Aeris Resources Limited (AIS) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the 2022 Annual General Meeting for Aeris Resources Limited. Executive Chairman, Andre Labuschagne, will officially open the meeting in a few moments. Before I hand over to Andre, I would like to introduce the Board and management team of Aeris resources who are in attendance today and run through a few items of housekeeping. Those attending the meeting in person today are Executive Chairman, Andre Labuschagne; Non-Executive Director, Colin Moorhead, Chief Financial Officer and Joint Company Secretary, Rob Brainsbury. Chief Operating Officer, Ian Sheppard; Chief People Officer, Kim Franks; and Joint Company Secretary, Dane Van Heerden. Attending there today, Nonexecutive Director, Michele Muscillo; Non-Executive Director, Sylvia Wiggins and Non-Executive Director, Robert Milne. Given the significant health concerns attributed to the COVID-19 pandemic, in addition to guidelines and restrictions issued by Australian state and federal governments, the company considers that it is appropriate to hold this AGM as a hybrid meeting in a manner that is consistent with the requirements of the treasury laws Amendment Bill 2021. The virtual component of this meeting is being held via Atomics online meeting platform. This platform enables shareholders and proxy holders to participate in this live webcast of the meeting as well as ask questions and submit votes. Questions can be submitted at any time. To ask a question virtually press on the Q&A icon. This will open a new screen. At the bottom of that screen, there is a section for you to type your question. Please start your question by typing your shareholding SRN, or HIN. This will allow the moderator to identify you as a shareholder. If you would like to ask your question verbally, type your SRN or HIN, and then type, I'd like to speak. Once you have finished typing, please hit enter on your keyboard to send. Please note that while you can submit questions from now on, Andre will not address them until the relevant time in the meeting, kindly include the agenda item number to which your question relates. Please note that your questions may be moderated or, if we receive multiple questions on 1 topic, they may be amalgamated together. Due to time constraints, we may run out of time to answer all questions. If this happens, we will answer them in due course via e-mail or by posting responses on our website. All questions should be addressed to Andre as the Chairman. Andre will either deal with the question personally or ask someone who is better placed to respond. We will do our best to answer any relevant question raised. We ask that you keep your questions short and to the point so that as many shareholders as possible have a chance to ask a question. For those who are attending physically, there will be an opportunity after each resolution to ask your question upon request. With housekeeping settled, I would now like to hand over to Aeris Resources Executive Chairman, Andre Labuschagne. Andre?

Thank you, Maddy, and good morning. My name is Andre Labuschagne, and I will be chairing today's meeting. It is now 10:04 and there being a quorum present, I declare the meeting open for business. I confirm that the meeting has been properly constituted. When we reach a formal business of the meeting, voting on all resolutions will be conducted by poll. Shareholders attending virtually and wishing to vote on the resolutions being put to the meeting can do so through the Automic investor portal. If you are not already logged into the investor portal, instructions on how to do so can be found in the notice of meeting, a summary of these instructions you can see on the screen. If you have already locked a proxy vote, please note that you do not need to vote again. Through the online, your votes will already be counted in a poll on each resolution and as per your proxy instruction. If you have any problem with your shareholding with Automic, please call the support number shown on the screen. [indiscernible] I now declare the poll open. Online voting is now open and will remain open until I declare it closed at the end of the formal business. Your votes must have been submitted prior to the portal being closed for them to count. The agenda for today's meetings as follow. We will proceed to the formal matters to be concerted at today's AGM and close of the meeting. After that, I will do a presentation on the business going forward. We now move to the formal business as set out in the notice of meeting. The notice of Annual General Meeting was mailed to all registered members on or about 18th of November 2022 and is to be taken as read. Voting on all resolutions will be conducted by poll. For the purpose of the poll, I appoint Amy One of Automic, the company share registry, who have examined and prepared summaries of the proxy forms received to act as returning officer and to conduct the poll. Those shareholders in attendance that are entitled to vote on the poll are all shareholders, representatives and attorneys of shareholders and proxy holders who hold yellow voting cards. If you are intending in more than one of those capacities, you will have been issued with as many voting cards as you have separate capacities. If anyone believes so, I entitled to vote on this