Aeris Resources Limited (AIS) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Aeris Resources quarterly presentation. The June quarter was definitely a better quarter than what we have seen in the March quarter. And as you would have seen, we achieved most of our guidance from all operations, and we will go through those. And we'll also, in this presentation, touch on the FY '25 guidance for each of the operations. So at Tritton, we ended up the financial year with 20,000 tonnes of copper, within the guidance. At Cracow, we were sort of mid to top range with the guidance at 46,000 ounces. And at Mt Colin, although we were below guidance at 7,000 tonnes, there were significant stockpiles and most of that was due to not having slots to process those tonnes. When you look at the key points, we have done -- we have improved the production quarter-on-quarter and went up to 10,200 tonnes of copper. Tritton, we have seen in the last 2 months of the June quarter an improvement specifically from times coming from our Avoca Tank and Budgerygar. And as you're aware, it is from better grades and better quality tonnes coming from these operations. And that is the focus going into FY '25, which we'll touch on. Cracow remained a strong production for the quarter, improvement quarter-on-quarter, but also achieved their guidance going -- for FY '24. Mt Colin, again, the team did an amazing job that Mt Colin ended up with -- more than 20% improvement on both tonnes and copper metal mine. And as I said, it was only due to not having processing availability that they didn't achieve their target. But that 200,000 tonnes will be processed in the next few months. On a -- from exploration point of view, a lot of exploration currently happening Constellation at Tritton. We're doing resource drilling and also testing the standard zone. At Cracow as always, you need to keep exploring to keep extending the mine. And we're targeting some new areas, which is -- it hasn't been discussed or looked at before. And at Jaguar, we have put 2 holes into the gold exploration at Jaguar and there's some very interesting outcome from those that we'll talk a little bit through those. Jaguar is on care and maintenance, as we know, this study on scoping or pre-feasibility study on that will be finished off in the next month and -- or in the next 2 months, and we will start to communicate the options to restart Jag to the market. Some really good outcomes on the Albion process for Stockman. I'm not going to go into the detail, but we'll talk a little bit about it, but that will significantly change the economics of Stockman going forward. We haven't put out the guidance for -- or the actual numbers for FY '24 on cost and capital, but we were below or at the bottom end of guidance for each of the mines, and we'll talk a little bit more detail about those. So a really good cost of capital management from the teams on all operations for -- Tritton, Cracow and Mt Colin. The -- at Tritton, 5,400 tonnes of copper and the improvement quarter-on-quarter. As you can see there, achieved the guidance, although sort of the bottom end. But on the cost, Tritton was 10% all-in cost below guidance, if you even use the bottom end of the cost guidance. So very good performance. [ Some of it ] was obviously driven by volume, but really good cost and capital management from the Tritton mine. If you look at the guidance, FY '25, we see an increase in production coming from Tritton going from -- to looking at about between 21,000 and 25,000 tonnes of copper. We have made a conscious decision at Tritton to simplify the business. FY '24, we would have mined up to 6 different ore bodies at any time trying to achieve the guidance or the production plans. We have simplified it. This year, we were targeting no more than 4. Most of the production will come from Avoca Tank, which is running at plus 2% copper and Budgerygar. So the focus for Tritton and the comfort around achieving these targets comes from really the focus on 2 major areas for production coming in for FY '25. On the cost and capital side, nothing out of the order, more or less in line with the actuals and the guidance for FY '24. What we do have in the FY '25 guidance, you'll see on the growth capital, there's a significant increase from 10 -- from around $5 million to $37 million to $45 million. That is because we're starting a cutback on Murrawombie pit around November. And so the capital cost of that sits in growth capital, the aim is to finish off the Murrawombie underground by around October then set up the open pit and start pre-strip of the pit around November. That's why you see the increase in growth capital in FY '25. Constellation exploration. That is going extremely well. I was at the mine last week, and I was quite lucky to see when they intersected a hole into the standup zone. So the team are currently working on drilling in the standup zone, which is an area, which needs to be identified and some good success in some of those holes and also do some infill drilling to upgrade the resource -- inferred resource to indicated resource with the aim of putting out a feasibility study in FY -- in the first half FY -- in calendar year '25 to update the market on Constellation as our production plan and the aim currently is -- environmental -- all the approvals started up has been submitted, and the aim is to swing that mine into production within the next 18 months or 2 years, as it will be -- our aim is to do currently at Murrawombie pit when you're done, you start the Constellation going forward. When you look at Cracow production, they achieved their numbers according to the budgets and guidance. Costs well managed. They were 7% below the bottom end of FY '24 guidance. So once again, they hit all the numbers and improve on the cost targets set internally for them and according to guidance. Looking at FY '25 guidance, and my apologies that should be FY '25, production, again around that 45,000 tonnes of ore ounces of gold, cost and capital more or less in line with what we've seen in FY '24 with a one change, the growth capital in FY '24 was $16 million. That was for the tailings dam lift, which we did, and obviously, in FY '25, we don't need to do that. The main focus for Cracow in FY '25 will be the exploration and targeting these new areas, which has been highlighted before. So the exploration budget, which we put in place is targeting Apollo and Coronation West, which is 2 new structures. So we are trying to start to look outside the Western Vein Field to see what is the opportunities to extend the mine with new structures going forward, and the team are busy working that through as part of the FY '25 plan. On Mt Colin, continued their strong performance, as I said earlier. From a tonnes mined and copper mined, they were more than 20% ahead of their plan. The challenge for them has been -- or for us, has been that we didn't get enough processing slots to get all the tonnes, which we mined through the process plant at Ernest Henry. We ended up the year with around 200,000 tonnes of stockpiles between Mt Colin and Ernest Henry. Now that will be processed in the next few months as part of this. The big difference between guidance for FY '24 and '25 all sits in, this mine will finish in November. So you can see significantly lower cost, although we're still targeting around 7,000 tonnes copper coming out of Mt Colin between now and November. So still generating good cash and the team are working on the Barbara feasibility study. The approval process has been submitted and aim is to start Barbara as soon as we can once you've done Mt Colin. And in a perfect world, you would want to move from Mt Colin to Barbara as soon as Barbara is finished, but the approval process will drive that time line. At Jaguar, that's on care and maintenance. The option studies are underway, we should have results on those in the next month, and be able to talk to the market within the next 2 months, that -- which is basically just a holding cost of around $4 million for the Jaguar mine into care and maintenance. One of the key things we've done, while we care and maintenance to hold on to the geologists and a lot of work has have been done around the gold exploration specifically around Heather Bore. So in the last 2 months or 3 months, we drilled 2 holes into Heather Bore. It is a structure nearby Northern Star's Thunderbox. It's a shallow 0.5 gram a tonne anomaly, there are 2 holes, I'm not a geologist, but the geologists are telling me that picture on the bottom left has got all the right [ 6 ] pictures. We're waiting for the results from the assay, but there has been some excitement around what they've seen. There's obviously fluids going into that area and some of those core can potentially hold gold going forward, but we're still waiting those results. So as we said before, although Jaguar is a very good base metal business, there is significant gold target on that tenement, which we're quite keen to test as we go forward. On Stockman, you would have seen the announcement, for those who have seen it, really exciting outcome for us. As we said before, we're testing -- we were doing metallurgical test work on an Albion process, a change in the flow sheet. And you can see there from the regional flow sheet for copper, which is running at about 77%, so if you use the updated flow sheet using a clean concentrate with a bulk concentrate recovery is going to go up to 92%, zinc up to 93%, gold improved nearly double and silver the same. So really exciting news because this -- obviously, most of that all go straight to the revenue line, and we are now in the process of updating these numbers with new adjusted capital and operating costs to see what's the impact of this change in flow sheet on the economics of the Stockman project. I'm convinced, with these improvements, we should see a significant improvement in the economic value for Stockman. At the same time, we have progressed some more independent studies on groundwater and also further approvals. We have in the last few months, received extension to the mining lease. So as I said before, most of the major approvals is in place for this project, and we are aiming to have a feasibility study in the next 3 to 6 months updated with these new flow sheets and capital costs associated with them. In the meantime, we're also doing some minor capital work as part of our contribution to the community at the Benembra school and some of those improvements are nearing completion as part of the process. At a corporate level, we've ended the quarter significantly, well, better than the last quarter with cash and receivables at $33.4 million, with cash sitting around $24.8 million. As part of that, we've also paid an additional $10 million in environmental bonding. So cash, if it wasn't for those bonds, would have been an additional $10 million. The trade and payables is steady at $33 million, of which $30 million of those are trade creditors, which is more or less -- which is actually lower than the previous quarter, but that's the sort of level of the credit issue [indiscernible]. So we believe that with the credit position and the trade payables and the other is $73 million is a level which we're very comfortable with that it's been sitting at that sort of level for the last 2 or 3 quarters, or at least 2 quarters. Debt position might say that $40 million. And as we said before, we are in the process of refinancing debt and bonding facilities, and we have received some term sheets. Our discussions are still underway on the refinancing of the finance -- the debt and bonding as we move forward. Focus for the next quarter, it's all about finishing off Murrawombie Underground, getting into the murra pit getting it ready for November start. Constellation ore program. The key for us is, right now, it's an inferred resource, getting them to indicated to put a reserve around it, and once we got a reserve, we can put the feasibility study out to market and let the market see the significant value Constellation will add in the future of the Tritton business. At Cracow, it is all trying to step out and trying the new areas of Apollo and Coronation West, and then a controlled closure of Mt Colin in the next 6 months is very important for us as part of that closure plan, getting all the tonnes, the 200,000, which is currently in stocks, plus we'll be mining through by November and then progressing all the studies between murra, Jaguar and Stockman to a point where we understand where the value of those projects sits for the future. On the exploration of Heather Bore, obviously wait for the drill results. Might be interesting to see what we get from those samples, which has been submitted. And then we continue working on the refinancing of the debt and [indiscernible] in this quarter and probably in the quarter after. This is sort of just a summary. As you all know, 3 operating mines. We've seen some improvements on all 3 operations in the last quarter. The development projects are progressing well. And we can see, as we move forward and the target for FY '25, the guidance around 40,000 to 48,000 tonnes of copper equivalent, which is a little better than what we have done this calendar year -- financial year, apologies. That's sort of summarize the quarterly results. I see there's 1 or 2 questions.

