Aeris Resources Ltd

ASX:AIS

Earnings Call Transcript 2023-Q3

[Willie Labuschagne, executive]

Good afternoon, everyone, and thank you for joining the Aeris Resources core activity support presentation. As a start, it's fair to say that the third quarter was a bit of a disappointing quarter and a bit of a more interesting type of quarter for specifically at Tritton, but also the impact of the production throughput of Mt Colin tonnes through Ernest Henry due to the rain events we had up in Northwest Queensland.

To summarize, the copper equivalent production at 11,100 tonnes was lower than the previous quarter, but if we were able to treat those tonnes out of Mt Colin, it would be significantly different. We'll talk a bit more about the impact of those.

At Tritton, Budgerygar delays still impact, we're now delayed high over 9 months, and it's really just timing of getting the raise for -- through and as we speak, they're busy setting it up, and they will start drilling by Monday, and we should have the ventilation shaft up by mid-May and the production into Budgerygar.

At Mt Colin, we ended up the quarter with 135,000 tons, roughly about 3,200 copper production metal tonnes on stockpiles. That was worth about $25 million of revenue or net realizable value, which we didn't bring into the quarter.

But since then, 100,000 of that has already been treated and 30,000 is being treated as we speak. So most of that stockpile has already -- or will be all treated by the end of April. And we'll go through a bit more detail on where do we see Mt Colin. On the cost side, we all know cost has been challenging across industry, but I must congratulate the teams, they are doing an amazing job to keep costs under control in a world that we see power costs going up, labor costs going up, but they have done an amazing job to keep the costs -- managing the cost on a monthly basis at all 4 of the operations.

On the capital spend, we have put a huge effort in specifically at Jaguar Mine and Cracow to manage the capital to ensure that we don't spend unnecessary money. And you will see in the next slide, we are revising our capital forecast down specifically around the management of capital and managing the balance sheet.

On the exploration side, every quarter, we show success every quarter. This quarter, it's about Jaguar. At Jaguar, we found a new deposit called Bacalar. And what we're seeing at Jag is as we draw, we found more and what is in the benefit is as we try to get down to Turbo, there's more and more ore bodies on their way through to Turbo, and we'll touch on that going forward.

On the corporate side, we closed the cash and receivables of $56 million. As I said, that $25 million impact on Mt Colin have made a difference, so that could have been significantly more than that. We still have no debt. And on the Stockman side, feasibility study is well underway. We had a detailed in-depth review in the last 2 weeks, and it remains a very exciting project for us going forward and bring that into production as soon as we possibly can.

Those who have seen the announcement this morning, you would have seen we revised our guidance, but it's only on the copper. And that's really impacted by Mt Colin on a major, major impact where, as I said, we're at 135,000 tonnes at the end of the quarter that has now been treated. But at this stage, we have only one more rock set aside of 30,000 tonnes, which will result in about 90,000 tonnes of stockpiles at the end of the financial year.

Now we will keep talking to the [ toll treat ] to see if we can get another slot in June. So [ there is especially ] upside to that. But at this stage, there's about 2,000 tonnes, which we were planning to bring into this quarter's production or this last quarter, which we potentially might not be able to, and that's one of the reasons why we've downgraded the guidance because of that. That doesn't mean that tonnes are there, the tonnes will be on deck. It will just come through in July instead of June. And that's just the unfortunate side of timing and when you are at [ toll treat ] or you rely on third parties and which have their own issues with the rain events up there, you need to respect that as well.

At Tritton, as I said, Budgerygar has been delayed. That said, though, the team at Tritton has done a really good job identifying opportunities to catch up. We're looking at -- have been assessing and are planning to mine remnant pillars, which is high-grade pillars available to us, which is already ready to go with mining the south wing. So we're bringing in other sources to try to catch up on Budgerygar, but there's risk associated with that, and we decided to be realistic in the guidance and downgraded Tritton as well with 2,000 tonnes, which then resulted in that new guidance.

On the capital costs, our original guidance was $173 million to $213 million on total capital. We're now downgraded that $139 million. So a significant downgrade on capital, but it's purely capital at both Jaguar and Cracow, all the growth capital spend at Tritton, Mt Colin doesn't take a lot of capital and the capital we delayed at Jaguar was necessary because of the understanding we needed for Turbo, and where you put the decline and how quickly you get there and the guys have worked up, so alternative options in the short term to improve ventilation and pumping and that's being implemented.

Obviously, when you drop 4,000 tonnes potentially out of your copper production, that will impact on EBITDA and we revised EBITDA accordingly to down to $50 million to $70 million. I'll just touch base on a few other -- touch on a few other things we've done on the sustainability side. We had one lost time injury, which was unfortunate when operator's thumb was degloved while working on a drill rig.