poll in any capacity and does not have a yellow voting card in respect thereof, please raise your hand now and a member of the [indiscernible] team will assist you. At the appropriate time, I will ask that you mark your vote for the resolution on the yellow voting card. If you are a shareholder wish to cast all your votes for resolution please place mark in either For, Against or Abstain box next to that resolution. If you wish to split your vote, please write the number of the portion of the votes you wish to cast in the corresponding For, Against or Abstain boxes. Please note that the sum of the split votes must not exceed your total holding. If you are a proxy holder, a summary of the votes to which you are entitled has been attached to the voting card. If the summary of the votes includes discretionary votes, these are yours to cast at your discretion. If you wish to cast the discretion votes, please place a mark in the corresponding For, Against or Abstain boxes. If your summary of votes does not have any discretionary votes, you do not need to mark your voting card and will simply need to hand it handed to the returning officer at the end of the resolution. After all resolutions has been read and voted upon, please place in 1 of the ballot boxes that will be circulating in the room. Are there any questions in relating to the voting process? With no questions, proxies have been accepted and all those validly logged have been accepted. Proxies have received representing 68% of the issued capital of the company. All undirected proxies or open votes that have been nominated -- which has nominated the Chairman of the meeting as a proxy will be cast in favor of each resolution of the mergers of the Annual General Meeting. We will now proceed to the resolutions set out in the notice of the Annual General Meeting. The first item of business is to receive the company's annual report for the year ended 30 June 2022. The financial report and the reports of directors and the auditors are now laid before the meeting. There will be no vote on this item and it is a discussion-item only. The company's audited for 30 June 2022 financial year, Markus Gola. [indiscernible] Cooper is present to take questions relevant to the conduct of the audit and the preparation and content of the independent auditor support. Are there any questions or comments on the financial report or reports of directors and auditors. We will take questions first of the floor, and then we'll do online questions. and then questions in the Q&A card. With no questions and comments with the financial reports, we will now proceed to the resolutions set out in the notice of the annual meeting. Resolution 1, to consider and, if thought fit, pass -- to pass with or without amendment resolution 1, the adoption of the remuneration report and the ordinary solution, as set out -- for as a ordinary solution. If you wish to discuss the resolution, please raise your hand or if attending virtually submit your question via the Q&A. The proxies received in relation to this resolution are shown on the screen. Are there any questions? I'll now put the motion. Those physically attenders, please mark your voting instructions on your yellow card voting card. Those attending virtually can vote via online platform. However, reminded not to click Next until you have selected your vote for all resolutions. We'll now move to Resolution 2: To consider any pass the following resolution with or without amendment as an order resolution of the company. That Mr. Colin Moorhead, who is in attendance today will retires by rotation in accordance with Rule 28 6A of the constitution and being eligible offer himself for reelection, be reelected as a director. If you wish to discuss this for solution, please raise your hand or if attending virtually submit your questions via the Q&A. The proxies received in relation to this resolution are on the screen. Any questions? With no questions, I'll now put the motion. Those physically in attendees, please mark your voting instructions on the yellow voting card. Those attending virtually can vote via the online portal, however, as it was mentioned before, not to click Next until you have selected your vote for all resolutions. We'll now move on to Resolution 3, to consider, and thought fit, pass the following resolution with or without amendment as an audit resolution of the company. That Mr. Robert Millner, who is joining virtually, having been appointed by the Board as a Director of the company on 1 July 2022 in accordance with Rule 28 2B of the constitution and offers in self-appointment as acquired under Rule 28 2B of the constitution be appointed as a director. If you wish to discuss this resolution, please raise your hand or if attending virtually submit your questions via the Q&A. The proxies received -- the proxies received in relation to the resolution are on the screen. Any questions? I'll now put the motion. Those physically in attendance, please mark your voting instruction on your yellow voting card. Those attending virtually can vote by the online portal. However, as we mentioned before, don't click on Next until you selected all the Ordinary Resolutions. Resolution 4 and 5 in bars, myself -- relates to myself, and I'll hand over to Colin Moorhead to deal with Resolution 4 and 5. Thank you, Colin.

