Aeris Resources Ltd
ASX:AIS
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Aeris Resources Ltd
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Thank you for joining the Aeris Resources September quarter results presentation. In a few moments, Aeris Resources' Executive Chairman, Andre Labuschagne, will present the results for the September quarter. At the end of the presentation, Andre will take questions during the Q&A session. [Operator Instructions] With housekeeping settled, I will now hand over to Executive Chairman, Andre Labuschagne, who will begin the presentation. Andre?
Thank you. Good morning, everyone, and welcome to the Aeris Resources quarterly results presentation. Just going through the normal disclaimer. Just going through, I am pleased to talk you through this quarter's results. Every mine in the business has performed according to budget or better. And as we go through, and I'll just talk to each one of the operations.
So Cracow, they've been consistently producing over the last 18 months. And once again, this quarter, they achieved their budget and up from both production and costs. At Tritton, as you all know, FY '23 for Tritton was quite a challenging year with the start-up of Avoca Tank and Budgerigar delay, specifically on Budgerigar, as of this quarter, those mines are in production, although the ramp-up of those mines will mainly start to make a bigger impact in quarter 3 and 4 as they establish more and more operating stopes. But Tritton overachieved on the internal budget on all levels and still are forecasting to achieve on the upper end of the production guidance as the Avoca Tank and Budgerigar production steps up.
At Mt. Colin, the team did a really good job, they achieved the tonnes, the mining tonnes and grade and production, although there's a sequencing of the processing, which will happen on the second of November, which is the next one, which will trigger the next round of revenue.
At the Jaguar mine, that is now operation care and maintenance. The guys did an amazing job to produce significantly more zinc and copper for the quarter. Although we have kept the mine open a bit longer. So there is some costs, which offset by additional revenue, but the mine is now operation care and maintenance, we will talk a little bit more in detail. On the Stockman project, the feasibility study is nearly done, we will come out with an announcement in this quarter around the results from that study.
Stepping into the highlights for the quarter. As I said, copper equivalent production of 12,900 tonnes at an All In Sustaining Cost of AUD 5.44, that is a better than budget for the internal target and more or less in line with the last quarter. The key improvements was the drilling at Constellation. We are back in their drilling. And as we see the mineralization, some of you would have seen the results of the drilling with some spectacular intersections in the bottom of the Constellation deposit, and we'll get into a bit more details and then the cash receivables increased to $43.9 million from -- at the end of the quarter.
Going to the different operations. As I said, Tritton on all levels outperformed on the internal targets and slowly will step up in the next 2, 3 -- quarter 2, 3 and 4 as Avoca Tank and Budgerigar comes in production. What we are seeing at Avoca Tank is significantly better grade than what we originally thought and we will bring another resource update on Avoca Tank. We've installed the Jameson Cell in the process plant, which was commissioned this quarter. That's all driven trying to get a better concentrate grade. So as you improve the concentrate grade, you save yourself a lot of cost on haulage and actually smelting and that will result in a -- that once it's up and running at full capacity, the payback on that is less than 6 months.
We've talked about the higher grade at Constellation. And as you can see on that slide, all the costs and capital is within and better than the last quarter at all within the internal target. We look at Avoca Tank. That mine is now up and running. There's a lot of work being put into high-speed develop so we can get more and more stopes in line. The grade, which we're seeing, as I said earlier, a plus 2.5%, the grade control drilling we're doing to from a resource reserve point of view, seeing some significantly better grades, and we will bring in a new resource estimate in the next few weeks.
We've also seen that it does extend some depth as we get deeper into it and establish this mine, we will start to do more resource drilling to extend the resource down-plunge. This has been the success. Constellation, as everyone knows, is a 7 million tonne, 1.85% copper resource already. That drill hole #95 at 25 meters at 3.81% copper plus really good gold grades has been the best intersection we've had in that sulfide area down the bottom. The feasibility study which was working on an open pit and then an underground mine is nearly complete, and we will bring that out to market for people to understand the value of this. As we drill this out, we're also going to drill in the next -- in quarter 3 and all for improve the confidence in the resource but also to test a standup zone to the right-hand side of that image, which if that is and those continued down-plunge would make a significant impact on the financials of this potential mine going forward.
