Aeris Resources Limited (AIS) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Aeris Resources' quarterly presentation for quarter 3. We will go through the different results and take questions after we've presented. First up, as you all know, the company has got -- most of you on the call will know, the company has got the 3 assets. It's got Tritton, Cracow, and had the Mt Colin mine, which is now in care and maintenance. And the main asset, of course, is Tritton, currently forecasting around 21,000 tonnes to 25,000 tonnes of copper with gold on top of that and Cracow between 40,000 ounces and 49,000 ounces. We'll talk about each one of these individually as we go through. And then the 3 projects in the portfolio is the Barbara project, the Jaguar operations, and Stockman. We go to the next slide. We'll see, the last quarter, quarter-on-quarter copper equivalent production is up to 10,700 tonnes. But that is mainly on the back of higher production from Tritton and Mt Colin, and then offset a little by lower production from Cracow, but that was planned. Costs well managed has come down at a group level to $4.91 per copper equivalent per pound. And then cash and receivables at the end of the quarter is slightly up at $33.6 million, but that, to be very clear, in that number, on top of that, we actually put $14 million additional funding into cash back bonding. So that number would have been significantly higher if it wasn't for the requirement to put $10 million specific into the ANZ facility to get an extension. At the operational cash flow level, a significant increase quarter-on-quarter to $45 million for the quarter, you'll see in slides coming up. It was mainly driven by Tritton. And that's just the nature of the Tritton mine and the sale of concentrate and timing of cash. So there was cash coming in, more concentrate sold during the quarter, but the year-to-date numbers will be accurate, although cash -- the movement of working capital quarter-on-quarter, but a good outcome for the operations at that level. The safety, as always, has been well managed. No lost time injuries for the quarter. You would have seen there was a minor environmental incident due to heavy rains at Cracow. At Cracow, look, everyone knows the gold price is making a big difference, lower on production for the quarter, but that was planned. We mined lower grade stopes for the quarter, but still for the financial year and quarter 4, we'll see an improvement again for Cracow. At Tritton, they had 4,300 tonnes of copper at all-in sustaining costs of $6.16. It's better than the last quarter, but we are looking at quite a big quarter in quarter 4, where the open pit now, as of this last week, is actually mining and keeping the mill full at the annual run rate of about 1.8 million tonnes. So we're expecting a very good quarter 4 on the back of those mined tonnes, and then we'll talk more about it. At Mt Colin -- Mt Colin is now finished. So we ended up with 5,500 tonnes of copper for FY '25. We're slightly below guidance. But then again, on the gold side, there was significantly more gold in the ore and the gold ended up at the top end of guidance. But what we're now doing with Mt Colin, it's in care and maintenance, and we'll talk a bit more about how we're progressing on those. The rest. The feasibility studies for Jag and Stockman is continuing. And as you would have seen in the last few weeks, we've announced the Constellation mineral resource estimate update. That was a significant change. And to us, it's a significant change in the way we look at the business over the next 3 to 4 years, and we'll get into the details of that. If you move on to the cash flows. The cash flows, as you can see there, significant operating cash flows from Tritton, good cash flows from Cracow, the last bits coming out of Mt Colin. And then obviously, we spent quite a bit of it on capital. One of the big outflows, of course, as I said earlier, was that restricted cash of another $14 million, of which $10 million was put into ANZ for the extension of the ANZ facility while we're working on refinancing that facility, ended up the cash more or less where it was in the last quarter. The year-to-date numbers, there's $135 million of operating cash generated between the operations, quite a bit of money getting back into capital. We are now putting significant capital dollars into the Murrawombie Pit. That has kicked off in February, and we can see those capital costs coming through and significant money, as we move forward, will be spent, but that pit will generate significant cash for us over the next 12 to 18 months. The look at Tritton. The performance for Tritton, as you can see, quarter-on-quarter, it's better. The grade is definitely better grades being mined. We can see the impact of Avoca Tank in that quarter. And we also see the impact of pulling out of the Murrawombie underground mine, which were low-grade tonnes. So it is basically a higher grade quarter for us and an improvement in production and costs for Tritton. We've been talking quite a lot over the last 6 months about the improvement projects to improve productivity, improve the mining sequence, improve development. In the last quarter, we've seen a significant uplift in development rates. We're achieving rates we haven't achieved for many, many years. Now that the backfill is up and running for Budgerygar, although there was a delay in that backfill because of OEM breakdowns at start-up, we're now doing a significant amount of paste. And the drilling, the diamond drilling is all the things you need to do to advance and get that consistent production from the underground mines. And we can see that now flowing through, especially in the last month or so. Murrawombie open pit, that has commenced. There was a slight delay in start-up because the contractor was struggling to get qualified labor. It is now in place. And basically, in May month, they will mine all the ore, which will be processed between May and June. So within the next few weeks, we'll have significant stockpiles of ore which will be processed through the plant. And we see May and June will be run at full capacity of over 150,000 tonnes a month. What we've also seen with the Murrawombie Pit, we originally talked about 1.3 million tonnes at 1.3%. We're now seeing that potential for those tonnes to go to 1.7 million, 1.8 million tonnes at slightly lower grades, because there is quite an opportunity on the lower grade side. So there, you can see the pit Stage 1 is basically taking the ore available in a short space, and then we'll do the cutback. So that's all going really well. But one of the big benefits, of course, we talked about a lot. You can already see the work which has been done on the old heap leach pads in that photo on the right-hand side, where we're starting to cap them with the waste from the pit. Now that has all been part of the environmental closure plan. That will save us about $8 million in environmental closure cost, because as we finish the Murrawombie