Thanks, Andre. Resolution 4 is as follows: to consider, and thought fit, to pass the following resolution with or without amendment as an ordinary resolution of the company. That for the purpose of Listing Rule 7.2, Exception 13 B and for all other purposes, approval is given for the establishment and operation of the company's long-term incentive plan and the issue of up to 34,537,280 securities under the long-term incentive plan within 3 years from the date of this resolution be an exception to Listing Rules 7.1 and 7.1A. If you wish to discuss this resolution, please raise your hand or if attending virtually, submit your questions via Q&A. The proxy -- the proxies received in relation to this resolution are on the screen. I now put the motion. Those physically in attendance, please mark your voting instructions on your yellow voting card. Those attending virtually can vote via the online portal. I reminded not to click Next until you have selected your vote on all resolutions. Resolution 5, approval for the issuance of performance rights to Mr. Andre Labuschagne under the long-term incentive plan. Resolution 5 is as follows: to consider, and if thought fit, pass the resolution with or without amendment as an ordinary resolution of the company. That for the purpose of listing rules 10.14 and Sections 200B and 200E of the Corporations Act 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 investing and exercise of those performance rights under the long-term incentive plan and on the terms and conditions set out in the exploratory -- explanatory memorandum. If you wish to discuss this resolution, please raise your hand or if you're attending virtually submit your questions via the Q&A. The proxies received in relation to this resolution are on the screen. I now put the motion. Those physically in attendance, please make provide instructions on your yellow voting card. Those attending virtually can vote via the online portal. They were reminded not to click on the Next button until you have selected to vote -- your vote for all resolutions. I'll now hand the chair back to Andre.

Thank you, Colin. That concludes the resolution to be voted on today. As noted, we are conducting a poll on all resolutions, and I note that the poll is already open. Can all shareholders voting online, please now ensure that they have submitted their votes. I'll allow another minute or so before the poll is closed. If you have any questions in relation to the submission of online votes, please send them through to the Q&A function now. For those shareholders attending physically, I now invite Amy want to collect your voting cards. [Voting]

Just put up your case need to pick it up. There'll be no further questions, I declare the poll closed. The staff of Automic will now process the poll, and the results will be announced to the ASX once they are available. That concludes the formal part of the business. I'd like to thank all shareholders and I'll start at the meeting and for their attendance and declare the meeting closed. As advised earlier, the results of the poll will be announced to the ASX once they are available. I will now go into a presentation to shareholders -- to give shareholders a bit an update on where we are with the business, touch on the last 12 months and leave shareholders with the plans for the next 12 months and going forward. So 2022 was actually a very interesting year for the company. We must say a challenging time at the operations with grade and COVID. But the guys at the mine has done an amazing job to keep going, deliver close to where we were hoping to be, but obviously, didn't achieve on the guidance as we set out at the beginning of FY '22. That said though, we've committed a lot of money into capital investment within the business with Patria exploration. So we kept investing setting the company up for the future. And then in -- as we announced on the first of July, although that was the financial year, but we worked on the transaction close to 7 months in FY '22 the close of the Round Oak acquisition. That acquisition, which was approved by shareholders, was a major step for the company going forward and setting ourselves up for the future. As we stand today, 2.5 years ago, we only had the trick and copper mine, and we were a $10 million market cap company. Since then, exactly 1 July 2 years ago, we bought Cracow and we discovered -- in November that we discovered Constellation. The share price or the market cap went up to over $300 million. That allowed us to start to look for bigger and better opportunities to keep growing the business. And as you all know, on July 1, we closed the transaction of the Round Oak assets, which included the Mount Colin mine in North Queensland, the Jaguar copper zinc mine in West Australia and the Stockman project in Victoria. So we ended up now with 4 operating assets and operating cash flow. We've got a long life price 10-year reserve life asset in Stockman, significant resource and reserve upgrade as part of that. And production has gone from about 33,000 tons of copper equivalent production in FY '22 going forward this year between 57,000 and 71,000 tons of copper. So a significant increase in production. We do believe that copper is a good commodity to be in as everyone, I'm sure, on this call would recognize, and this gives us a very strong copper dominant portfolio going forward and an excellent platform to look at organic growth at each one of these mines, but also further look at how do we grow the business into the