So in FY '24, specifically in the second half, we will put a lot more drilling in specifically around the top end of that resource to work on the [indiscernible] and also the confidence of the resource. At Cracow, as I said earlier, Cracow has been our top performer in terms of consistency over the last 18 months to 2 years. The guys keep on achieving what they set themselves out to do. We've done 12,700 ounces this quarter at AUD 2,398 per ounce all-in sustaining cost. The operation, we are investing in a new tailings dam. I was there last week. The process of that tailings dam is about a month ahead of plan and on budget, and that will result in a better production performance in the second quarter than what was originally internally forecasted. And very pleasing to see how they have responded to get that in place within 6 months.
The very interesting part of the work they're doing currently is to look at the near mine exploration within that Western Vein Field. Some of these targets are new areas where we are trying to establish new resources. And for example, in this area, if you can see on the screen where I'm showing we expect there are some intersections in and around this area, which potentially show that there's another lens going between those 2 ore bodies sitting down there. And so the drilling is currently targeting in those areas and also the potential offset of this zone coming up, which you can see that offset but there's also a potential offset for that ore body. So there is potential for some significant additions to the resource. And then as we've been saying this mine as long as you're willing to explore, there's always continue to find more and more resources. And every year, we managed to replace what we mine.
We also keep the focus, of course, on that Southern Vein Field, which we discussed before, to keep looking for new targets going further south from this -- from the Western Vein Field to keep looking for another big Cracow type deposit going forward. At, Mt. Colin, Mt Colin has got basically FY '24 left. They've done 2,400 tonnes of copper better than the last quarter. Mining costs and capital all within plan. The re-scheduling of the toll process by Ernest Henry did result in 18,000 tonnes less processed than the original forecast. But at the end of the quarter, we had 70,000 tonnes sitting on stockpile, and the next process run is, as I said earlier, will be on the second of November. So within this quarter.
The Barbara deposits shaping up really well. The studies are underway, feasibility studies underway for us to restart or go underground at Barbara. You can see 2.2 million tonnes at 2% copper with gold. It's been mined before and treated at MIM, that resource remained open, though the idea is once Mt. Colin is done that we will relocate to mine Barbara in a similar way that Mt. Colin was run. That is already on a mining lease. We just need approvals for a restart.
Jaguar, I must compliment the team who is not in the company anymore. They've done an amazing job to keep the focus and safely shut down the Jaguar mine and we're very proud team will actually deliver significantly more copper -- zinc and copper more production in the last quarter over the last few months, which were planned. There was a big focus on getting the stopes which were there out on time and on budget. So they have done a significantly better job than what we originally had in the guidance to get production. Now the mine is now on care and maintenance, and it's very pleasing to know that most of the people who work for us had jobs to go to before they left.
And that it just helps from a personal point of view when you go through these processes. So on the care and maintenance, there's about a team of 8 people who's left. We also kept some geologists to keep the exploration focused. But we are -- will continue as part of this care and maintenance program to keep pumping or dewatering the Jaguar mine. So as I would have said before, the restart of the Jaguar mine or the Jaguar complex would revolve around running 2 mines at any time. So the idea would be to run the Bentley mine, which has got the turbo deposit and restart the old Jaguar underground mine and bring those into production at the same time, full-year multi capacity of about 700,000 tonnes and produce 20,000 tonnes of copper equivalent production for a much longer period of what we originally thought.
There's 4 deposits, all up to about 8 million tonnes of resource between the 4 different opportunities. But the first one will be to keep dewatering that, look at the rehabilitation required to restart. And as I speak, the guys are on-site at Jaguar to start to look at the restart plans to get the studies underway and get the plans in place to restart the Jaguar mine. We also, as I said earlier, kept geologists to ensure that we keep the focus on exploration. On the tenement package, there is some really exciting gold exploration targets. And like Heather Bore is one of the targets, which is close to Thunderbox, so we will be looking at doing a bit of gold exploration as part of looking at base metals while we care and maintenance specific look at the tenement package and a lot of groundwork to create some new targets to do some drilling.
