Hi, and welcome to the Perenti Operational Update conference call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Mark Norwell, Managing Director and CEO. Please go ahead. Good morning. Thank you for joining us today for the Perenti Operational Update. My name is Mark Norwell, Managing Director and CEO of Perenti, and joining me today is Peter Bryant, our CFO. I'd like to start with the recent changes to the board. Earlier this week, we announced that Ian Cochrane had retired from his role as Chairman of the Board of Directors due to health reasons. With Ian departing, we welcome current Non-Executive Director Rob Cole as Chairman. Rob has more than 30 years experience in the energy and resources industries and has been a valued member of the board since 2018 and was appointed Deputy Chairman in 2020. We look forward to continuing to work with Rob and under his chairmanship, we'll remain focused on executing against our 2025 Strategy. I'd like to thank Ian Cochrane for his many years of commitment and dedication, not only to Perenti but to the broader Perth business community. Over the last three decades, Ian Cochrane has developed a reputation for his integrity, business acumen, and down-to-earth approach. Ian Cochrane has been instrumental in the evolution of Perenti and has been involved with the company since first listing in 1994 as Ausdrill. Since then, the company has grown to become one of the largest and most respected mining service companies globally, and Ian Cochrane has been a significant part of the Perenti journey. His valued input in the boardroom will be missed. Our thoughts are with Ian Cochrane and his family as he focuses on working through his health issues over the coming months. I'd like to provide an update on recent operational performance and the outlook for the business. Firstly, I'd like to once again commend all of our people for their commitment and tireless efforts in managing and dealing with the persistent challenges that COVID-19 has presented. Over the quarter, we have continued to deliver on our 2025 Strategy by securing new work in North America, releasing AUD 87 million in cash from West Africa by exiting Yanfolila and Boungou, and securing over AUD 700 million of work in hand calendar year to date. These achievements have occurred while we navigated a number of broader global and local headwinds. During Q3, the business has continued to face external headwinds similar to those in the first half of FY 2021, particularly the ongoing impact of COVID-19 and the strengthening Australian dollar, plus the recent tightening labor market in Australia. The characteristics and spread of the virus is beyond our control. As a result, we are still experiencing unproductive impacts. These impacts are caused by ongoing on the rosters for our expat workforce, the reduced ability of our senior staff to travel site, and broader logistical challenges. To further exacerbate things, the emergence of new variants of the virus and hotel quarantine issues in Perth and Melbourne has added to the logistical complexities. While we are navigating the COVID-19 landscape, the impact on the business is clear. We've seen ongoing operational impacts. In addition, and as it has been widely reported across the resources sector, a tightening labor market in Australia is becoming increasingly evident. For Perenti, this has manifested in higher employee turnover rates and wage growth impacting business margins. We have recognized this and have responded by deploying and continuing to develop targeted attraction and retention initiatives with the aim of maintaining our high-quality team. Notwithstanding these latest market conditions, we are confident that Perenti and our employee value proposition positions us well to source and maintain appropriate personnel levels to deliver on our current and future contract requirements. As I also mentioned, the Australian dollar strengthened further against the US dollar, which is negatively impacting our financial performance given a significant amount of our earnings are U.S.-denominated. Our forecast at the time of the first half FY 2021 results were based on an FX rate of AUD 0.76. However, during the third quarter, the average daily average FX rate was above AUD 0.77. When combined and with the expectation that these conditions will continue into the fourth quarter and beyond, we have revised our outlook for the second half of FY 2021, primarily due to the expected softer performance of our underground business. For context, at the half year FY 2021 results, we forecast that our second half revenue and operating margins will be in line with those reported in the first half. However, we now expect that consolidated operating margins for the second half will be softer than the first half. Given that we expect that the current backdrop will continue beyond the end of FY 2021, we also expect the forecast growth in revenue and earnings in FY 2022 to be delayed. I would now like to expand on the recent achievements of the business I mentioned earlier, as individually and collectively, they represent significant progress towards the delivery of our 2025 Strategy. In recent months, we expanded our growth pipeline by more than 20% with a focus on underground