Aeris Resources Ltd

ASX:AIS

Earnings Call Transcript 2022-Q1

[Operator]

Good day to all attendees morning, afternoon or evening. We apologize for the short delay in starting this webinar. Welcome to the Aeris Resources October Quarter Call and presentation. Aeris' Executive Chairman, Andre Labuschagne, will be making a short presentation, after which there will be time for questions. [Operator Instructions] I'll now hand over to Andre Labuschagne, Executive Chairman of Aeris Resources. Andre?

[Willie Andre Labuschagne, Executive Chairman & CEO]

Good day, everyone. And welcome to the Aeris Resources First Quarter FY '22 activities report presentation. My apologies for the late start. Just sort of -- just having a bit of a look at FY '22 and the highlights as it was announced in the annual report this week, as most of you on this call will know, it was a spectacular year for us in FY '22. The production results were as expected from the mines. The Constellation deposits keeps -- kept on growing and it's still looking very, very good. We'll talk a bit more about that. And then on the balance sheet, every single area of the balance sheet has improved, including -- by the end of July, we were debt free, and we had $97 million in the bank. And what FY '21 has set us up to do is actually to look at how do we grow this business further. It will turn Tritton from a surviving business to a growth business. It will keep on focusing on extending the life at Cracow, but most importantly, it's all about creating that additional life as we move this business forward. Getting into the first quarter results. At Cracow, they did 4,691 ounces (sic) [ 14,691 ] at an all-in sustaining cost of $1951, in line with our guidance. The monthly throughput has achieved a record tonnes in August. That's an annualized throughput of 700,000 tonnes, which historically, this mine has done about 550 to 570. And all aim as we would have discussed before was as we get into Cracow, it's all about how do we extend the life, how do we put more tonnes through the process plant. And the guys have done an amazing job to push that to over 58,000 tonnes in August. As we would have spoken before in FY '21, we now have commissioned the Tailings Storage Facility No.2 at Cracow and it's actually looking really, really good in the time team is delivered on budget and on time, delivering that storage facility. On the exploration side, we still got the 3 rigs going underground. We're now focusing on surface drilling with 2 rigs drilling on surface and it's all, we'll talk a bit more in the presentation, but it's all about creating that extended underground mine but also starting to look at other projects to bring them forward into the production plan. Tritton had a below-average production for the first quarter and 4,534 tonnes. It was not significantly below our internal budget. So it's always budgeted to be a soft quarter at an all-in sustaining cost of $4.73 per pound. As I said earlier, Tritton is moving into a growth phase, and we'll put $50 million into developing 3 new projects and new sources at Tritton. We have started Avoca Tank. We'll talk a little bit more about that. Constellation keeps on extending. It's now strike extended over 300 meters or up to 300 meters, and we're now moving back into the Greenfield's exploration and really focusing on that northern part of the tenement package. The closing cash balance at a corporate level was $75 million. PAG has been repaid and after 9 years, we debt free and we would have talked about in the last quarter, but that was an amazing outcome. And we've now got new facilities in place with ANZ, who is now our primary banker going forward. On the ESG side, Safety, we had lost -- 1 lost time injury for the quarter, Cracow, one of the employees received minor burns but he was back at work and no further issues. We had 0 lost time injury at Tritton. And as you can see, we're slowly clawing back that injury frequency rate. There was no environmental incidents. And on the COVID side, we have all the measures in place. We have seen specifically at Tritton that it did impact on the production and the manning levels at Tritton with the lockdowns in New South Wales. That is now being managed, but we are working through all the challenges, specifically at Tritton around COVID. We are very proud to have released yesterday our first sustainability report. That is -- that demonstrates Aeris's commitment to transparency integrity and a sustainable performance. That is how we pride ourselves and how we run our business, we earn our license to operate and really put our commitment in to how do we see the future at a sustainability level. It is on our website. It has been released yesterday. Please feel free to read it and any feedback is welcome. But we now will report on that on an annual basis. and will show progress on what we're doing on all the different levels in our sustainability of the business. Getting in to a bit more details into the highlights for Tritton, production was lower than planned. You can see there's lower tonnes and grade. The tonnes was mainly impacted by COVID restrictions following availability of manning levels, but the grade was impacted due to lower grade being mined than what was expected. We did do a great reconciliation investigation into it. We now understand where the lower grades are coming from, and we have adjusted the plan accordingly going forward for the rest of this financial year. Development of Avoka Tank has commenced. You'll see some photos. We have changed our all-in sustaining cost guidance by $0.15 and it's all due to the sea freight rates. 