The Stockman project in Victoria, the feasibility is progressing really well. We will update the market in this quarter. What we -- we've done some metallurgical drilling to get some more -- to pour some more assays. And the reason being, we believe that there's a much better processing option for this mine and new technologies like Jameson cells and the Albion process would significantly potentially improve the recoveries and part of the drilling, which we've done for metallurgical test work will also do test work specifically on those new technologies. So the approval processes are following the normal route and pleasingly, I think the study, which we will bring out would look very good, but there's some significant potential to improve this study and the outcome of that through new technology, specifically, as I said, the Albion process and the Jameson cells.
On a corporate level, we've put a lot of focus into stabilizing the business with a big focus on consistent operating performance. We've made some changes in leadership at general manager levels. We have taken Jeff, who was the General Manager at Cracow over the last 18 months or so. He is now the General Manager at Tritton, and with specific focus on plan and deliver at an operational level. There's also been in the same process, a reduction in the corporate cost as the closure of the mines and focus on cost savings. And as I said earlier, the cash and receiveables has gone from $29 million to $43 million. We have drawn down $40 million of the $50 million from Washington Soul Pattinson, and that was mainly focused on the -- ensuring the Jaguar closure is according to plan and the funding of redundancy costs and making sure we can pay down all the creditors as and when required in Jaguar to ensure that there's a controlled closure of the mine for a restart within the next 12 to 18 months.
That is the presentation, and I'm happy to take any questions from anyone on the presentation.
[Operator Instructions] And we do have a few written questions. So we'll just go through them now. Andrew has asked how much do you think it would cost to develop the open pit at Constellation?
Andrew, it's a bit early days, but the pit is a very small pit. It's only going to do about 1 million, 1.2 million tonnes. So the cost, the capital cost and the pre-strip for only it starts literally at surface. The infrastructure costs associated with setting it up for a restart will include a small little heap leach because there's some oxide -- good grade oxides at the top, and then we will take the balance to the process plant. It's hard to give you a firm number, but it's probably around $30 million or $40 million.
Thanks, Andre. We have a few questions from Nishal. Nishal is asking, first of all, what is your time line to profitability and repayment of the WSP facility?
So as this year is continuing, we're getting better grades out of Tritton. Tritton will start to deliver significant better performance. The same with the Mt. Colin mine, which will result in better performance and cash. The Washington Salt Pattinson facility is a 2-year facility with a bullet -- with a bullet payment after 2 years or can be extended by another 12 months. So the repayment of the facility itself is only due in 2 years' time, and we will work on repaying that facility or restructuring that facility within the next 12 months or so.
Wonderful. Nishal's second question is what is the Cracow tailings dam budget? And do you expect any other major CapEx at the existing mines?
So who is that from?
Nishal.
So the, Nishal, the Cracow tailings dam budget is around $19 million. That includes $4 million of our old costs. So the actual cost or contractor point of view is about $15 million. And that will all be done by the end of this calendar year, so by the end of December, the tailings dam they will be in and operational. There is no other big capital spend at the existing mines. So we have started the Avoca Tank and Budgerigar will just be capital development to establish stopes, which is normal process. But there's no other specific big items for growth other than the exploration we will do at the Constellation deposit.
Wonderful. And last question from Nishal is, when do you expect Tritton to break even on an AIC basis?
As these other mines, as Avoca Tank and Budgerigar steps up in production, specifically in quarter 3 and 4, I believe that, that it will start in this quarter, but quarter 3 and 4 will definitely be an improved position.
We have a question from Magnus. Magnus is asking what sort of zinc and copper price would you suggest a restart at Jaguar?
Look, even at today's spot prices will -- would suggest a restart at Jaguar. Because one of the things we've seen, the Jaguar underground mine is higher copper grades than the Bentley mine. And at today's zinc and copper price, I do believe that will still be a good restart price for Jaguar. And if you look at the price index we're using within that, I'm convinced that Jaguar will -- if you step back from Jaguar, Jaguar can go from 13,000 or 14,000 tonne copper equivalent to 20,000 and have a 7-year plus mine life with not a big capital restart. It would be a project with very good returns. But the important thing is you've got to start those mines at the same time and actually maximize your throughput through your process plant to make it a really good process.