gold and nickel projects, working with top-tier mining companies in Australia and North America. We successfully converted some of our existing growth pipeline into work in hand, announcing several contract awards totaling more than AUD 700 million, with another AUD 320 million of work related to letters of intent, for which we are in the process of finalizing contract terms. Of particular significance is the Red Chris letter of intent with Newcrest in Canada. Whilst this initial piece of work is relatively small, it represents a far greater opportunity for Perenti. Firstly, it puts us in a strong position to capture future revenue growth with a global top-tier gold mining producer. Red Chris represents our second underground project in North America, the largest underground mining market in the world, and a key pillar of our strategic growth. Thirdly, our win at Red Chris is recognition from the North American market that the expertise Perenti has developed over the past 30+ years is a service offering that is attractive to the North American market, capable of delivering significant value. Now to our surface business. Since we announced the completion of the strategic review of our African Mining Services business, I'm really pleased that the African surface business is performing to expectations, and we have seen a significant improvement in our African surface mining risk profile. Our views of the AMS business has now shifted from a position of net risk to net opportunity. Although the Surface Australia business has been impacted by the tight labor market, we continue to expect that the surface business as a whole will deliver revenues and operating margins in line with those reported in the first half, if not offering some slight upside potential. To add to this, I'm pleased to advise we have received additional cash payments related to the exit from the Boungou and Yanfolila projects in West Africa. To date, we have received a total of circa AUD 87 million in cash, and we hope to realize some additional payments as we finalize working capital balances. However, AUD 87 million is at the upper end of what we reported in February, so we are very pleased with this result. Lastly, and certainly not least, the Investments business. We expect the investments business to perform similarly to the first half of FY 2021, as the recovery in BTP is progressing slower than expected and the operations have been impacted by the Australian labor market. As a result, we expect that the investment business will deliver revenues and operating earnings broadly in line with those reported in H1. In summary, I'm very pleased with the efforts of our people and what has been achieved in the last few months given the ongoing challenges. I truly believe that we are well on the way to successfully delivering on our 2025 Strategy. We recognize the headwinds we are facing, and we have strategies in place to manage the effects of these headwinds. Going forward, we will continue to focus on executing our 2025 Strategy, winning new work, and delivering projects. In time, we see significant upside in our business, and we are very confident that we will manage the current environment to deliver consistent, high-quality operational performance that will generate long-term growth and value for our shareholders. Thank you. Now we'll open up the call for questions. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Michael Aspinall from Jefferies. Please go ahead. Yeah. Good morning, guys. Thanks for the update. Firstly, can you just characterize the hit to margins in terms of wage inflation versus a hit to productivity due to the turnover or tightness in the market? Michael, thanks for the question. I guess if we look at the Australian market, it's hard to really differentiate between those direct costs, I guess, in terms of wages and turnover. I guess firstly on wages, what I would say is whilst we do have rise and fall protection under our contracts, generally what we are seeing is the labor rates move at a quicker rate, and we update our indices every three, six, or 12 months, depending upon the contract. What we're seeing is a different impact on the various jobs subject to their rise and fall provisions. Michael, hard to really outline exactly the split. We're certainly seeing certain pressures there. Peter, unless you've got anything further to add to that? I think also what we are seeing is the bonus payments, et cetera, being paid when people are trying to attract staff, and that is something that ordinarily is more difficult to recover through- Right. ... if it's a one-off bonus of, say, AUD 10,000 to sign up. Okay. No, that makes sense. Thanks for that. Could you just characterize maybe then your book in terms of how many of your contracts would have a three, six, 12-month time lag for recovering rising labor costs? That is a good question there, Michael. I guess we've got varying contracts, some from fleet rental contracts through to long-term contracts. I'll be frank, I don't actually have the percentage- No ... of what's three, six, and 12 months. No. Not going to lie. Michael, if you think the portfolio of the mining surface and underground contracts, there's circa 54 of them. I would say a very, very, very, like 