Aeris Resources Limited (AIS) Earnings Call Transcript & Summary

Good morning, and welcome to the Aeris Resources Annual General Meeting for 2021. I hope this is the last virtual meeting we'll have for a long time, but please bear with us through this presentation. I now declare the meeting open at 11:00 a.m. On behalf of the Board, thank you for taking time to attend the meeting today via the online platform. As we foreshadowed in the Notice of Meeting dispatched to shareholders on 26th October 2021, the company has opted to hold the meeting virtually using the online platform due to the current restrictions on gatherings and travel imposed by the Australian state governments as a consequence of COVID-19. This means that there is no physical attendance at the meeting. This is an important health and safety measure given that we have approximately 8,000 shareholders on our register. The company is holding this meeting virtually in accordance with the regulations prescribed by the Coronavirus Economic Response Determination that was passed by the federal government in May and extended in September 2020. This determination modifies the operation of the provision of the Corporations Act and the corporation's regulations to allow companies, such as Aeris, to hold meetings remotely as virtual meetings instead of in person, subject to certain conditions being satisfied. The company wants to ensure all shareholders that all conditions required under the determination have been satisfied, with the intention that all shareholders have a reasonable opportunity to participate in the business of the meeting. The company has opted to use online platform hosted by Link to facilitate the meeting. Instructions on how to use online platform for the purposes of the meeting are set out in the virtual meeting online guide. This is attached in the Notice of Meeting on the company's website and the online platform. Investors can submit their questions on the online platform now for each item of business. If you experience any technical difficulties during the course of the meeting, please contact 1800-990-363. I can confirm for the record that this is a properly constituted meeting and that a quorum is present. On behalf of the Board, thank you for taking time to attend the meeting today. I would like to introduce my fellow directors, Mr. Michele Muscillo who's with us in the room; Mr. Colin Moorhead and Ms. Sylvia Wiggins, which are online; and the company other Non-Executive Director, Mr. Alastair Morrison, is unable to attend today's meeting and sends his apologies. Let me also introduce Mr. Robert Brainsbury, Chief Financial Officer and Joint Company Secretary; Mr. Ian Sheppard, Chief Operating Officer; Ms. Kim Franks, Chief People Officer; and Dane Van Heerden, Joint Company Secretary. A special welcome to our external auditors, PwC, and welcome to all visitors to the meeting. Before I continue the formal section of this meeting, I would like to extend a word of thanks to Alastair Morrison who, after 10 years, is leaving Aeris. The Board and myself would like to thank Alastair for his great contribution to Aeris and the guidance over the last 10 years to get Aeris to where we are today. On behalf of the Board, senior management and the team at Aeris, we wish Alastair and his family all the best for the future. Pursuant to Coronavirus Economic Response Determination, Notice of the Meeting and details of the online location of the full Notice of the Meeting was e-mailed or mailed to all registered members on 26th October 2021. I propose that this notice is being taken as read. Should anyone wish to comment on the notice or the information sent with the Notice of Meeting, please do so via the online platform, and we will respond accordingly at an appropriate time during the meeting. I also table the minutes of the previous Annual General Meeting dated 26th November 2020. Those minutes have been signed as a true and correct record of the meeting. And so they are taken as read and confirmed. We will now attend to the business of the meeting. Unless you have any objections, I don't plan to read out the results of the proxies received by the company. However, details are available from the company's Secretary for any shareholder who would like to inspect them, and they will be displayed on the platform. Details of all proxies received will be recorded in the minutes of this meeting and disclosed to the ASX. A total of 238 valid proxies have been received. Shareholders should be aware that any undirected proxies given to the Chairman will be cast by the Chairman and counted in favor of the resolution, the subject of this meeting. The business of this meeting commences with the financial report. In accordance with the Coronavirus Economic Response Determination and in order for shareholders to vote on the resolution put forward at this meeting, each resolution will be decided on a poll utilizing the online platform. Please refer to the online meeting guide for instruction on how to get your voting card. The company financial report, together with the directors' report and auditor's report for the period ended 30 June 2021 were mailed and e-mailed to registered members on 26th October 2021 and have been held by shareholders for a time that meets a statutory period. There is no requirement in either the Corporations Act or the company's constitution for shareholders to vote on the annual financial statements, directors' report and auditor's report. Though we take this opportunity to invite questions on these documents. Are there any comments or online questions on the financial statement? I confirm there's no current questions. Are there any questions on the phone line?