Thank you, Andre. We have a written question from Andrew. Andrew was asking was the seismic activity near the Turbo lens or elsewhere at the Bentley deposit?
It was elsewhere at the Bentley deposit. So it's on the way to the to -- it's at the top end of it, probably not top end. It is in an area where we mine with the Turbo deposit further down to, I think, to the East. So it was not in the turbo lens, but look, the thing is as well, the Bentley market always had seismic activity and always managed the seismic activity. The seismic activity we had in the last 6 months was not new. It was just in areas which we don't expect it. If there was enough resources there to keep going, we probably would have gone through those and kept mining. But it was just to get down to the turbo lens would have resulted into half of the production for about 12 months before you get to Turbo, which doesn't make sense at the time, and that's why we put it in care and maintenance.
Thank you, Andre. We have a question from Peter. Peter is asking if you can please comment on Cracow AIC, which for September '23 quarter was $3038 per ounce versus September '22, which was $2,841 per ounce versus September '21, which was $2,096 per ounce and September 2020, which was $1,321 per ounce.
So really, Peter, what you're asking is why has cost, all-in sustaining unit cost going from $1,300, 2 years ago, to where it is today at $3,000. And the real answer is it is all driven by grade. In 2021 without recalling, without seeing the numbers I would suggest, we would have produced close to 70,000, 80,000 ounces of gold. Where we're now forecasting around 48,000 ounces of gold. So it's really driven by lower grade as we're moving out of those high-grade stopes we've seen a drop in grade. So production in terms of tonnes is still where it was. And then the -- so most of it will be driven by the ounces produced, and also, of course, over the last 2 years, the inflation environment we've been operating in, specifically around power, fuel and labor costs has also crept up on us.
But I would -- without seeing the numbers in front of me, it will absolutely mostly have been affected by lower actual ounces produced and all of that driven by grade.
Thank you, Andre. We have another written question from Adam who is asking how long until the Jaguar concentration receivables will be converted to cash. Are there any restrictions for AIS drawing down the additional $10 million in debt from the WHSP facility?
Adam, your first question, we have now received the money after the quarter end. So that money has been received for the Jaguar receivables. And no, there's nothing holding us other than normal approval process to draw down the additional $10 million.
Thank you, Andre. We have another question from Nishal. Nishal is asking, will you be looking for a partner to develop the Stockman project?
Nishal, we'll definitely look at all options to finance the Stockman project and one of them would be to bring in a partner to do the development as part. And there is quite a few companies who is interested in opening to us about financing or becoming partners within the development of Stockman. But that decision has not been made till and we'll only make it once we have the study complete.
Thank you, Andre. We can see that Paul has a verbal question they'd like to ask. Paul, I'm going to turn your mic on now. Is that working for you?
Can you hear me all right?
Yes.
A few for myself here, if I may. Firstly, on exploration spend, that's sort of running a little bit lower than the quarterly run rate for guidance. Can we sort of expect that to increase in the coming quarterlies? And then, I guess, where will the focus be there, at Tritton? Is that going to be on resource infill and down drilling there at Avoca or is it going to sort of be a bit more focused on Constellation?
Paul, firstly, yes, we will see an increase in exploration in the quarters coming. We only had one draw rig out of Constellation. The cost for most of the exploration drilling would be for Constellation, where we're going to drill -- do infill drilling at the top end. We'll be doing a few more deep holes, but also then test that standard zone. So there's a lot of money going there. And we're also doing then the normal drilling at both the Avoca Tank and Budgerigar to ensure that we get to understand the resource a bit better as we mine them. But from a growth point of view, most of the exploration would be focused on drilling at Constellation.
Yes. No, understood. And then just secondly, a couple of questions here on cash flow. I think the first one has sort of really been answered there with the Jaguar receivables. But just on trade payables, I mean that was at $121 million at the end of June. Now you've paid a bit of that down this quarter. Are you able to sort of disclose what that trade payables figure is at the end of September?