90%+, in fact probably 99% of them, have rise and fall. We just don't have the split on the term for three, six, and 12. Okay. No, that's okay. Thank you for that. If I'm thinking about the hit to underground, is that labor tightness impacting the Australian operations and turnover there or Africa, or is it both? Yeah. Look, it's twofold, Michael. Certainly, the tightening labor market in Australia is clearly a direct impact to our Australian operations, but it is also having an indirect impact to international operations. That is magnified, if you like, by COVID as well. With the ongoing delay with vaccinations, the ongoing impacting controls around COVID, we are seeing it more challenging to attract people, to take them out of the hot Australian labor market, to go and work long rosters overseas and experience quarantine periods, certainly coming back into Australia and potentially into the country that they operate as well. Yeah, definitely a direct impact in Australia and also indirect to international, less interest, basically. Yeah. Do you think that that could have a longer-term impact in terms of people just deciding they do want to work closer to home? Or there'll always be people who are willing to jump on a plane and go work in Africa, given the uplift in earnings? Yeah. I think to that point, Michael, I think there's always going to be people willing to work internationally. They have the ability to have their rostered breaks in other parts of the world and rotate that around, the higher pay that comes with working internationally. I think once we get back to some level of normality, once the vaccines take hold, and also we get some more commercial flights flying, which if you look at Qantas and their timing, it's probably going to be next year at some point. I think you'll definitely see people keen on international work. Okay, cool. No problem. Just two more. Are new contract signings continuing in the current market? Yeah. They are. We announced the Red Chris project a few weeks ago. We're currently mobilizing that work into Canada, and that's in the province of British Columbia. We're doing that currently for Newcrest. The Savannah project, letter of intent there that we're finalizing the contract and prepping mob for circa July of this year, and we're still actively tendering jobs as well. Our pipeline was circa AUD 9 billion when we reported our half-year results. We've seen that increase to north of AUD 10 billion given the activity out there at the moment. Certainly seeing contracts awarded. Cool. Great. Last one from me. You've mentioned your 2025 Strategy a couple of times. Can you just provide us with some additional details on the main elements of that? Yeah. A couple of main elements there, Michael. We first released that to the market, if you like, circa two years ago now. A couple of the key items there is shifting our business into better jurisdictions, for example, Canada. We're looking to increase our work and our earnings out of North America through the underground service. We're looking to increase our earnings in Australia, so we continue to bid. We also see Africa not as one mass, if you like, but we see it as a number of countries, and therefore, we've called out Botswana as a very good country to operate. We're shifting into what I'd say is better jurisdictions, and we're progressing that very well. The other is about the balance sheet, releasing capital out of West Africa from AMS, improving our cash position, which we've been doing well over the last couple of years. We're continuing with that technology, a key focus across the whole mining industry and the world more broadly. We're progressing in that area very well. We also specifically called out the challenges in AMS, and we are seeing some recovery and some green shoots coming through there. I guess that's a high-level overview of the operational aspects. The other point there, Michael, just quickly, is the ongoing investment in our systems and processes to support our global business, and secondly, investment in our people. If we think about the tightening labor market at the moment, we're well positioned there in the fact that we have been investing in people pre the market tightening. That's the broad overview of the 2025 Strategy. Great. Thanks very much. That's all from me, guys. Thanks, Michael. Thanks, Michael. Thank you. Once again. There are no further questions. My apologies. Your next question comes from Cameron Bell from Canaccord. Please go ahead. Hi, guys. Just coming back to the rise and fall. I understand there's a range of metrics within each of the contracts and that can differ. When you think about labor costs going up, how much are those labor costs specific in your area of work, say W.A., for example? How much of that labor cost increase do you think you can actually recoup? So I guess- Satisfy. Yeah, sure, Cameron. I guess two parts to that. One is, let's say we do a pay increase today, and a particular contract may have an update next month or maybe an update in six months. It might be linked to labor indices, and labor indices are generally published quarterly or half-yearly and lag. I guess that timing will dictate what recovery we do get, and that is very contract