There are no phone questions at this time.

Thank you. In that case, I will take them as being adopted. Agenda item 1 relates to the approval of remuneration report. In accordance with Section 250R of the Corporations Act, the remuneration report for the company and its subsidiaries is submitted to the AGM for shareholder approval. The vote of this resolution is advisory only and does not bind the directors or the company. The Board has abstained from making a recommendation on the resolution in the interest of good corporate governance. Please note that there are voting restrictions on key management personnel of whose remunerations are included in the remuneration report and their proxies and closely related parties on this resolution. Are there any comments or questions on the remuneration report? Are there any questions on the phone line on the remuneration report?

There are no phone questions at this time.

If there are no questions, I will proceed. I now turn to resolution 1 set out in the Notice of the Meeting, which is displayed on your screens. To consider and, if thought fit, pass the following resolution as an advisory resolution to the company, with or without amendment, that the remuneration report for the year ended 30 June 2021, as set out in the directors' report, is adopted. In accordance with the Coronavirus Economic Response Determination, all votes taken at the meeting must be by poll. The poll for all resolutions will be conducted once all resolutions have been put forward to the meeting. We now move to agenda item 2, which is the reelection of Mr. Michele Muscillo as a Director of the company. I will now turn to resolution 2 in the Notice of the Meeting, which is the reelection of Mr. Michele Muscillo as a Director. Details of Mr. Muscillo's experience was set out in the Notice of the Annual General Meeting. The Board, with Mr. Muscillo abstaining, recommends Mr. Muscillo's appointment as a director of the company. Are there any online questions or comments on this resolution? I can confirm there's none. Are there any comments or questions on the phone line?

There are no questions at this time.

If there are no questions, I will proceed. I'll now turn to resolution 2 set out in the Notice of Meeting, which is displayed on your screens. To consider and, if thought fit, pass the following resolution as an ordinary resolution of the company with or without amendment, that Mr. Michele Muscillo retires by rotation in accordance with Rule 28.6(a) of the constitution and, being eligible, offer himself for reelection, be elected as a director. The poll of this resolution 2 will be conducted once all resolutions have been put forward to the meeting. We now move on to agenda item 3, appointment of Ms. Sylvia Wiggins as a Director of the company. Details of Ms. Wiggins' experience was set out in the Notice of the Annual General Meeting. The Board, with Ms. Wiggins abstaining, recommends Ms. Wiggins' appointment as a director of the company. Are there any online comments or questions on resolution 3? Are there any questions on the phone line on resolution 3?

There are no phone questions at this time.

If there are no questions, I will now proceed. I'll now turn to resolution 3 set out in the Notice of the Meeting, which is displayed on your screens. To consider and, if thought fit, pass the following resolution which, with or without amendment, as an ordinary resolution of the company, that Ms. Sylvia Wiggins, having been appointed by the Board as a Director of the company on 15 October 2021, in accordance with Rule 28.2(b) of the constitution, offers herself for appointment as required under Rule 28.3 of the constitution. The poll for this resolution 3 will be conducted once all solutions have been put forward to the meeting. I will now turn to resolution 4 of the Notice of Meeting, which is the ratification of prior issue of shares. Details of the prior issue of shares was set out at the Notice of the Annual General Meeting. The Board recommends that the prior issue of shares be ratified. Are there any online comments or questions on this resolution 4? Are there any questions on the phone line on resolution 4?

There are no phone questions at this time.

If there are no questions, I will proceed. I now turn to resolution 4 as set out in the Notice of Meeting, which is displayed on your screen. To consider and, if thought fit, pass the following resolution, with or without amendment, as an ordinary resolution of the company, that pursuant to and in accordance with Listing Rule 7.4 and for all other purposes, shareholders ratify the prior issue of 287,915,576 shares at an issue price of $0.175 per share on the terms and conditions set out in the explanatory memorandum, which were issued on 18 June 2021 to the placement recipients. Are there any questions on this resolution? The poll for resolution 4 will be conducted when all resolutions have been put forward to the meeting. I'll now pass to Mr. Michele Muscillo to attend to item 5 of the meeting. Michele, if you can join?

