Aeris Resources Ltd

ASX:AIS

Earnings Call Transcript 2021-Q4

[Peta Baldwin]

Good day to all attendees, morning, afternoon or evening. Welcome to the Aeris Resources June quarter call and presentation. Aeris' Executive Chairman, Andre Labuschagne, will be making a short presentation, after which there'll 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]

Thank you, Peta, and good day, everyone, and welcome to the Aeris quarterly presentation. I guess firstly, I think it's just such a great feeling to start FY '22 with 0 debt, $97 million in the bank, and it's really allowing us to look at FY '22 in -- through a very different lens. So first off, I just want to thank all the shareholders, the executive team and the team at the various mines in Aeris, and also for their operations over the last 8 years. But I'm looking forward to a very different FY '22, and hopefully, you, our shareholders and investors would see it the same way. With that, I'll jump into the presentation and sort of kick off with the normal. Let me just see why this is not bigger. Let me just touch on the highlights over the last 12 months. As everyone, I assume, on the call know we did the Cracow deal. That integration was done and very successful. And as we have announced a while back, we achieved the guidance of 70,000 to 75,000 ounces at nearly 74,000 ounces for the year, and we better the all-in sustaining cost at $1,483 an ounce at Cracow. Through the year, as we said, we -- a lot of focus are going into exploration, and we've seen significant uplift in resource updates. The new tailings dam is nearing completion and that would be commissioned in August. And after the equity raise the other day, we are accelerating exploration at both the operations to significantly enhance and improve the life of mine plans for both. At Tritton, once again achieved the revised guidance, very close to the original guidance of an all-in sustaining cost at $370 a pound. We started Budgerygar, the development's in place. The drilling is underway. And at this stage, what we're seeing is very successful, and we'll start the mining in Budgerygar in FY '22. The key excitement, of course, for everyone was the discovery of Constellation. Pad drilling is continuing. We keep on seeing it looking better than what we thought and has put in a lot of excitement to the business in terms of the future of that mine. At a corporate level, what a great result to close with over $100 million free cash and receivables. We -- as we announced yesterday, and that's sort of the reason for this being on the last day of the announcement. We're now debt free after 9 years. We're very lucky to get ANZ on board as a new financier and a support -- and a supportive banker. And really, it's moving away, as you have seen with PAG was, as we said, very supportive, but it was expensive debt to now we are debt-free, but also being able to use the new facility of ANZ to release cash to be able to do the final payment on the debt. And as you know, we've raised the $50 million. So a very exciting FY '21. On the ESG side, as a company grow, we are putting a lot more focus on it on the safety point of view. Very disappointing, 2 lost time injuries for the quarter. Both was unfortunate soft incidents, but still not acceptable and a lot of focus is going to get better at the safety. But overall, a 30% improvement over the last 12 months. On the environmental side, there were no incidents. We took the opportunity with a wet weather around Tritton to plant 600 trees and shrubs and that's all part of the environmental rehabilitation plans moving forward. On the COVID side, happy to report, no significant impact at the 2 operations. We have seen a bit of an impact at Tritton with the latest restriction specifically around Orange and the short lockdown they had. But it's being managed and we haven't seen any significant impact other than a bit of a longer delay in the sampling results coming back. But as always, we continue to look and review all the guidelines as per the government directions. As you -- some of you might have seen, we're very active on social network on both LinkedIn and Facebook. So please join a whole lot of these things. So a lot of work is going into supporting the communities with water. We're supporting events. We're keeping the community up to date on development of the various mines. We had a push or better at the business. So that's all for support. And as far as I know, the corporate office won, so that's a good result. On the electric side, that loader you see there is our electric loader, which we got involved with a few years ago to sponsor the body that is being reworked a little, but we are working on a strategy. As Tritton grows on our strategy is how do we slowly and starting to move to better and lower emission strategies going forward. Our first sustainability report will be due in the December quarter. Very proud to say that there is a great piece of work that guys are busy doing. Moving on to the operating results. So the highlights are for Tritton. There was a significant improvement on both grade and tonnes coming from the Tritton mine from the March quarter. As you remember, March quarter was quite low and driven by the back -- the paste fill issues we had. That said though, the cost for the quarter is higher. The main impact of that cost is increase in mining and development activity, and that's setting up the next level of production at Tritton for FY '22, and then catching up on the backfill was a significant cost for the quarter. The Murrawombie resource drilling, we'll talk a bit more about it in slides coming up. But it keeps on delivering at Murrawombie when we thought