specific. The second part is in terms of our labor base, it probably varies in the range of 30% - 40% of our cost base across our projects. We then have that level of cost built into our rise and fall formula. Our rise and fall formula will cover various materials, if we're providing fuel, labor, and other consumables, and the factor will be based on our direct cost input. If we do see a labor change, it will be 40% of our increase linked to labor for our revenue. Other than timing, it should cover the labor cost. It's just the timing that's the issue, Cameron. Yeah, okay. I guess thinking about it from another way, with the new contracts that you tender now, noting that, say, wage inflation is probably going to be much higher in W.A. than it is, say, Victoria or New South Wales, are you changing the indexes that you use in your contracts to try and better defend yourselves? Look, we review those each time we tender and also extend any contracts. I guess on the flip side, there's potential at the back end when you see the pressures that have come off to then survive as a recover when the wage pressure comes down. We're mindful of the back end as well, rather than just the initial. In short, each time we look at an extension or a new contract, we always review the T's and C's based on what we know at the time. Yes, if there's the opportunity, we will reset. Okay. Cameron, irrespective of labor pressure, we always try and put ourselves in a position that provides us with the best protection possible of any inflationary pressure on our cost base. Yeah. Okay. How's Mako going? Mako's still challenged. If we think about what we've been working through in AMS, I guess as the broader aspect of AMS, but the three challenging jobs we called out, Boungou, Yanfolila, and Mako. We've addressed two of the three. We're now working on the third. That is an EBITDA positive job. EBIT circa breakeven, I guess, but EBITDA positive. We're working through the mine plan with the client. That's work in progress, Cameron, and I guess we see that as challenging to reset with the client, but we're working to see what we can do. The positive about being EBITDA positive is we're continuing to depreciate the assets there, generate cash on the back of that. We are managing our PP&E in Senegal through depreciating the assets. Yeah. Okay. Sure. I guess a similar question, how's the progress at Zone 5 and Hemlo? Yeah. Zone 5, that continues to be challenged, I guess, by ongoing COVID impacts. I guess if I just talk about some specifics, and I spoke about logistical impacts when I opened up the call, but maybe just to put some more detail on that. If you think about the recent Perth quarantine hotel issues, and then you see the government reduce the number of overseas travelers by half, that requires us to look at different ways of bringing our people back in, extending further rosters. We are seeing, for example, Tanzania. Tanzania have a new president and the previous president said that COVID didn't exist. The new one is a bit more open to reality and we're looking at some quarantine there at the moment, which we're through. Specifically, Cameron, back to Zone 5, that has been impacted by just availability of getting people into Botswana. We are, however, working closely with the client and government to look to put on additional crew. We're looking to put a fourth panel into Zone 5. That's the early days discussion. We are looking to actually ramp up that despite COVID impacts. That's our focus at the moment. Cameron, I don't really want to get into a lot of project-specific details, but I just might add, in terms of the drivers for the softness that can harm revenue, Zone 5 and Hemlo are a significant component of that in terms of the impact that COVID has had and the performance in terms of physicals and that's revenue for us against the targets or forecasts that we have. Yeah. Okay. I guess just last one from me. Obviously, North America is a pretty big part of your future and the quality and the price of the business, et cetera, going forward. In regards to your progress to date, are you happy with what you've achieved or were you hoping for a bit more or less? How do you see yourself going so far? Mate, I think to be able to win two projects, mobilize one, and be in the process of mobilizing the second with the global pandemic, given the challenges that everyone's seen, including our clients, I think we're doing a fantastic job, to be frank, to take that on. We could've said, "No, we're going to stop growth in North America" when COVID-19 hit, but we decided to forge on. We're profitable. Yes, it's a challenge, but I think given the hit with the COVID-19, building a progressive business in North America, I think is really well done by the team. Cameron, I know we said it before, I just want to go back to that Zone 5 as well. It's important just to note that revenue loss or revenue reduction is not a revenue loss, it's effectively a revenue deferral. We're behind the ramp-up schedule, but ultimately we will deliver the ramp-up and we'll deliver the volume. The revenue will come our way. It's just deferred because of the impact of COVID. I think, sorry, Cameron, just rounding out North America as well. We are