Thanks, Andre. I'll now turn to resolution 5, which seeks approval for the issue of performance rights to Mr. Andre Labuschagne under the equity incentive plan. Details of approval for the issue of performance rights to Andre under the equity incentive plan was set out in the Notice of Annual General Meeting dated 26th October 2021. The Board, with Mr. Labuschagne abstaining, recommends approval of the issue of performance rights to Andre under the equity incentive plan. Are there any online questions or comments in relation to the resolution? Are there any questions on the phone line?

There are no phone questions at this time.

On that basis, I'll now proceed. I turn to resolution 5 set out in the Notice of Meeting, which is displayed on your screens. To consider and, if thought fit, pass the following resolution as an ordinary resolution of the company, with or without amendment, that for the purposes of Listing Rules 10.14 and Sections 200B and 200E of the Corporations Act, and for all other purposes, approval is given for the grant of performance rights to Mr. Andre Labuschagne or his nominee and the issue of transfer of shares to or for the benefit of Mr. Labuschagne upon the vesting and exercise of those performance rights under the equity incentive plan and on the terms and conditions set out in the explanatory memorandum. The poll for resolution 5 will be conducted once all resolutions have been put forward to the meeting. Now I pass the chair back to Andre.

Thank you, Michele. We move on to agenda item 6 in the Notice of Meeting, which seeks approval of the amendment of the constitution. Details of the amendment of the constitution was set out in the Notice of the Annual General Meeting. The Board recommends that shareholders approve the amendment of the constitution. Are there any online comments or questions in relation to this resolution? I confirm there's none. Are there any questions on the phone line on this resolution?

There are no phone questions at this time.

I will now proceed and turn to resolution 6 set out in the Notice of Meeting, which is displayed on your screens. To consider and, if thought fit, pass a following resolution, with or without amendment, as a special resolution of the company, that with effect from close of this meeting, for the purposes of Section 136(2) of the Corporations Act 2001 and for all other purposes, the constitution of the company be amended in accordance with and as explained in the explanatory memorandum. We will now go through the poll vote procedure. In accordance with the Coronavirus Economic Response Determination, all votes taken at the meeting must be via poll. The poll will be conducted in accordance with the virtual meeting online guide as follows. I appoint Chris Healey of Link Market Services to be the returning officer and to conduct the poll. All eligible shareholders and proxy shareholders will have registered to vote using the online platform and been issued with a voting card. Shareholders and proxy holders can either submit a full vote or a partial vote. To submit a full vote on a resolution, ensure that you are in the full vote tab, place your vote by clicking on the for, against or abstain voting buttons. To submit a partial vote on a resolution, ensure that you're in the partial vote tab. You can enter the number of votes. You either would like to vote for all or any resolutions. The total amount of votes that you are entitled to vote will be listed under each resolution. When you enter the number of votes in a certain box, it will automatically tell you how many votes you have left. Note that if you are submitting a partial vote and do not use all your entitled votes, the unvoted portion will be submitted as no instruction and, therefore, will not be counted. Once you have finished voting on the resolution, scroll down to the bottom of the box and click the blue cast vote or cast partial vote button. Please see the virtual meeting online guide for instructions. At the conclusion of the meeting, a red bar with a countdown time will appear at the top of the webcast and slide windows advising the remaining voting time available to shareholders. Please make any changes required to your voting cards at this point and submit your voting cards. Please now complete and submit your voting cards. You have 5 minutes and then the poll will be closed. [Voting]