On the sustainability side, we have now launched an internal project to have all the data ready for release as part of the annual report, have a baseline sustainability report, and that will go out with the annual report. But at a Board level, we've restructured the board as well to become more compliant. This sustainability was [indiscernible] risk. We've now added all risk to the audit committee and beside a sustainability committee is a separate and really focused on strategic way forward on sustainability.

On the environmental side, we had 2-3 events, which were reportable, the one was the water level at Barbara because of the heavy rain we had in Northwest Queensland. It was just reporting on water levels. And at Tritton, we had a bush fire, which was a result of an angle grinder setting the [ bush a lot ] and that has burnt down some properties and also ended up in some power loss, which had a small impact on production, but not material.

I'll just touch on the operations. At Tritton, we did 3,900 tonnes -- the main thing was the ventilation for Budgerygar. You can see the picture on the right hand side. That was a piling. We did say you do -- down to 30-plus meters. We did these piles, which will now stabilize the ground. The pilot hole is in. And as we speak, we're very busy setting up the raiseborer to pull that through. So by mid-May, we will be able to get the ventilation on, and then we can mine those stopes, which has already been set up out of Budgerygar. You just can't mine it legally if you don't have proper ventilation in place.

We also see a significant improvement in grade coming out of Avoca Tank. Avoca Tank, I was there underground the other day. That photo is a photo of ore sitting there, development ore we're not allowed to stope until we got second egress in place. That is being done as we speak. And as soon as that the stopes ready and those first stopes, we expect to come out at around 4% to 5% as we drilled that area, there was some grade control drilling. We had an interesting surprise on the upside on the resource.

As you know, the resource [ we follow is about ] -- resource grade is about 2.5%. We're seeing grades about 4% in those first stopes, and that's why it's very important to get those high-grade stopes to the plant in the fourth quarter to push that production volume through the plant.

So as a result, we've changed the quarter 4 forecast to 5,000 to 6,000 tonnes which is still significantly more than what we've achieved in the last 3 quarters, but that is on the back of those 2 operations coming online, plus the opportunities the guys identified which we will still mine even though Budgerygar coming online. And our operating cost and capital, as I said, no change in guidance. The guys are doing a really great job to managing on that side of the business.

On the exploration side, we spent $15 million on growth projects and exploration. I talked about Avoca Tank. We're seeing some real good grades coming out of it. We have put a resource out of Kurrajong. It was always just the exploration target. Now that's sitting at 2.2 million tonnes at 1.7% copper, but there's a high-grade zone of 1.1 million tonnes at plus 2.5% copper. So there's a significant opportunity, and it's still open at depth.

We also have moved our focus a lot to the north. You can see that VTEM. We've done the VTEM, which were weighed by the targets. So the guys are busy working through those targets, and we're planning to do some drilling in the next 3 to 6 months under some of those targets. But we also drilled 3 holes at the 5M7 target. And we've seen -- we did get sulfides. We're waiting for the results to come back. And then we'll see if there's something material or something to do more work in that specific area.

Jaguar. Look, although 4,200 tonnes is lower than previous quarter, we did plan for lower grades from those stopes, but there was an impact from a seismic event, which has impacted production a little, but it's not material enough or it's not that material that it will impact guidance. The guys are working through those and they are back in production.

What is very interesting, you can see that picture on the right-hand side where that area sits. It's at the bottom of the mine. And as we drill it, we got the Bacalar deposit. We've got Turbo hanging wall, you get Java Deeps. So there's a lot of opportunities. Originally, when we looked at it, you were just going to have a barren area. You have got to put development through to get to Turbo, but as we drill it, we keep on finding more and it looks very interesting and trying to put the plan together to get access to those turbo deposits, and that's all planned for FY '24 in trying to get there and start that. That is one of the -- the Turbo deposit is still one of the biggest lenses in the Bentley mine itself. So that's quite exciting.

They have managed to [ retail ] the capital. We have made a decision to move growth capital for ventilation up to FY '24 and start the development. We've started now to get down to Turbo. But -- so some capital has been moved, but there's also been a focus to save on capital as much as we can as we move through FY '23.

This is just some of the intersections in that Bacalar deposits. You can see the copper grade, 3.7%, nearly 2.9% copper with good zinc. That is a great deposit and a great find and there's more work now being done to draw that out and understand that whole ore body around Turbo and further down there to get Turbo. So this has been a really good outcome for the Jag team.

Northern Queensland. With 1,600 tonnes of copper -- the -- as everyone know, there has been a massive rain event and [indiscernible] was out for quite a period of time. And it was just not possible for us to pull all the tonnes through the mine. And there was -- as you can see there, 135,000 tonnes at 2.4% copper left at the end of the quarter. That is now being treated, and it's really going forward, how do we can bring that forward.