18 months ago, we would have paid USD 35 a tonne for concentrate freight. Currently, it's close to $100 a tonne and we don't see in the short-term a big clawback on those rates, and that impacts around $0.15 a pound or around $5 million to $6 million in cash in additional rate. We kept our production forecast at 21 to 22, but we have, as I just said, increased all-in sustaining costs. At Cracow production was in line with the previous quarter, a little bit more tonnes, lower grade but was mainly impacted by grade. It was all due to mining sequence, and it all come down to when we take certain high-grade and low-grade stopes out. Those forecasts both costs and guidance remained in place for FY '22. Looking in a bit more detail at Tritton, and I think this is an important slide, which we're trying to get across to the market to show the future of Tritton. As I said, Tritton is moving from a survival mine to a growth mine and where we sit today, we're currently mining that Tritton and Murrawombie underground mines. We just started a Avoca Tank. We started Budgerygar. You can see when those operations get into the blue, that's when they get into production. So over the next 2 years, both Tritton and Murraw will start to slow down -- but in that period, we bring into production, Tritton - Budgerygar, Avoca Tank and Murraw open-pit, then we'll finish off exploration of Constellation and bring that into production the same with Kurrajong and Budgery. The key take with this slide is, as Tritton, Murraw drops off, better quality, high-grade production profiles will come into production. And by the end of FY '26, there will be 5 operations in production with substantial life and substantially better grades that we're currently mining. So as I said, if you look at Tritton, it's a transformation it's going to a growth phase. We're investing capital now. And as I said, this year, we'll do will invest $50 million. But all those projects, as they come in line, will create a substantial improved life and better quality tonnes for Tritton. This is just a few pictures of Avoca Tank. So the Avoca Tank decline is going into that -- an old decline -- The work has started. That's the first -- a photo of the first cut taken earlier this week or actually end of last week. We see first production coming out of Avoca Tank in quarter 4 FY '23. So between now and then, it's all about development and getting it ready. When you look at Constellation, you all would have seen these slides quite a few times. This is just over the last 12-months, just getting bigger and better. We now got a clear 850-meter down plunge identified, there's another 300 meters identified through EM plates. We will drill holes through those EM plates and test them down plunge. There's a clear oxide and transition ore bodies, and you can see some of those results from the RC drilling, which we've done. We now have done -- 103 assays has been received back. You can look at some of the latest ones, 48.7 meters at 2.5% copper plus 1.2% gold. That is just spectacular results. So we now will put a -- we're now turning that to a targeting a resource -- Maiden Resource by the December quarter. Trying to start to get the concept, we've launched a concept study for the development of Avoka Tank -- for Constellation, starting off with an open-pit going underground. And within the next 12 months, we'll have a clear plan on exactly how that will be mined and coming into production. But if you look at that previous slide I put up, the target is to have this in to production within a 2-year time frame from where we are at today. If you look at Budgerygar, which is the one we also started. The drilling there is going really well. You can see some of the results, really good grades coming out of that. We're now doing -- by quarter end, we had 33 resource definition holes drilled to 40-by-40 spacing to get into Indicated Mineral Resource, and we expect mining to produce ore tonnes in quarter 4 FY '22. So once again, as Tritton goes deeper and the grade drop starting to top off, we're bringing these higher grade, lower cost tonnes into production from Budgerygar. Then Murrawombie, has always kept on delivering. We're now drilling the testing, the hanging wall at Murrawombie. We're joining that to 40-by-40 meter spacing as well to get it into Indicated Mineral Resource. But you can see there some really good results, 25 meters at 2.3% copper with a 6 milli true thickness. So that is all sort of turning ahead of us trying to see how far we can extend Murrawombie. So we'll always start to extend Murrawombie as far as we can and keep on drilling it out. It's 1 of