I would now like to take this opportunity, while we're still going through the 5 minutes, to take shareholders through the last 12 months, probably 18 months, for the last financial year, but also start to look at what's the future looking like. And please, I'll take you through this presentation of what we're planning to do. So as you know, we got a gold mine, which is the Cracow gold mine we bought on the 1st of July last year from Evolution. The mine is forecasted to do about 67,000 to 71,000 ounces of gold this financial year at about $1,550 all-in sustaining cost per ounce. We also got the Tritton copper mine, which is forecasted to have about 21,000 tonnes of copper at an all-in sustaining cost between $4.15 and $4.45 a pound. And then we also still have a joint venture on Canbelego with Helix and we got the Torrens joint venture. But it must be said, our main focus for growth, and looking forward in the company, lies with the 2 operating assets. This slide just gives you where we are today. As of yesterday, a market cap of $370 million. At the end of the last quarter, we had $72 million of cash in the bank. But the interesting part is the slide on the right-hand side. When we bought the Cracow mine and we raised money to buy the mine, the share price was at $0.03 and the market cap of the business was below $20 million. Since then, we bought Cracow. We found Constellation. We'll talk a bit more about Constellation. We had very good results in the first half, which was a big change from where we were the year before. And Constellation has continued to keep growing and is a very exciting project. And you can see the share price closed yesterday at $0.165 -- or the day before. What is also a major movement in the business is the support from institutional shareholders. And as I said earlier, we now have 8,000 shareholders on the register, which is significantly more than where we were when we did an unmarketable parcel buyback 12 months ago, I think it was, or less than that. So a significant change in the business. The big highlights for us in 2021 was obviously the acquisition of Cracow and both mines achieving their guidance and cost guidance and the success we've had so far at Cracow with discoveries and increases in resources for Klondyke and Royal and Roses Pride and the acceleration of our exploration plans for Cracow. At Tritton, Constellation was a great discovery and will become one of the future mining operations. We have started in FY '21 the development and the drilling of Budgerygar as a deposit to start to look at replacing the deeper Tritton underground lower-grade tonnes with better quality tonnes, and Budgerygar is progressing really well. Both the mines, as part of the capital we raised in June, the $50 million, has been allocated a significant amount of money, $28 million for exploration to keep the growth of those mines going. At a corporate level, we ended the financial year with $105 million with cash and receivables. PAG has been repaid and has been with us for a long time and a very, very supportive financier and shareholder. And at the end of July, we repaid, and we're debt-free as we sit today. We also sold Yandan, which was a gold project, which we saw as noncore, and that was the way, trying to consolidate our position. Those, of course, then moved on to strengthening the net profits. We can see the significant improvements on cash flow. You can see the senior debt was at $48 million, and it's now 0, and the cash in the bank. But what this is allowing us to do is to start to refocus on our internal businesses, both at Tritton and Cracow, in how do we use our organic growth opportunities to get some significant value out of the business with a better balance sheet, no debt and significant exploration dollars to look at growth. We are very proud to release our first sustainability report in 27 October. And can I thank Kim and the team for the work they did on that. It's an amazing report. It just shows our commitment and transparency and integrity to run a sustainable business. That is our first report. Please feel free, on our website, please have a read. Happy to get feedback on that report. Going into the operations a bit in a bit more detail. We'll first talk about Tritton. Tritton has been a fairly consistent producer since we became involved as a management team. And you can see that it consistently, on the bottom right, produced between 22,000 and 27,000-plus tonnes of copper. This year, we're forecasting 21,000 to 22,000, and we are investing quite a lot of money in starting up new projects. And we'll talk in a lot more detail. We have started Budgerygar, we have kicked off Avoca Tank in the last month, and we are investigating the Murra Open Pit cutback, all of those to be invested in FY '22. I'll talk a little bit about the pipeline. You can see the map on the right-hand side where most of the projects sit, all within a 50-kilometer radius and less from the Tritton process plant. So currently, we're producing from the Tritton and Murrawombie underground mines. We have started the Budgerygar mine, and we're drilling out that to update the resource. That will move into production within FY '22. Avoca Tank has kicked off in development. That will be in production in FY '23. And the Murrawombie pit is part of the process. And the other projects, the Constellation, which is exploration discovery, will move into the development pipeline. We have put a team in place, specifically focused to expedite and accelerate the Constellation into production. And then Budgery and Kurrajong will be drilled out. So a lot of focus. But if you look at that and you try to put that in conceptual development plan, you can see Tritton underground mine will slow down. But within that infrastructure, you'll bring in Budgerygar in the same infrastructure and you'll bring