future. Just touching base, we probably can update this with today's price, which significantly had a bit of a run currently this morning. But a market cap of $352 million. Cash at the last quarter was $52 million. But as shareholders would have seen in 1 of the announcements in the last few weeks, there was an additional $28 million paid by Washington salt packs on the final close of the working capital with the acquisition which would have put that number close to $80 million. So significant cash to ensure that we keep investing in setting these businesses up for the future. We have also welcomed on the first of July, Washington salt back is a 30% shareholder and long and see them as along to support of how do we grow this business going forward. On the Board side, we have put a lot of effort into the last 2 years to improve the skill sets on the board, and we've seen some significant changes on the board over the last 2 years worked first the join of Colin Moorhead. It was in 2020 with Colin joining after we bought Cracow, Sylvia joining last year, and then Colin Moorhead in the last from the first of July. So a significant change, and we do believe a much stronger board supporting the future growth of the business as we go forward. The senior executive team been together for a long time, Robert, Ian and I and Kim Frank is joining us in the last 2 years to help us to look after the 1,000 employees in the business going forward. Just touching on the FY '22 highlights, I already sort of mentioned that production from 2 operations, 80,000 tons, 85,000 tons from Triton, nearly 54,000 ounces from Cracow generated good operating cash at $93 million and closing the net cash balance of $138 million. That said though, part of that was the capital raising for the payment of the Round an acquisition of $80 million. On the growth side, the first mill resources put out on Constellation. Constellation now nearly a 7 million ton ore body with significant upside. We'll talk a little bit more about that. But Guy has been brought in production, and we're currently mining the budget gold body, and that was all part of the focus to move from low-grade Tritton down deep to better quality grade coming into the production profile. On the exploration side at Cracow, we're drilling out Golden Padoan what we've seen there, starting off with chasing 1 structure. We're looking at multiple structures at really good grades. And obviously, as I said, the acquisition of the ground assets. I thought it would just be a good time to just sort of touch base on why did we do round up. It was on strategy. We always said we want to grow the business through multiple assets. We always said we're interested in base metals. And we always said we want to upgrade the portfolio of the assets, and we believe that this is exactly delivering on that strategy. Increased scale diversity of mine life, multi-commodities, multiple mines, as always, a much better opportunity and allows you to invest through multiple operations into growth, and this brings that back into the fold. As I said, that production increase going from [ 33 ] to over 60,000 tonnes of copper equivalent is a significant increase for us. And then you still got the Stockman project, which is a 10-year mine life, currently a 10-year reserve life with significant potential to extend that life. Certain the cash flow. So you've got 4 operating mines generating operating cash, which allows us to allocate capital funds to where it's best suited to grow these businesses into longer life assets. And as I said, copper dominant, we always said we want to be the copper space. We're still around a 60% copper dominant producer as part of the new portfolio. On sustainability, we would have talked about it in the last AGM. Since then, we have made a clear and conscious decision. There's 4 focus areas for us to work through One is water and containment. Some of the long-term shareholders would realize -- well, remember that 2019 challenge we had when we ran nearly ran out of water at Tritan, where the bottling dam was at 1% or 2% and needless to say today, it's 130%. But it was a challenge. So we understand the importance of water and how to manage it, and there's a lot of focus. On the carbon and climate change, that is just part of what we need to do. As a mining industry, we need to get better at it and really look at the renewable energy options, especially when you do new projects and going forward. Diversity and inclusion goes without say, that's what we need to drive as a business and on biodiversity and land, we have got a lot of land. We're in the area where we need to focus on the new projects, which we need to build by diverse the offsets and management of those is going to be critical to get that up and running. So touching based on the operations now. Interesting, I would have stand in front of shareholders 10 years ago now, saying we've got 4 years' life in Tritton. 