we're seeing lower grades and we're seeing the potential end of [ Murraw ], the drilling came back and had some very spectacular results. On the guidance for FY '22, in -- last year, we said the guidance for Tritton would be 21,000 to 22,000 tonnes of copper. So we're maintaining that level and all-in sustaining cost between $3.95 and $4.30. The main reason for that increase in all-in sustaining costs is driven by the lower tonnes, but also lower production of byproducts as a result of the lower grades we're mining in FY '22. At Cracow, they had another cracking quarter, nearly 20,000 ounces of gold. The good team there keep on getting better and delivering great results. There was a slight increase on the cost side in absolute numbers. That was driven by additional costs associated with the development and ventilation, allowing us to get access to better quality stopes. So that has been a result of the cost. But overall, we achieved the guidance and the tailings dam at #2 will be commissioned in August. It's nearly done. The guidance for FY '22, originally when we bought Cracow, we had a forecast of 57,000 to 62,000 ounces. We know that we get a better understanding of the resource. The drilling we've done so far, we've lifted that back up to 67,000 to 71,000 ounces, more or less in the same range of -- as this financial year. So a really great result as we get to know the asset better. At the -- getting back to Constellation. This has just been one of those spectacular outcomes where we've seen every -- nearly every withdrawal has got a result. Originally, we thought it's a small high-grade deposit up in the higher end. What we're seeing, it's getting thicker and better, and we'll talk about some of those results. We got it now traced 1,150 meters down [ deep ], but the strike has also increased to more than 200 meters. And the 2 EM plates identified on the bottom, we're busy, and we'll be drilling those soon. Looking at the shallow RC drilling program, it has delivered very, very good results. And as I said, the first I remember we drilled was 3 meters, I think, at 20% copper. And since then, we've seen this ore body getting thicker. And as we drill it, you can see some of those results, 8% copper -- 8.2%, and 4% copper. That cycling is now over 200 meters. The whole concept here is, in terms of the mine planning, is to drill this out as quickly as we can to a resource, start to put a mine plan around it. You'll start off with an open pit mine and then go underground. And the whole aim is how quickly we can fast track this, this plan into the life of mine plan for Tritton. Just looking at Budgerygar. So we have got the access development in. That was about 600 meters of development. Drilling is underway. We've got 2 rigs, 45 holes has been done. We're waiting still for quite a few results. But the results we've seen so far and the intersections we've seen, some of them outside the regional design. So it does show that there's potential -- the results we've seen is according to expectations. So this mine will become -- will be in production in FY '22. Murrawombie, as I said, originally when we started this, we thought we're going to get 1.3% copper out of it. And about 3 years' life, listing is now going for a long term. In the last 6 months, we thought that hanging wall, we're not sure what's the grade. And as the guys drilling it up, it's getting better and better. So the Murrawombie keeps delivering in terms of expectations and then we'll continue in the life of mine plans. I guess this is sort of just a touch, and this has been in previous presentations, but it's really just trying to show you that I know the market is waiting for a life of mine plan, and we are working on it, and we'll share it with you as soon as we practically can. But if you look at that Budgerygar's coming into production. Soon Avoca Tank is, in this year, plans to come in. Murrawombie has got an open pit with the underground still strong. We're working out how do you mine those 2 together. And then all those exploration projects, we've got to allocate $15 million to exploration this year. And a lot of those projects will be come into a development ready within the next 12 or 18 months. So a whole range of pipeline of projects, which all will become plan of the future life of mine plan for Tritton. So we'll share that with the market as soon as we can. These move around a lot. So we have been working on it for a long time. Looking at Cracow operations. The whole thing with Cracow was when we got in, it's about how do we push the mill to 650,000 tonnes. And in May, this year, the guys hit 57,000 tonnes, which is a new record for the plant. So it showed that it can do those sort of tonnes. The whole focus on how do you increase underground mine life with additional tonnes, you can start to look at productivity, cost, cut-off grades. And the whole idea is how can you use all those parameters to actually create a bigger resource, and we are busy working. You'll see the next slide what we're doing, but it's all about trading that additional resource by relooking at old areas and new areas and we're spending $9 million in FY '22, just on the near mine exploration. Then in the new space, we call it a new space, but it's greenfields exploration. It is about prioritizing the targets. We've got Ballymore, which we're going to do some surveys on. We will start drilling in Boughyard in the next quarter and start to see how that comes. So those are real great opportunities for new exploration targets and new tonnes to come or ounces to come into production and $4 million is allocated to that. On the resource updates, most of the areas we've built has resulted in an