, sure. So originally, we had USD 200 million.

So we now have decreased that to AUD 100 million committed. And then, we have an accordion feature for an additional AUD 300 million, which is uncommitted.

But obviously, it has been through credit committees of our bankers.

You may have touched on it earlier. Just about the exploration in Jamaica.

Just interested on I guess the broader strategy there. I mean, is this an opportunity to try and generate some value and find a partner?

Or would you guys consider in 3 to 5 years down the track, with some success, looking to build out a project there? But it just maybe hard to answer, but just interested in the strategy given it's, I guess, a long way away from your operating base here in Australia?

Yes, sure. Paul, Jamaica is already a joint venture with some Canadian exploration companies, so we're turning in to their ground.

This is a joint venture that's been in the making for a couple of years now. It's the only project that we have in our books that is more greenfield or grassroots in nature, if you like.

It's not the type of program that we would enter today. But I think I flagged when released our strategy that the reason that we are staying in this joint venture is because of the results we're getting.

They are -- it is a very interesting district that I think generally has been unrecognized as a porphyry district before. So we've had Dick Sillitoe, who, I think, if you're a geologist, you'll know that Dick is a globally renowned, probably the renowned expert in porphyry.

He's been to the site. He thinks it is a new porphyry district discovery, so we are staying in the program until we've got enough information to know whether the grade for these systems are going to be sufficiently high to be economic.

And we don't know the answer to that yet. So it's a bit premature to be pulling out of it now.

We're quite encouraged by the results that we're getting. In terms of if we were successful in defining economic resources in Jamaica, I think that's a question we'd have to answer at that time about whether we develop that or we brought another partner in to develop it.

It would depend on so many things, Paul. I probably can't answer that question now.

But finding an economic porphyry system in Jamaica would be fantastic. There are already multiple bauxite mines in Jamaica, so it is a mining jurisdiction.

It's a recognized mining jurisdiction there. The legislation in Jamaica is very favorable.

The government is very supportive. So from that perspective, there is no challenges.

It's more so around the technical aspects. Do these porphyries have the grade that is warranted to develop an economic resource?

How we build it? I think we'll have to answer that at the right time.

That's fine. Obviously, it's a good problem to have.

But yes, it sounds like it's as much a legacy sort of exploration strategy, if anything. So that answers my question.

Yes, legacy but we've kept it for a good reason. So yes, it's pretty exciting.

So we don't want to let this one go, not yet. Okay.

Thank you very much, Paul. That brings us to 10:30, which brings us to the hour.

Thanks very much for everybody's time this morning. I appreciate your time.

If you do have any follow-up questions, please get them through to us, and we'll get back to you as quickly as we can. Thanks very much.