[Operator Instructions] I got a question here from Peter Cooper. Of the 20,000 tonnes of Mt Colin ore not processed early June, was any prepayment received by Ernest at 30 June and what was the amount? Peter, I'll have to come back to you on the amount. But yes, we are getting paid for tonnes, which is at Ernest Henry, but we're getting paid for about 50% of the value of those tonnes at the mine. So that's roughly -- there was about 150,000 tonnes at Ernest Henry. At around 2% copper, we would have paid -- got paid half of that roughly as part of the prepayment for those tonnes. I've got Paul Kaner. Paul, I'm going to unmute you if you want to ask a question.

Just on Murrawombie, that cutback, just trying to get a sense of how much of that growth CapEx guidance at Tritton is earmarked for that Murrawombie pre-strip?

That is about $30 million, Paul.

Okay. Great. And that's starting in November. So then yes, just sort of following on from that, just curious on how you sort of plan to fund that pre-strip in November, just considering your current balance sheet position?

That is all funded from internal cash flows generated through the business. David, I've got -- David Coates, I'll -- I'll allow you to -- unmute you.

Right. Can you hear me Andre?

Yes, I can.

Nice quarter, and thanks for the presentation this morning. A couple of quick questions. So 1 is quite sort of broad, 1 is fairly specific, high level one. Our Constellation continues to look -- to be like the real key opportunity among many organic growth and development across the portfolio. What would you -- what's your -- without choosing any favorites, What would the next couple be after Constellation? Jaguar, Heather Bore, Barbara is potentially coming in depending on the time the permitting. Which ones are you real focus suppose after Constellation?

Look, Constellation is obviously a big focus for Tritton. Outside of Tritton, the Barbara, if we can get the approvals on time for a start for Barbara post Mt Colin. It's not a big capital spend. It will be something we really consider to push hard because it can add another 8,000 to 10,000 tonnes of copper metal to the business in this copper market we're in. And depending on the outcome of the studies for Jaguar, that is an easy study, it's in care and maintenance. The guys are looking at various options. One of the options we're looking at is low volumes, high grade, low capital or a bit more capital, but go for higher volume. Those are the 2 studies. But once we get the results of those studies back, we'll know which way we're going to head specifically with those. But right now, obviously, I think the priorities would be keep working on Constellation. If Barbara comes and approvals to get in place, push that as hard as you can because it's quick and easy. It's got an easy route to -- into production, although there is some development to be done. But the Jaguar restart will be -- the decision on that would be made on the back of the studies we're going through right now.

Right. And then next question is a little bit -- more micro related to Stockman. The Albion process and the recoveries there are related to, if I'm reading it correctly, the production of a bulk concentrate?

Correct.

Is there anything specific about the marketing of that? That is different to what are being considered in the past?