Pit, those heap leach pads will be covered and we can finish off the rehabilitation of those old heap leach pads. The key opportunity, which we've announced in the last few weeks, was the Constellation deposit. We've updated the mineral resource. We've done quite a large drill campaign. The resource is now 7.6 million tonnes at 2% copper and 0.66 gold. And as you can see, the 150,000 tonnes of copper and 161,000 ounces of gold. I don't think we always realize the value of that gold in these deposits. And we'll talk a bit more when we talk at the open-cut mining as an example. So we see significant increases in both contained copper and gold. And the real upside for us is that open-pit resource has increased by 46%. So there's now 4.7 million tonnes. And what that means is originally, our view of that, this was a just small open pit and then you go underground and the new resource update has shown that you can actually have quite a large open pit, which means if you mine 800,000 tonnes to 1 million tonnes annually from this open-pit mine, you've got an open-pit mine running for 3 or 4 years. And then you add on the current open pit for Murrawombie, which will run 15 to 18 months in itself. So you will have a 6-year period where you will have a good baseload feed to the Tritton mill from these mines. And if you go look to the next slide, the specific interventions we're focusing on, there's going to be a 3-stage approach to this. The oxide literally starts 5 meters below surface. There's an opportunity for a heap leach of 1.5 million tonnes, which will be a pretty fast process. But the main opportunity, the way I look at it, is you look at that supergene and primary ore in the pit, that starts around 50 meters below surface, there's 3.2 million tonnes. Now if you say you mine 800,000 tonnes to 1 million tonnes, it's anything between 3 and 4 years of open-pit mining at grades of 2.5%. That is where we bring Tritton to a 30,000 tonne producer with Constellation and Avoca Tank and Budgerygar as part of the feed. And then you get underground is still open at depth. There's already 2.9 million tonnes around 2% -- plus 2.2%. So for us, we can see this mine being used in the Tritton processing plant and projects for close to 10 years, and we know it's open at depth, and it should continue as we move forward. So we see this as sort of a game changer for us. If we can have 5 to 6 years of base load at high-grade open-pit mining, it will really trigger a significant uplift for the business. On the development plan, the EIS is launched. We're doing a feasibility study to turn the indicated resource to a reserve, and then we will start to look at how do we bring -- basically trying to finish off the Murrawombie Pit and go straight into Constellation Pit with the same contractor is the time line we're working on for the start of Constellation development. If you look at Cracow. Cracow, once again, slightly lower quarter. They had 2 really good quarters, but a lot of the production for this quarter was planned, because there were some lower-grade stopes, which was always in the plan, which has come out. We had a bit of production losses due to the cyclone, not impacted by rain, but more impacted by people who couldn't get to the mine or couldn't get to work when we lost a few production shifts from that. Not material, but it did make a difference. One of the projects we're working on to improve the recoveries is a secondary cyclone project. So that is busy being commissioned, and that should give us 1% increase in recoveries as we move forward. So for us, really, Cracow generates good cash. It is, as we said now multiple times, the cash we generate from the gold assets is how we develop the copper assets, and that will help to fund the start-up of the Murrawombie Pit. It also will look at how do we fast track and progress on the Constellation mining plans. Then you move on to Mt Colin. As I said earlier, Mt Colin is now finished. As you can see there, we produced 5,500 tonnes. It's slightly below guidance of 6,000 tonnes to 7,000 tonnes. But on the gold side, we produced more gold than what we estimated. So one offset the other. What the plans are now? We've basically relocated all the buildings and infrastructure offsite. We're busy looking at the rehabilitation plans and we'll kick that off. But also, as part of the bigger picture, we have decided to divest our North Queensland assets, so the Barbara deposit and all the tenements surrounding it, and we're running a formal process. It's all part of focusing the capital where there's better returns, but also on projects with a longer life as we move forward in the business. On the Jaguar deposit, nothing more to report on the quarterly really other than we have done a lot of work on ventilation and geotechnical reviews, ground control at the restart of the Bentley mine or the Turbo deposit. That work has now resulted in a new mine plan, and we're now looking at that mine plan, specifically around power supply and the distribution network across the business. So that work is still underway. And we are also doing quite a bit of work on both base metal and gold exploration opportunities. As we said previously, it has got gold tenements and gold targets very close to other gold miners in the region. So the work is ongoing for Jag. The production plans are being pulled together based on ground control and ventilation. At Stockman, Albion Process, the test work is literally underway, as I said before, trying to finish up what's the cost and capital associated with those. And once we finish that off, we will update the feasibility study with results from the Albion Process test work. At a group level, at a corporate, as we talked before, $33.6 million cash and receivables. Receivables is basically Tritton concentrate, which hasn't been sold. We've put another $10 million into cash backing against the ANZ facility. That would have put the cash receivables at $43 million if we didn't do that. And the restricted cash now sits at $28.9 million. That restricted cash is all cash-backed bonding facilities on top of the ANZ facility currently in place. Moving on to the debt side. So I'll just touch on that quickly. We are in the process of finalizing the debt refinancing with replacing the ANZ facility. That is close to being a position where we can talk about it. And also the current debt in place, as you all know or might know, is $40 million on the Washington Soul Pattison facility. So I think that sort of summarizes it as we sort of kicked off with 2 producing assets, 3 development projects. We really can see the value of exploration opportunities, both at Cracow and Tritton, and we're still maintaining that copper equivalent guidance between [ 40,000 tonnes and 48,000 tonnes ] copper equivalent for FY '25. With that, I don't know if there's any questions. Happy to take. If you want to put your hand up, we can open it up; or if you've got a question and you want to put it in the Q&A, we will answer those questions.