Trade payables in terms of payables on creditors is standing at $64 million at the end of the quarter.
Yes, that's great. And then just on the Washington Soul Patts facility. Is there any sort of covenants there that we should be aware of?
Look, just the normal ones which we said in an announcement, so there's EBITDA covenants and then asset covenants, but they're all pretty standard. The only one which we're managing on a quarterly basis is the EBITDA covenants and to ensure we achieve that. But those are the key ones. There's nothing -- there's no real big ones which is out of the ordinary.
Andre, we have another verbal question from David. David, I have unmuted your mic. Is that working for you?
How are you, Tom?
Hey, David. He Is back on mute?
Yes. Well, Andreas, thanks very much. I must submit a little better after just seeing that working capital balance. I had a similar question to Paul on that, and that's where I thought might have been to be honest. So I don't know if it's worth advertising that at all, but I think that's a desirable improvement over the position at the end of June. So that sounds good. So look, so a couple of questions other than that. And I know you kind of touched on this earlier, Tritton costs are tracking at the sort of very -- sort of top end of the guidance and I think there was a question about that, and it sounded to me like you're saying it is grades that is probably going to be the key driver of bringing those costs down. But on the unit -- are there other sort of unit costs or levers coming down as well? Like will we see the sustained capital maybe drop off a bit on -- and I wouldn't necessarily expect that at this stage, but is it just the grade and those absolute dollar costs is going to kind of stay on the same? Or are there other sort of revenues or other ways to pull on the cost of treatment?
Yes. Look, there is definitely always a focus on cost, David. First answer is yes, we'll see production increase on the back of more and more stopes coming online from Avoca Tank and Budgerigar. So that's definitely a drive to better improve production over the quarters coming, specifically 3 and 4. And then on the cost side, there's a big review underway at the mine around the structures of the operation, the location of equipment, the allocation of people across the different mines because as a mine has moved from only mining 2 mines Tritton and Murrawombie, to now mining 3 mines within Tritton, so making sure we reestablish those and not just add more people into the system. So there's those -- but there's also general cost savings. We review the capital on a quarterly basis and reforecast all that to make sure we only do what we need to do. So I think at this stage, it's all within guidance. And at the top end on the production and obviously on the lower end of cost is what we're forecasting.
Okay. Okay. Okay. So additional production dirt and the grades creeping up over the course of the year, sounds like the main driver...
You're going to get -- the more you can -- there's a lot more focus now on Avoca Tank and bringing that into production as fast as we can because...
Is that because [indiscernible]
We are mining 3% grade in there currently. So getting those grades would make a huge difference.
Okay. So -- I mean, you mentioned that the grades coming out there are higher than you expected. So that's sort of resulted in a bit of a shift in priority from an operational sort of level. Okay. All right. Good. And then just a couple of questions on study timings. Well, Constellation firstly. You mentioned the studies underway. How's the sort of notional kind of time line for studies and if you dare production at Constellation?
Well, their production I'll hold up a little. But look, the study is nearly complete. We will aim to have it either late this quarter or early in the next quarter out in the market. We're just going through the different stages. Do you do it all in one, do you start underground at the same time if you'd open cut. How do you manage the capital allocation for that. Look, it will make a big difference. That 1 million tonnes or more than 1 million tonnes we'll get from the open pit will come in a very short space of time with pretty good grades of, I think, around 2% copper. So that will make a big difference in terms of the overall production profile for Tritton.
Cool. And -- okay, so all right. So we'll see study in the next sort of 4 months or so, 4 months perhaps. And again, Stockman, you did mention again earlier and you say we'd be getting an update on the study but that didn't sound like the completion of the study or if I kind of misinterpreted that?
No. Look, I think you're right. We will come out with a study, which is a base case study, which will assume normal flotation circuits as per the original plan, which is looking good in any way. But we do believe this and the results of some of the work which has been done to date that you're working to -- if you replace the flotation circuit with an Albion circuit and Jameson cells and can give you potentially another 10% recovery from both zinc and copper and top your cost because the biggest cost for that will be power. So if you can drop that power cost down by having a smaller footprint and better processes would make it a spectacular project. So we will update the market, but they will take another 6 months to just finish up those specific best work. And if that then comes up, that will be -- we will bring out the final study.