10 years later, we say we've got 8 years' life. And that's all to do with Brad and his team finding constellation, the ongoing extensions of Tritton [indiscernible] be in the current operations. And we're now circa easy, say, there will be more than ideas of life coming out of Tritton. Cracow, when we bought it 2 years ago from Evolution, we said we know there's 2 years, but we think there's more today after 2 years, we're still saying we think there's more, and we're now estimating if we bring the Golden Platte deposit into production that you look at around 4 years. Jaguar. Before it was sold in December by Washington Salt packet, it had about 2 years mine life. They discovered the turbo deposit. The work we've done so far on Turbo has significantly increased the tons and the grade and we're now seeing Jaguar easily extending beyond 4 years. Mount Colin, it's a very firm 2 years. It's in a cash harvesting phase. It generates good money, and those funds will be used to invest in other growth projects, but also to create a pipeline in North Queensland. The Stockman project. As I said, that's a 10-year reserve life. We are seeing that we aim to have that in production by FY '25 were significant with up to 30,000 to 35,000 tons of production coming out of Stockman. I'll just touch base very briefly on each 1 of the mines, just to give you a feel for the plans going forward. The Tritton project, there's always been mining tritone depth on that bottom slide on the middle slide, which you can see we've always mine Tritton down the bottom. In January, this year, made a decision to move away from high tons, low grade out of Tritton deeps to focus on the higher-grade deposit part of the deposit at the bottom of Tritton. At the same time, we did the development for Budgerygar guys. You can see on the top right of that same slide, and that is now in production. So it's all about mining around 1.1% copper down at Tritton deeps, replacing it with 1.7% to 1.8% copper from an ore body pretty close to surface. At the same time, we are busy developing the Avoca tank deposit. The development driver will hit the ore body by December. And then we will start to set it up for mining and should see mine tons coming out of -- in the last quarter FY '24. But that, again, is all about the grade, which currently sit in that reserve is 2.5% copper. So you're looking at potentially going again, replacing that [indiscernible] with 2.5% copper with very good gold grades by the way, coming out of [indiscernible]. [indiscernible]. We started [indiscernible] a while ago. We thought there was 2 or 3 years in Marugame keep on extending and even 12 months ago, we thought there's maybe 12, 18 months left at [indiscernible]. The exploration team drilled a hole 50 meters below the current workings the other day and intersected some significant grades, further 250 meters down. So there's a high likelihood that Morumbi will still keep continuing production as we're going forward. So those are the capital investments, a lot of money has got to be a lot of money that got into a [indiscernible] tank. But once they are set up we can see better grades coming out of Tritton for multiple assets going multiple mines going forward. The Constellation deposit, as I said, that was discovered in November currently a resource of 6.7 million tons of 1.85% copper and pretty good gold grades. It's still open a death can see on the right-hand side. Everything in red is still to be tested. Those gray blocks are or [indiscernible] plates, which shows the decal continuation of that ore body. And it is very were currently as it is all over Australia. We will get back in there and draw that out, and we're busy putting a pre-feasibility study together for the extension of that ore body and actually bring it into production. The total exploration pipeline. So I just want to touch pretty quickly on this. The Constellation deposit was found using EM technology, airborne technology and then ground base and then we drilled the first hole and it was a spectacular discovery. Now that -- the top left-hand side, northern side of the tenor months has never been tested. Brad and his team is currently doing an EM survey waiting for the results, but we are looking for the repeats of the Constellation type ore bodies as we go further north in this tenement package. As you can see there, there's other known deposits like Karajan, which we're planning to drill if it gets dry again and to bring that into a resource later this financial year. Going on to Cracow, that's a beta for photo, which you can see a very good infrastructure, very different setup than both all the other mines, it's very, very beautiful. The Cracow mine is a mature operation, high grade with very good quality infrastructure. The rest we've been mining for the last 2 years is declining grade because we're basically mining old inland areas. So the main focus for us is to reinvest. It's a very clear strategy for us. The cash flow we generate out of the Cracow is getting reinvested in exploration to set it up for the future. So a lot of work has been done on the gold and Plateau drilling. We also started to focus on the Southern Wayne field, which has never really been explored to see what we can discover and find further south of the current infrastructure. Touching on gold and plate. You can see there, that purple color was the resource structure we thought would have been a low-grade structure, which we're going to drill. As a geologist got the head around the structure. We're now seeing cross-cut structures and wherever the cost there's some significant grades. You can see some of those grades in that slide at [ 16 7 4 9 ] gram a ton. So there's some significant grades, and we're seeing -- and we're expecting golden [indiscernible] to be better than what we thought when we originally got into it. The Jaguar operation, that's a new acquisition from Round Oak, very different, again, in terms of the area. It is currently mining the Bentley operation depth. The new discovery, as I said earlier, the Turbo lens, which was discovered in '21, the drilling we've done so far since we own this