in the South Wing deposit. So basically, the idea is moving away from deep, lower-grade underground tonnes to better quality, higher-grade tonnes. At the same time, we're starting Avoca Tank and the Murrawombie Open Pit later in FY '22, and then the other projects will come online. What that is saying, by '26 onwards, we potentially will have 5 projects with better-quality tonnes, higher grade feeding the Tritton mill. And that is the future. We are working hard to do the exploration. We're working hard to get the project pipeline working so we can come out in the market and give more detail. But that is exciting to see Tritton moving from a survival mine to a growth mine purely from the capacity for us to invest, great support from shareholders and, obviously, as everyone knows, in a very good copper price environment. This is an example. So the Budgerygar deposit, you can see in that small little picture with the Tritton ore body, we're currently mining right down the bottom over 1,000 meters deep. The Budgerygar deposit is nearly, I don't know, close to surface. That development is already in. We're busy drilling the resource out to grade control drilling, bringing a resource out within the next few weeks, and then we'll start to get into production by quarter 4 FY '22. So that comes back to replacing high-cost, low-grade tonnes with better quality tonnes. Avoca Tank, there's an example of Avoca Tank. We're putting in, we started off with a straight line decline from one of the old Northeast mine open pits. The whole idea there is to minimize the footprint, take out geological and technical risk and access a thick high-grade zone when you hit the ore body. That resource, you can see there, there's a 700,000 tonne at 2.5% copper and 0.8 gram a tonne gold in reserve, so once again replacing low grade with better grade at Avoca Tank. Development has been started. We awarded the contract to 360, and the work has progressed in the last 3 weeks and first ore targeted to be quarter 4 FY '23. Really exciting stuff happening at this mine, a lot happening. And then with the exploration, we've allocated $15 million to the exploration budget for FY '22. You can see on the right-hand slide the location of the Tritton copper mine within a region where you've got CSA, you've got the peak mines, you've got Helix, you've got Peel in a very well-endowed region. And we have 2,330 square kilometers of ground, with the northern part of the package really haven't been explored at all, or very little exploration, with additional tenements added in the last 6 months. Looking at that slide, that sort of just gives you a feel for where the focus will be. Obviously, Constellation is now moving from pure exploration to drilling it out to a resource. A lot of work has been done on that. Very exciting results, we'll see some coming up. If you look at Avoca Tank, we'll drill 2 deep holes at Avoca Tank, trying to see the extensions at depth because we still believe it extends. The aerial EM program, all that pink area on the north, has never been tested. And to give you the background, Constellation was found with an EM survey which was done on the northern part of the tenement package. And obviously, the first hole we drilled intersected is a great result and the second one even better. And from there, we've now got a really new mine coming up, and we're expediting it. So a lot of excitement around that. That is a very highly prospective area. We'll do 270 square kilometers of airborne EM in the next 6 months. Then obviously, we have restructured the team at the mine to not just focus on Constellation, so whole greenfield drilling program, which includes the aerial EM plus all the programs and looking at keeping the momentum on those greenfields exploration because there will be another Constellation or Tritton. I can see Ian is agreeing with me that we will find the next deposit. A bit about Constellation. It's 45 kilometers northeast of Tritton. So it's about 20 kilometers north of Murrawombie and where it's already a bit of inroad from Murrawombie to Tritton, so it's only another 20 kilometers. 63 diamond ores have been drilled. It has now got a cycle end defined from 200 to 300 meters. There's 2 EM plate which was intersected at depth, so it's already traced. It was originally traced to 850 in the last month, we drilled one of the deep holes. That extended to 1,000 meters, and you'll see on the next slide how that looks. So currently, you can see there, there's still those EM plates at the bottom. We're waiting for the results of the drill hole, which intersected one of those EM plates and then we'll do further downhole EM to see how far that extends. So it's already got a potential for more depth. We're already at 1,000 meters. And you can see some of the latest results, 23 meters at 2.3% copper plus, 0.8 gold is really significant in the bigger scheme of things. The whole idea for the development of this, which the team is starting to expedite, is it will probably start off with an open pit mine and then go underground. And we're busy with the test work on the areas to see how the metallurgical test work, sampling and the results of those, which we'll share with the market in due course. So Tritton summarized, great exploration upside, great exploration and further extensions of mine life in a mine which now we have the capacity to grow that business to significantly more than what it was 2 years ago. When we look at Cracow, Cracow historically did about 80,000 to 90,000 ounces under Evolution. Last year, we did 73,000. This year, we're forecasting 67,000 to 70,000. And then you see in 2023, we're forecasting 60,000 to 65,000. Those are all part of work which we're doing. As you might have remembered, originally, we said this year would have been 50,000 to 60,000 ounces. As we get to understand the ore