Okay. So okay, so when the update comes out, whether that will be sort of the base case study, we'll see that this quarter. Is that correct? And then 6 months for sort of an optimized kind of study? And all right. And then so -- and that circuit is looking like the smaller footprint, lower power consumption and 10% higher recoveries. Is that correct?
That is sort of the current thoughts we have. So it will make a massive difference, if that is -- that's in fact and it's worth reviewing it with the detail. So we have got clinical technology, which works on the Albion and Jameson cells now on the test work and designs of those specific equipment.
Andre, we have another verbal question from Tim. Tim, I'm going to ask you to talk. Does that work for you? Tim?
Is that working now?
Yes, it's working.
Most of mine were answered, the previous one was pretty thorough with a few questions. The specific ones I had were with the Avoca Tank really looking good and about 2 years' worth of ore and dirt in it. Just confirming that we can just from a stoping and the drive and all the machinery that we can actually run on 100% of over-tank ore or ore at this point in time. Or does it need some degree of blending with lower grades?
Look, what we do at Tritton, so we mine currently the Tritton underground mine, which is we call it Tritton deeps. We are mining Budgerigar, and we're mining Avoca and Murrawombie. So between those 4 mines, we basically put about 120,000 tonnes to the mill monthly, of which Avoca Tank is 30,000 tonnes. So it all gets blended, but the overall blended grade goes up, that's how it works. You don't just put Avoca Tank through because it's not enough. The mill is a 1.8 million tonne capacity mill. So you're trying to keep that full when mining those other ore bodies.
Yes, I think that answers that. So I heard 3% in the present, which, again, is very, very encouraging because doing all the research it's 2.5% to 2.8%, but you looked at the actual mapping and...
There's areas which comes out really high and the race is on resource. We are in -- yes, grades coming up.
Yes. And sort of relating to that in terms of -- so that then extends out the overall mine life of the suite at Tritton. I know you may not want to answer this, but if you had an absolute crystal ball with Constellation, and this is pie in the sky, but do you see the first track rolling down a whole road in 2 years' time or 5 years' time or somewhere in the middle of that sort of thing.
It's pretty -- it's not 5 years, but it's potentially 2 or less.
Okay. Okay. No, that's again. So -- and again, from a total mine life of the Tritton suite that means you're then adding that ore in a little bit where you're sort of getting to the bottom of the barrel at [indiscernible] okay. Thank you very much. That answers my question.
Andre, we've had another written question comes through from Karen. Karen has shared that they are just a small investor and are a little concerned that the share price keeps going down. When in the future, do you anticipate it increasing and a return on investment being achieved?
Karen, that's a challenging question. Yes, the share price keeps going down and under pressure. Look, I can't tell you when it would increase. All I can tell you, this quarter, we've achieved exactly what we said we want to do, what we set ourselves to do. And that's the best we can do as a business is quarter-on-quarter achieve our guidance and achieve what we say. And then hopefully, the market will start to look after it. I think it is -- historically, FY '23, as everyone who has been a shareholder know that it was quite a disappointing 12 months.
But this quarter has been a significant improvement from all operations, and we have a high level of confidence that we will achieve our guidance as we sit today. The share price is driven by market's increment. And as I said, we will be focusing on delivering quarter-on-quarter results.
Thank you, Andre. We have our last question for this morning. Nishal is asking, have you investigated the gold lines of Avoca?And is there a meaningful resource?
Look, Nishal, there is a -- the gold lines are not the biggest focus for us right now. It is about the copper. The copper already got good gold in. There is work being done on it, and there will be more exploration around it. But right now, the best focus for us is to make sure we get the copper or the gold out of the business as quickly as we can.
Thank you, Andre. That brings us to the end of our Q&A call. Thank you for joining the Aeris Resources September quarter results presentation. We'll see you next time.
Thank you, everyone, and I appreciate your time.