seeing, clearly, more Australian clients looking at North America with activity there for some time. I think by progressing with our entry in North America through COVID, once the vaccine takes hold across the world globally, and we start getting back to whatever the new normal is, I think we'll be far better positioned by the fact that we've continued with this expansion, so we're not flat-footed the back end of COVID. I think it is very positive. Cool. Thanks, guys. Thanks, Cameron. Thank you. Your next question comes from Trent Barnett from Hartleys. Please go ahead. Hi, guys. Can you just clarify a little bit on the commentary around FY 2022 and the delay to revenue and earnings growth? Should I assume that means no growth, or is that your expectation of an absolute level? Thanks, Trent. I guess we're still working through our FY 2022 budgeting process and business planning process. I guess at this point in time, we have nothing definitive. What I would say is, I guess, given the recent government budget, their comments regarding COVID-19 restrictions, the hotel quarantine outbreaks, we were hopeful, like I think most people were, that we were going to see some abatement of the restrictions during calendar year 2021. What we're saying is, we don't see those restrictions easing throughout FY 2022. Nor do we see the tightening labor market that's been in W.A. coming off in a hurry. We think that's going to be around for a fair portion of 2022 as well. The strengthening Australian dollar. Look, I'm no economist or no futurist in terms of a strengthening dollar, but we expect that will probably continue. On the backdrop of those three macro headwinds, we are saying that's going to continue to impact us throughout FY 2022, and we're currently assessing the level of that impact. Trent, based on that, we are saying we think it will be flat because of the impediments that we've discussed and continue to see. Peter, anything to add there? Oh, gee, there's so many. Okay. Thanks. Obviously, you've got some really great people and skill sets and things, and they're very scarce at the moment. When do we start seeing a premium for that? When do you start adding in big scarcity premiums into contracts that you're tendering on? Tendering, we are including that in tenders. With tenders, we are looking at the margins given the hot labor market and also the mining industry demand more broadly. That's flowing through into current tenders. Look, we are looking at, in some cases, cap in hand with some clients. We're putting some retention programs in place for our folk in Africa, and we're talking to our clients, given that they benefit from the performance we deliver to them. Trent, we are looking at some cap in hand options at the moment. Okay. Thank you. Thanks, Trent. Thank you. Your next question comes from Nick Robison from Jarden. Please go ahead. Hi, guys. Thanks for taking the questions. Just firstly, on the cycle of the labor market and the way that your pass-throughs work. Obviously, we've been here before probably 2002 through 2012, and from memory, the industry got caught out then on rapidly tightening labor markets as well. You went on to, as a group, make record margins and profits. How are you feeling about this market? We've got record high commodity prices across the board, particularly in AUD. Basically, everyone, particularly those of you that are W.A.-based, look like you're getting caught out on labor here. You're not the only one to have said this in more recent times. Historically, you've moved on from these types of problems after six or 12 months and then being able to grow margins from there. Is that how you're currently thinking this cycle looks like it would be playing out? I think so, Nick. Our view, it goes back to a bit about the point re North America. Our view is we are well-positioned. Yes, we're being impacted by the three broad headwinds that I mentioned before. The base of the business is strong and stronger than it has been for some time. Our focus is to manage through those headwinds. When we come out the other side, that certainly is what we're looking at, Nick, in terms of the opportunities and springboarding thereafter. Absolutely the focus. As far as being caught out, I think we see the broader macro view about Brazil and lower iron ore production, and that's flowing back into the Australian iron ore market, which then flows through into the other mining sectors. Clearly, the impact is a global macro shift. We are clearly seeing the impact of that. I would say, though, that we do have our senior people have been stable. We have seen it at the operator/maintainer level, which we're managing there as well. Nick, in short, agreed. We hope that once we come out of these headwinds, the business continues to go from strength to strength. Probably worth calling out, too, a lot of our senior roles and some senior operational roles o utside of Australia are often filled by expats. Our foreign workforce is largely nationals. Our operations in Africa, it's a national business unit. 95% across the board are employees are nationals. The pressures that we're seeing here in Western Australia aren't the same globally. Right. I guess this is related to this, but, across the board, we are seeing