bodies better, we can utilize opportunities to see the growth on the reserves and resources. Biggest focus for us at Cracow is exploration. We have pushed the mill. The guys at the mine, at Tritton, has done an amazing job to take that mill from 570,000-odd tonnes annually to currently pushing it to over 650,000 tonnes. And the byname for us there was pushing the underground mining as hard as we can, putting more tonnes through to allow us to look at flexibility on cut-off grades and all other mine grades. But also, there's 900,000 tonnes of lower-grade 1 gram a tonne stockpiles sitting around the mine. So there's no reason why you should not run that mill at maximum capacity because that all helps to manage areas which was left behind before to see if we can mine those. So the near mine exploration, we will talk about that in slides coming up, $9 million this year is allocated to near mine exploration. That's basically in the areas we currently mine. And then we call it new spaces. It's basically greenfields exploration, looking outside the current workings and there's a few slides coming up. So far, we have had significant success on resource updates. But it's all about keep going on that exploration. Similar to what we had at Tritton, significant pipeline, a lot of that still sit in exploration. So the work is underway to move those up from exploration to development, development into production. Roses Pride has now been brought forward and will be expedited into production within FY '22, FY '23. Golden Plateau, the project has been launched specifically to draw that out and bring that in as a project. And then you can see all the others, which is greenfield opportunities going forward. Diving into a little bit more. Those are the near mine targets. All the ones in red is what the guys are focusing on. All the ones in black or gray is still to be focused on. We've got 3 rigs going. And the guys at the mine has been very flexible, really working hard to understand cutoff grades, understand grades, through the drilling. And work has been done to keep the mine plan focused on growing. And as you can see on the right-hand side, there's Roses Pride, and we're bringing that into production within the next 12 months. And then you go into the new spaces. You've got Cracow South-West. So you see there the little blue area is the Western field. So that's where we're currently mining. And then there's all those other ones in red, which is the ones which we look at. So currently, we're prioritizing Cracow South-West. Ballymore and Boughyard, all of those can be potential significant projects or ore bodies going forward. The team at Cracow on the exploration side is still learning, is still looking at various ways of assessing all the different opportunities. And we've seen some amazing work coming from that team in the last 12 months. Growth. Now I need to talk about the guy in the photo. Chris Raymond, he's the Head of Exploration at Tritton. He and his team were the ones who found Constellation. And that smile just tells a story. That is a great picture. And I wouldn't know what the grade is in that core, but it's significant. Now with growth, we understand that a lot of our growth opportunities is within the drill bit, within our life-of-mine extension projects. But as we always said, we are looking at M&A. We always look for growth opportunities in both gold and copper. Australia still makes the most sense currently with COVID. Hopefully, restrictions will start to ease in the new financial year, and then we can start to look offshore. We are producers. We're operators. We're not pure exploration guys. So we are looking for projects which either are in production or something which is development ready as we move forward. We will be sensible when we look at projects. We will be disciplined in pricing and discussions with vendors and make sure that anything we do adds value to shareholders. I guess in summary, FY '21, a transformational year. And I've said this so many times. Operations delivered. We had exploration success. We had great support from shareholders to raise money for Cracow but also raise money for the $50 million placement, which has put us in a position to be debt free and, of course, ongoing focus on M&A. FY '22, we spoke about the guidance for Tritton. The guys are doing a great job to develop 3 new mines -- or 3 new projects, bring them into production or into production pipeline, and there's a big allocation of exploration dollars going forward. At Cracow, it's all about exploration. The team has done an amazing job to improve the tonnes through the plant with the $13 million allocated to exploration for both brownfields and greenfields exploration. The tailings dam, which we knew we had to build when we bought the mine, within, what was it, 13 months since we bought the mine, the team at the mine constructed and commissioned a new tailings dam, which was a great achievement. And of course, we will always look for M&A. What makes us different? I think we are a team, which has now been together for a long time, and we've shown that we got ambitions. We show that we're trying to grow this business. We're well funded. We've got no debt. Favorable price environment with both gold and copper. We have put some gold hedging in place in the last few days. We're already in the money, touch wood, and financially robust. And we've got a great platform to actually see how we grow this business. That is the update from Aeris, and I want to thank you for your time. And that concludes the business of the meeting, and I declare the meeting closed. Before I declare it closed, are there any questions or comments from anyone on the platform? There's no questions. In that case, there's no questions, I thank members for their attendance, and I declare the meeting closed. Thank you very much.