What has been considered in the past -- I mean, consider the past would have been just a concentrate which would have been sold copper and zinc at those low recoveries. So we're working through the salable products for what comes out of the Albion process. And right now, it would be considered to either turn it into metal or to sell it as a product, which will go to other smelters. We can deal with it. So we're in discussions with the smelters. But there is a process route for it, which looks a bit different to what was originally it was all would have been a concentrate. The Albion process can be turned into various different outcomes other than just a concentrate.

Okay. All right. So that's kind of being evaluated, but you're confident about the markets...

Yes. No, there's definitely markets. We're selling some of the products and some of the final products is products we would use actually at Jag, as a way of -- as part of the recovery process. Then we go to [ Gadetiya ], apologies if I got it your name, not right, but I have unmute. You want to ask some questions?

I just want on like -- I just joined this to understand -- I invested in the stock. Just wanted to understand how company is doing, that's it?

What is doing? The stock price is doing?

Yes, yes. I was just trying to understand how the company is doing. I'm just trying to -- I'm a shareholder, I just joined.

All right. No, no problem at all. So look, we -- as you've seen in the quarter, the last quarter has been better than any of the other quarters in this financial year. And each one of the operations has improved over the last quarter. And we see that if you look at the guidance we're putting out, there's a lot more confidence on both Tritton, Cracow to what maintain what they're doing and then the Mt Colin mine is starting to slow down. And the key for us is the delivery of all these projects as we move forward. I'll then -- Daniel Roden, I see there's another question from Daniel.

I just want to, I guess, unpack some of the costs that you've outlined in the FY '25 guidance. Mining costs at Tritton and Cracow, since you have increased a fair amounts year-on-year. Is that -- you're seeing, I guess, operating cost inflation come through? Or is that, I guess, more reflective of you entering a more challenging operating conditions at both of those assets?

No. In fact, it's not operating conditions. For Tritton, it's a little bit volume. We are planning to mine a few more tonnes than before. But the biggest increases in both Tritton and Cracow is actually power cost. Power costs over the last 2 or 3 years at both these mines has significantly increased, somewhat even double. So the bulk of the increase in costs you see between -- for both of those operations is actually electricity charges.

Yes. Okay, that makes sense. And exploration costs in the guidance, actually, it seems a bit low too, what I was expecting. And I think we're probably going with that is, I guess, specifically at Cracow, you've got a fairly low reserve life, and that's supported by quite light resources, but that is a fair bit of exploration to be able to firm those up into a production plan.

What you don't see, Daniel, is actually we split the exploration around 50-50 between growth and sustaining capital. So within the sustaining capital, there's about another -- for Cracow would be another $4 million to $5 million sitting in the sustaining capital and the same for Tritton. But we allocated -- trying to allocate what is just resource increase and what is really growth capital. So what you see in the exploration is probably double.

Okay. No, that makes a lot of sense. Thank you for that clarification. And I just wanted to -- probably last one for me, for time being. Probably a couple of years ago, there's -- Tritton has always had this growth plan to 30,000 tonne per annum of copper production. You talked today about, I guess, the simplification of the mining plan to reduce the number of operating fronts at the asset. Has that changed your view on that production target? Yes, I think that production target was always underpinned, obviously, by Avoca Tank for supporting deposits as well. So if you're removing their supporting deposits, does that changed that north 30,000 tonne per annum copper target?

Well, look, we're still targeting that higher production, which is sort of around the increase of production, but that was always on the back of 2 things. One is the Avoca Tank and the other 1 is the start of Constellation. Because if the Constellation start we're going to do an open pit, which will be I think 1.2 million, 1.3 million tonnes at around 2% copper. That will drive with Avoca Tank and extensions at Avoca Tank. The areas we're walking -- I shouldn't say we're walking away from. We're trying not to go back to is all the small little stopes in Northeast license and South [indiscernible], which are our stopes, which takes a lot of effort and doesn't give us your returns, but it produced the copper. So we've reassessed all of those, and that won't make a material difference in trying to get to the higher production. The key is these high-grade deposits of Avoca Tank, Budgerygar with the start of Constellation is still the drive to get the production up to the levels we're looking for.

Awesome. That's perfect. And yes, sorry, I might slip in one last one, Andre, if that's okay. At Barbara for the approvals up there. My understanding is you're trying to amend the existing mining lease to include underground mining there. And you're working with the regulator to, I guess, to permit that. When are we expecting a decision whether it's going to be included in the existing mining permit or whether the regulator will require a new mining permit to be issued for the that project?