asset has shown significant potential for further growth of that deposit. And we're also investigating the old jaguar mine, copper zinc mine to see if we can restart that mine because we do believe there's some potential going back into the old mine. Looking quickly at the Jaguar deposit, as you can -- or the turbo deposit on deeps, you've got the Java Deeps, which only had 1 draw hole through it. And you can see pretty good grades through the Java deposit. So this year for Jaguar, we're specifically focusing on using the cash we generate out of that operation to reinvest it to set it up with ventilation because we know we need to get deeper, fix out the pumping system and really setting it up for production of the turbo deposit going forward. You would have seen we put an announcement out on the Turbo deposit, it's now over 1.26 million tons at very good copper and zinc rates, which we're seeing out of those deposits. North Queensland, that photo is basically the full footprint of the Mt. Colin mine. The Mt. Colin mine is a small underground mine. We're mining it with contractors, which is Barminco. We then haul it to [indiscernible] and we treat at the [indiscernible] a very simple process an office setup, a camp and the whole plan for us going forward with this asset is look at that model of using small underground and toll treating for various and create a pipeline of projects going forward to duplicate these projects going forward. As you can see there, quite a like statement package, and we will start to look at where the priority is to go and target for further exploration, but also starting to talk to neighboring explorers around us to see what they have, which can fit this model. Barbara, of course, is a mine which has been mined before by Round Oak. We are going back as a -- it was mined as an open pit. We're busy drilling it out as we speak to confirm the results and the aim is to move from Mt. Colin to Barbara by moving infrastructure using the same contract and the same model to keep producing out of the North Queensland assets. Then Stockman. That photo you see there is the old tailings dam, which is already in place and being managed by the government. It is being used as [indiscernible] rough historical mining. So it's not new to the area, I think, is our takeaway point. On the Stockman, we already have a mining lease approved. We've got the infrastructure lease to use that Tailings dam already approved. There's a work plan, which is project work plan has been approved. There's various other approvals we're working through. But it's a project with 10 years mine life at significant good grades at 2.9% copper equivalent we covered in ground, it's over 4%. So a lot of work is being done on further work on recoveries and plant set up as we're going forward. And a key takeaway as well, a lot of new structure is already in place. There's about $10 million worth of road infrastructure already there, which we don't need to go and replace. So when you stand back from this, we know that there's some skepticism from some investors around, can you get this up and running. It's a historical site. You've got your lease approvals, you've got your Tailings dam approvals. The rest of the approvals we're working on is similar to any other approval you need to get for any project you're going to start around Australia. [indiscernible] model, 2 underground mines You look at the infrastructure, it's pretty small, 200,000 tons and 300,000 ton tandem mines. If you think about what we have at Tritton, we got [indiscernible] 500,000 or 600,000 tonnes. You got Budgerygar doing 200 or 300 tons and the development to get to those are pretty short. If to get to avocatank, was 2.6 kilometers to get to budgerygar was 600 meters. So that should be fairly simple to set up as an underground mine. At this stage, it's designed as a conventional flotation plant. Ian and the team working on various options to make sure we use 21st century technology to build this plant. So as as we work forward on this, we will have a definitive feasibility study plan for the end of FY '23. That will -- that will look at various other technologies available for both production and the treatment processing side. But you look at that once it's up and running, this mine has got the potential to deliver between 30,000 and 35,000 tonnes of copper equivalent production. You add that to the current 60-odd thousand tons, you'll get pretty close to 100,000 tons of copper equivalent production if you get Stockman up and running or when you get Stockman up and running. I'm not going to spend too much time on this slide. So as shareholders would have seen we are giving a lot more detail on guidance in or specific commodities. There is a big focus in the company on costs and every team at the mine is doing a very good job at this stage to manage their costs according to their budgets. And the biggest driver for us is to manage the cost manage the cash flows and keep investing in these projects because we need to set this business up for the future as we discussed before, a lot of organic growth at each 1 of these mines and take those opportunities to create a significant business. Thank you very much. Are there any questions from any shareholders on the presentation. There's no questions. I want to thank all shareholders I want to thank all the employees of this company and and the Board for leading us to where we are today, and I'm looking forward to FY '23 to be a great year and setting us up for the future. Thank you very much.