So there's someone who asked, can you please provide further details on the ANZ facility that we paid $10 million in fees? No, it's not $10 million in fees. It was just an offset on the cash backing facility. So the facility was $50 million. We put in $10 million to offset against that. So it's basically turned into a $40 million guarantee facility. So that $10 million is now cash backed against bonds.

Andre, we have questions from David Coates and Paul Kaner.

Yes. Can you open them up?

Yes. Just first one quickly on Tritton. I see you sort of kept guidance unchanged there, which would suggest around sort of 8,000 tonnes of copper to be produced in the last quarter. I guess throughput will increase with the addition of Murrawombie, but should we expect grades to tick up as well in this last quarter?

Yes. There's a high-grade zone coming out of the pit, and we're also expecting higher grades coming from Avoca Tank as part of the volume mix coming more tonnes from Avoca Tank. But there is a high-grade zone in the pit where we're currently mining and those tonnes will be on the ROM pad within the next 3 or 4 weeks.

Yes, that's great. And then I guess, how should we think about the transition from sort of, I guess, the Murrawombie open pit to the Constellation pit, just rough timing on that?

So the Constellation Pit will run for about 15 months as of today. And basically, as the pit finishes up, because when you get to the bottom, you can't keep all the trucks. Those equipment will move straight over to Constellation. So when the one finishes up, the other one will start. So basically, in our view, by mid next year is when you want to be into the Constellation open-pit mine.

I just had a question on Murrawombie historic heap leach pads and, I guess, the mechanics of the bonding. You mentioned you'll save about $8 million environmental costs from the rehab of these. Just wondering if you can talk through when you're expecting to receive that cash back? And is that an annual readjustment or a quarterly readjustment? Any sort of color you can add to that would be great.

So Adam, my understanding is that once we have finished off the profiling with the waste and the closure of the pads, you then get someone in to assess it and you can resubmit basically post that. So within the next 15 months or 12 months, we can resubmit our bonding and get some of that bonding reduction through the government bonding scheme or the environmental bonds. So you need to prove that you've done the work and then a reassessment will be done and then you can claim your bonds or a reduction in the bonds back.

Okay. That's helpful. And just following on from the bonding. Is there any further cash payments now that Mt Colin has been transferred into care and maintenance moving forward?

On Mt Colin, their bonding and the environmental cost is between $1.5 million and $2.5 million. So it's not a significant amount. So what we need to do, we need to close the water dams and close the portal and do a bit of rehab and then we can claim a reduction of those bonds back. But it's not significant in the bigger scheme of things. There's a few more questions. We don't see any hands. So we've got a question from Jason. I'm just reading the question. The question is around hedging and the cash flows from Tritton, and then also just on the Washington Soul Pattison and ANZ facilities. So at this stage, Jason, we don't have any hedges. And there is a view currently that once we refinance ANZ facility and the outcome of those, we might start to look at some gold hedging or hedging some of the gold, but it will all be -- it depends where we are at the time. At this stage, we haven't done any purely because we are working on the refinance options for the ANZ facility. And your question around the facilities outside the -- we are working on those facilities. And as I said earlier, both the ANZ facility replacement for the bonding guarantee facility, we're working on that and then should come into the market shortly with an update on those. There's currently none of these facilities requiring us to do compulsory hedging, but we can do hedging is the answer. David Coates is asking about permitting and Constellation. So David, we've submitted the EIS. We're expecting that to -- we're putting a few more amendments in with the road changes. We're expecting the approval of that towards November this year. And once we've got that, we can do the final mining lease and that sort of take that where we can start mining in FY -- in calendar '26. But it's well underway and well in hand and being submitted. Stefan, I can't see any more raised hands. I don't know if they are.

No.

If there's no more questions from anyone, I think we'll close off on the presentation. Thank you, everyone. I appreciate your attendance, and we'll give you a further update when we're ready on the refinancing. Thank you.