upgrade. We are waiting for some results to come back, and you'll see in the next slide some of the -- one of the areas we're busy with. In the -- we will put a new reserve, up that out in August. So a whole new resource and reserve statement will come in and will be shared with the market in the next few weeks. This slide just shows you all the different areas, which has opened up because of the relook at cut-off grades and costs and associated. So you might find a lower, lower grade coming into the reserve, but it's more tonnes. The fact that the mill can do those tonnes, you're still targeting your 70,000 ounces out of the mine, but it might be with some more tonnes, but it all goes about its high-margin tonnes. So the drilling -- the red area is where we're currently drilling. You'll see one of the slides. We are going to start to drill Golden Plateau soon. We are going to do the -- the black area is the Roses Pride, and bring the Roses Pride into production plan pretty soon as part of our life of mine. This is just one of the examples. I don't know what -- this is just one of the examples of the underground resource drilling. So this was focused on extensions to the Crown, Tipperary, Royal deposits. Some of them were still waiting for results. But if you look at the Crown, all of those intersections is outside of current resource envelope, and we've seen some pretty good results, which will definitely result in that becoming a future mining area for Cracow. At a corporate level, as I said earlier, what a nice way to close FY '22, FY '21, especially coming from where we've been in the last 8 years. With over $105 million -- nearly $106 million between cash and receivables. Being able to say we paid our debt back -- all back in July, having ANZ there with $35 million in a contingent instrument. Now that is all used for environmental bonding. So they're basically guaranteeing the bonding. What that did is it released $20 million of restricted cash, which was actually cash backing those bonds. And that's been -- that's the money we used to repay PAG. We also got a working cap facility with ANZ of $20 million, which is nice to have. But with the funding we have, surely, I can't say that, that would be necessary to use, but it's good to have that as a backup and they can do FX and gold unsecured hedging lines for us if required. Just touching on the hedging side. Those -- the hedges at -- if you look at September quarter, that first 2 hedges, 833 tonnes and 667 tonnes, that finishes in July. So basically, today is the last day for those hedges. And then we put new hedges in place. It's about 20% of production -- 25% of production, sorry, at between $11,900 and $12,900. So we participate in any price movement between $11,900 and $12,900 a tonne. That said, though, the current copper price sits at $13,100 a tonne, what a spectacular price. But the reason why we've done these hedges, this is a double the price, it was 6 months ago or 12 months ago. We do have a bit of capital we're going to spend in bringing all those projects onto -- into production for Tritton, and we believe it's just prudent management to put some hedges in place. We're not intending to put any more in place, but it's a good baseline to work from. On the M&A side, look, the key, as you've seen through all those projects we talked about at Tritton and Cracow, the organic growth is a priority, but I do see organic growth as our responsibility to do in any way. So there's a huge amount of upside for both those businesses. And as I've always said, we remain focused on M&A. We have been in quite a few processes since we bought Cracow, but the challenge now for us is you've got to average up. So whatever you get each to add value with the market cap now it's -- today, close to $500 million, it does allow you to look at better project. So -- and that is the aim for us to see what is a better fit. And as we grow the business, we grow with better quality acquisitions or mergers. I guess in summary, FY '22 was a great year, big transformation, good exploration, very great support, and thank you to shareholders on the line for the $50 million placement, and there's always been the focus on M&A. Looking at FY '22, Tritton guidance, as we said, about the same in tonnes, what we always had. The big thing for Tritton is moving Tritton from, I call it a survival mode, 18 months ago, we nearly ran out of water, and it was really just all about how do we survive. Where today, it's all about how do we grow the business? How do we bring these -- these new mines into production? How do we accelerate our exploration success we've had and actually see how do we create this significant longer life for it Tritton? Where, at Cracow, we've already seen the work the guys have done on the exploration side. The fact that we can lift the guidance and manage our costs in the way the guys are doing it, we're going to allocate a lot of money on exploration, $13 million. Originally, remember, we said we're going to do $13 million over 2 years. We're now basically saying we're going to put it all in another $13 million in this 12 months, and it's all about getting that reserve back up that you replaced with your mine and slowly start to build that up. But also from a resource point of view, see how you get a significant better resource with all these opportunities.Caller, can you just put yourself on mute? Thanks. On the tailings dam, that's ready by mid-August. It's going really well. There's a few delays for -- due to rain, but everything is in place. And as I said, it's all about M&A as part of our growth strategy. I guess that brings me to the end of this presentation and open for any questions.