those deposits, which we mine and drill nearly only about 6- to 12-months ahead of ourselves. But at this stage, we are planning to bring in the Murrawombie open-pit as well into production in the next 12 months. Then we go and we look at Cracow. As I said, we are pushing that mill to target of 650 team at the mine did an annualized production. If you take orders and annualize it at 700,000. So 650 is very achievable. The all the focus there is how do we improve the near mine production, keep the drilling. We've got 3 drill rigs going on the ground. We've allocated a $9 million budget in FY '22 to extending those near-mine targets. But a lot of priority has now moved on to look at Ballymore and Boughyard to see how does the -- we call it the new space look and prioritizing those targets to bring them in. We have also started drilling Golden Plateau, which is a deposit which has been mined before very large deposit. And the idea now is to bring Roses Pride into production as quickly as we can within this financial year, but also starting to look at how do we get Golden Plateau into production within the next 12 to 24 months as we move forward with the Cracow plan. You've seen this slide quite a few times. This is all just the different areas we're testing all the ones in red is where we're drilling. All the ones in black is where we'll still test. Roses Pride on the right-hand side, that will now become one of -- part of the production plan for this financial year and it's all about bringing in and bringing forward some of those tonnes into the production and Golden Plateau, which you can see on the top of that slide, units an old open pit with underground potential extensions, and there's a lot of work being done on exploration on the deposit. This is an example of Roses Pride, the RC drilling. You can see some of those results, 4 meters at 5 grams a tonne. We are -- we're in place, getting it ready so we can bring that into production in FY '22. As I always said, you've got to look at Cracow just beyond the current working, so the Western field is where we're currently working. Now that Western field is a 2 million-ounce system. The Cracow South-West has got a potential analogue towards that. So that has been [indiscernible]. Ballymore and Boughyard is currently under investigation and work has been done to start drilling within those areas. So we are focusing -- keep the focus on the Greenfields exploration or the new space as we call it, going forward. At a corporate level, the cash has gone down from usable and cash and receivables of $105 million to $75 million. That was planned, only $5 million of that was not planned. And it's all -- a bulk of that is on the back of big capital spend happening in the business. We have repaid debt with cash, which we had. We also had the final payment for the Cracow acquisition for the stamp duty, which was $4 million. So the cash going down is not unexpected, $5 million of that is on the back of the production at Tritton but there was also quite a significant amount of concentrate at the port, which is not accounted for any way in the system. Hedging currently, we got about 1,650 tonnes per quarter hedged in between $11,900 and $12,000 a tonne. So it's currently slightly below the current copper price, but it's still within a very good close range but it's only about 25% to 30% of the production on a monthly basis. On the debt side, as I said, debt has been repaid in July. We now got ANZ as our primary banker with a worth $20 million working cap facility and then a $35 million contingent easement facility, which is purely for the use of our environmental bonds, specifically for Tritton and Cracow. As always, we are focused on M&A. We always said we want to grow this business further. We are looking for copper goal. We're looking specifically in Australia at this point in time. We're happy to go offshore, but it's a risk-award thing for us. We are operators in essence, so we're always looking for producing assets first, development-ready asset second and then if there's some bolt-on assets to the current operations. We will be looking, and we will be trying to see what's available to keep growing this business beyond just according to assets. And that was always a clear strategy from us going forward in the business. So I guess in summary, FY '21, we talked about it was a great year, FY '22. First quarter was a bit disappointing for Tritton, but we're still very confident that we'll achieve the production guidance. We have changed the cost guidance a little, but that's purely driven by uncontrolled freight rates. We are very excited about the transformation from survival to growth at Tritton and the way we set up for it. And of course, exploration in this year between the 2 mines has been $28 million in exploration just on the 2 assets. So I guess from our point of view, great start, disappointing for where we start off with Tritton, but it's not a difficult situation. We're still achieving the forecasting guidance and looking forward to FY '22, where we'll start to see the benefits of the growth of Tritton going forward. Thank you very much.