The team has put an extraction plan in place. So that is on the right-hand side, you can see the extraction plan basically to get out of Mt Colin in the next 15 months or so. And there's a clear plan being developed and strategically developed to manage the exit of Mt Colin and ensure we get the returns we're looking for.

The potential of having 90,000 tonnes of stockpiles has been brought into the guidance, as I said earlier, and efforts will be made to see if we can reduce that significantly by getting another treatment slot.

The Barbara deposit has now been drilled. Engineers are looking at the -- and the geologist are looking at the resource, up at the resource and up at block models to see how does that work as an open cut or as an underground and see there's potential to move from Mt Colin to Barbara in using the same process.

Barbara's previously been mined as an open pit. That was [indiscernible] so that opportunity still remains there to do exactly the same, but also look at the underground extension of that ore body.

At Cracow, look, this is the best operating mine currently in the business. The team is doing exceptionally well in managing cost, managing production, managing compliance to plan and have achieved 13,000 ounces of gold. What we're also seeing, you would have remembered in the first 2 or 3 quarters, we talked about the reconciliation between grade control drilling and actual grades mined was always a challenge. We now got that under control. We're getting very good reconciliation. So we know where we mine and what we're getting.

And now what is happening now that there's time and effort, we can look at these new opportunities has been identified. You can see on that slide on the right-hand side. Drilling is underway and testing new areas where we think there might be opportunities to extend that Western Vein field even further from what it is today.

We have revised the capital guidance, as you can see, and a lot of that is purely looking at do we have to spend the money? Can we move it out? Or can we just don't have to do everything. So the team has really worked hard. As I said before, the Cracow model has been for a long time, you need to make money to put in exploration. And at these gold prices, they are actually starting to generate money and spend money on exploration.

Interesting new technology, for me it's new at least at the Southern Vein, which we now focus on because that is where we still have a view that, that's our best exploration target early in the business. They did a A N T or ANT survey. That image on the right-hand side is the first data from that, and it's all trying to identify where the structural geology is moving to the south -- and that's just the first pass, but some -- that versus other work will drive the exploration plan to test that Southern Vein out.

Golden Plateau still remains a high priority. The idea with Golden Plateau is we've now got a resource on it, put our exploration drive in, drill it out and then start mining it as quickly as you can because there's some potential for 3 plus 4 -- around 4% -- 4 gram a tonne gold or 3 to 4 gram a ton gold sitting in those -- in the Golden Plateau deposit and then you bring that into production while you still got some tonnes in the Western Vein Fields.

At a Corporate & projects, Stockman is going really well. Feasibility study, as I said, we had a detailed full data review in the last couple of weeks. The permitting is underway. The -- we're doing now some technical work on mine drainage. We're doing some more work on the metallurgical processing side of things. We have registered now vegetation clearing offsets. Some of it is already underway. Some of it we are still negotiating. But a lot of that work on network has been done, and obviously, very close to the community.

We've got regular quarterly meetings with representatives and that project is going to plan and still on track for and study to be finished by the end of June. -- that photo on the right-hand side is an interesting photo. So that's the current infrastructure. You can see the road. You can see where the plant site is going. You can see the TSF at the back, which is already in place. So a lot of that road infrastructure to get to all these mines, Currawong and Wilga is already in place and it's been there for a long time.

So we'll keep you up to date. But really, it is all -- we have got meetings next week with the government to make sure there is alignment. But we have yet to see any reason why we can't do this. So everything's on track to deliver this project.

At a Corporate level, you can see the cash we talked about it. The cash and C was at $56 million. We got a bit of hedging left. So there's some gold hedging, which is obviously out of the money at this point in time, 2,700, but it is a gold hedging, the copper hedging at 3,000 tonnes at $13,200 in the money.

So we haven't got any hedging at this stage planned post June, but we always look at opportunity and being a bit opportunistic on hedging, but that will be part of when we finalize the budget for FY '24. I guess the key takeaway is, for me, Cracow and Jag have done a great job, they're well on track on guidance.

Tritton had its issues, but we can really see the light at the end of the tunnel now with Budgerygar and Avoca Tank coming online in production this quarter. And then what I need to probably stress is, the production from Mt Colin, which is on stockpiles plus delay in production out of Tritton and Budgerygar has not lost. It will just come in the first quarter. That's what we don't mine in this quarter will just be in the next quarter. And unfortunately, it falls over financial years. On the exploration side, we talked about the success and there's a clear exploration strategy for each one of these mines to keep delivering successful exploration and then extend the mine life of these businesses. I guess that sort of summarized the quarterly results.