It is not really the mining [indiscernible] it's go a mining lease on it. So what we -- you submit your operations plan or your real plan to restart. And that can either be seen as a minor or major amendment. It's the minor amendment, then it's a 2- or 3-month approval process, if it's a major, it's probably 6 to 12 months to get that in place. So we're still waiting for that feedback. But there's other ways we're trying to look at how do we start it as soon as we can. But it is really just that approval process if we can convince them that it is a minor amendment. Now that is underway. We, at this stage, not sure which way it's going to land, but there is other ways, you can start the operation because this is a development process needs to kick off. But there's already a mining lease approved. It's really just getting the operations the plan approved is where we're going.

Yes. And that major or minor approval is expected in the next couple of weeks, do you think?

Yes. I would say in the next month, we'll know which way to go.

And depending on the relation, that will update, I guess, FY '25 guidance to include...

At this stage, Barbara is not in the FY '25 guidance. I got 1 last question on Q&A, and Adam, I'll come to you soon. Previously flagged labor shortages that have impacted our production, has that been resolved? [indiscernible] labor availability. So labor is always a challenge. It's still a challenge. We still always recruit -- we're recruiting. We have seen a bit of stabilization in the workforce. I must say that as part of this plan for Tritton trying to simplify the business, we also would see a reduction in required workforce. So it's not that we're dropping labor numbers, it's really just the people we have is enough to mine what we plan to do for FY '25. But there's always a rotation of labor in the industry, and I don't think that will go away soon. Adam, I'm going to unmute you. Adam, you're on screen, if you want to ask your question?

And apologies, I missed the start of the call, so you might have gone through this already. Just wondering on the Murrawombie open pit, just -- could you talk through the open pit mine life there, maybe the IRR for that project? You have $30 million in pre-strip there. But how much of the cost is getting integrated into the operating cost to the mining line item in Tritton's guidance?

So within the guidance, there's no operating cost for the pit because it's all still pre-strip. The $30 million is the pre-strip for FY '25. The mine plan is really just a 24-month plan. So you're going to do a pre-strip for about 9 months, and then you can produce about -- mine about 1.2 million tonnes around 1.2%, 1.3% copper in FY '26 roughly, and some we will roll over into FY '27, but not a lot. So it's a fairly short life. What we are planning to do as part of this is use the waste to do closure of the old heap leach pad because it's really right next to it. And that will be about a $9 million saving on the rehabilitation cost going forward. And that's part of the discussion on these environmental bonding we're having. Adam, I don't have the IRR and NPV numbers at hand. Obviously, it's driven by the price you use, but it is a project, which will push Tritton and be a bridge -- to bridge Tritton into Constellation in FY '26. I can come back to you on those numbers.

Got it. Got it. And maybe just on the debt refinancing, you've got a process underway there. you've still got an additional $10 million you can draw down if need be. Could you remind us of the necessity or the time line that you're expecting to refinance this debt?

Yes. So look, it's underway. We're in the process of various term sheets. We are probably would refinance these, we're targeting towards -- within this quarter. There has been a requirement from ANZ to refinance the bonding. We don't necessarily have to refinance the debt, but that is not -- it's just something we intend to do as part of improving the balance sheet, the bonding refinancing with ANZ. We're in discussions with ANZ to -- on the time line for those bond refinancing. But it is all underway. Okay. Okay. Are there any other questions? I don't see any other hands. I don't see any other Q&A on the [indiscernible]. I'll give it another 30 seconds, and then I'll close the meeting. David Coates. You've got another?

Can you hear me?

Yes, I can.

So I just have a follow-up a little bit related to Adam's question there. Can you just remind us of the mechanics of the bond and rehab financing? Would be -- the way you refinance that potentially release some of that $10 million bonding back to you guys. How does that potentially work?

Look, if we get the full bond refinancing back, so in other words, you can finance all the bonds, yes, you should get that $10 million back. And it depends on the size of facility you get. So if we can get the full facility for the bonding, you'll get -- I think we currently got $14 million in cash back bonds if not more. We should get most of that back. If not, you'll get -- if you refinance what's cash back less than you'll refinance a smaller amount as part of the process. But there is a material opportunity for us to get some of that cash back, which is currently in bonds.

Right. I'll look forward to seeing that coming out.

Yes, me too. Okay. Thanks, everyone. I don't see any other questions or any other hands popped up. Thank you for your time, and thank you for joining the Aeris' quarterly presentation.