all these commodity prices hitting new heights, particularly in AUD. We're at all-time highs for pretty much every metal, most of the bulks. How is that translating into opportunities? It seems like the miners are maybe slow to pull the CapEx lever here. It would seem like on a two-to-three-year view, the pipeline must be getting or looking like it is going to be significantly bigger just by the fact that the miners haven't made these kind of margins basically ever. They are flush with cash and the market is telling them that they need to drive the supply response, which obviously means they need to spend some CapEx. You said that your pipeline's largely gold and nickel now, but compared to where you were in February, I think you mentioned a number of 20% larger here. I'm just trying to understand what you're saying in terms of the opportunity set, albeit that that opportunity set maybe is coming through into contract awards a bit more slowly than what you were thinking. Nick, certainly, we are seeing the pipeline increase and positively we're seeing the pipeline increase in the jurisdictions that we're targeting, so North America and Australia for that matter as well. You're also right in the fact that we are seeing some of the projects delays in terms of pipeline, and obviously we have the impact of our clients in terms of when they bring the projects online. We've definitely seen that increase. We're also seeing an increase skewed towards underground, which is very positive given our earnings out of underground. We're seeing that north of AUD 10 billion now. We'll give more detail when we do the full year results, but absolutely increasing. You're right, there are some delays as well, Nick. Okay, could you look at what you were saying today with the obviously disappointing news? If you looked across two or three years here and assuming that COVID normalizes and you get the right contract structures in place for labor like you did in the last cycle, it would seem to me that the outlook is actually, from a macro perspective, is significantly better than what it was even a few months ago. Is that a fair way to characterize the current market dynamics? Yeah, Nick, I definitely like your articulation of that, actually. I think that is a fair way, and I guess subject to, obviously, as you've already called out, COVID and tight labor market. I think once we work through that and understand the longer-term landscape, and look, we've navigated the challenges to date well. Whatever occurs in the future when it gets easier, we'll be well-placed. Certainly, our view is down the track. We see positive on the backside of COVID and the labor shortages. I guess the other item with our contracts is when we do see commodity prices increase, clearly our clients benefit from that. Our contracts are structured so that we don't actually receive uplift from commodity prices. What I would also say is when you then see commodity prices come down, we're not seeing the impact on our contract rates because, again, they're not linked to commodity prices. It's at times almost countercyclical. We also target operating mines. We've shifted our business away from, I guess, a bulk of exploration, which is very cyclical, to more operating mines and also targeting mines that are on the lower end of the cost curve. We continue to operate. Certainly we see positive outlook once we get through the current challenges. Well, look, there's plenty of Australian miners that are trading on 30%+ free cash flow yields at the moment. That cash is gonna, at least some of it incrementally needs to go back into growth, you would think, given the margins where they're at. Just one last question, which you may or may not be able to answer. Just in Botswana, did you tender on Sandfire's new work there for the T3 and A4 deposits? Yes, Nick. With you for the Motheo contract, service contract. Yeah, we have tendered on that, and we're currently in active tender with Sandfire. Okay. You're in the shortlisted, I think they've said there's shortlisted parties. You're one of those parties? Yes. We are. We're still talking to them and working through and answering questions on the tender. We're one of those parties. Okay, awesome. That's all my questions. Thanks, guys. Thanks, Nick. Thank you. Thank you. There are no further questions at this time. I will now hand back to Mr. Norwell for closing remarks. Thank you, everyone, again, for joining the call. Thanks for the questions that came through. I guess just wrapping up what I've said already. Certainly headwinds, but as a business, we continue to execute the strategic imperatives, which is strengthening the business, albeit we're seeing softer operational impacts on the backdrop of those headwinds. As I guess Nick particularly outlined, we do see the business will be in a very strong position once we get to the other side of the headwinds. Unfortunately, we're in the same boat as everyone else about understanding the crystal ball nature of the duration and severity of those impacts. We are well positioned for the future based on what we continue to do and the team we have in place. Thanks again for your time, and look forward to talking soon. Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.