Aeris Resources Limited (AIS) Earnings Call Transcript & Summary

Okay. Good afternoon, everyone, and welcome to the Aeris Resources quarterly results and also the FY'26 results presentation. As per normal, we got the normal disclaimers. For those whose on the call first time, don't know much about Aeris, just to give a recap. So in FY'26, we produced 42,000 tonnes of copper equivalent production. Out of our Tritton copper mine, we did about 23,000 tonnes of copper metal. And in Krakow, our gold mine, we produced around 41,000 ounces of gold. Those are the 2 operating assets. Then we've got 2 development projects. One is the old Jaguar copper zinc mine in Western Australia and the Stockman project in Victoria. Both of those are projects, which can add future production to the portfolio. As you will see through the presentation, we've invested the last -- in FY '26, significant money into exploration with also the success on the back of that exploration will be clear when we go through some of the slides as we present the results. That has created us with an acquisition, we did -- we bought Peel Mining, which closed in 1 July. Peel Mining with a combination of the exploration is really looking at Tritton adding significant life and reserves and resources to the Tritton mine life. Sort of just touching base in the beginning of FY '26, we said this is a plan for FY '26. At Tritton, it's about operational delivery was the Murrawombie pit coming into production and close out. Although we had some delays in the December quarter, Murrawombie pit is now in full production and will finish off in November. We need to -- we wanted to make sure we start conservation on time, and we have brought some of the capital works earlier to ensure the timely start of constellation. Over the group, we spent about $25 million in exploration, and it all was for resource extensions, and we were successful at both Tritton and Krakow in extending those resources and for both of those added significant potential mine life as you'll see -- as we go through more slides. We sold the noncore assets. That was already done in quarter 3. At Jaguar mine, we have now reduced the care and maintenance to the bare minimum. We did test 8 base metal targets, and we're awaiting the results of those and then we'll make a decision on what's the best way forward. The Stockman feasibility study, although we said we wanted to get it in FY '26, it will come out in the first half FY '27. And we -- for those who've been around, we have repaid the debt. So we went from $40 million debt to 0 debt. We sold the noncore assets. And we did put some gold hedging in place, but that whole gold hedging has now rolled off end of June. So currently, there's no hedging in the group. So what does that mean for the results? As I said earlier, Aeris 42,000 tonnes copper equivalent. Tritton had a 19% improvement on copper production year-on-year. Krakow was stable. The key takeaways on the financials, in my view, is an EBITDA of $285 million, which is a 78% increase year-on-year and then cash receivables, a 300% increase year-on-year. So although some of it is a capital raise, but still really good operating cash flows and financial performance in the business in FY '26. For the June quarter, you can see Tritton and Krakow delivered about $120 million operating cash. We have put quite a bit of money into exploration, both for capital development, but also a significant amount of that is for the last bit of the Murrawombie pit capital. And then there's the other bits and pieces, including finance and other, which are interest and other expenses, closing the year with $165 million available cash as at end June. If you look at the year-to-date, $350 million operating cash flow from the operations, significant improvement year-on-year. Capital, quite a big number, but it is capital development predominantly from both the underground mines and also the Murrawombie strip, which is about $100 million of that $180 million. Once again, the improvement in the operations, both obviously helped by commodity prices, but also then achieving significant improved production year-on-year out of the 2 mines. Touching on Tritton in a bit more detail. We have put quite a bit of information out in Tritton in the last few weeks. One was the reserve resource update. And that was, in my view, a spectacular result. We went from December '24 at 2.4 million tonnes in reserves, which is not even 2 years in reserves to 10 million tonnes in reserve and you've seen the slide kind of significant opportunity to improve. So you go from not even 2 years of reserves to over 5 years of reserves is making a big difference. Although some of it is through the acquisition of the field assets, specifically Malibu, but bulk of it is through the conservation of underground reserves being declared. And you'll see there is still significant upside for all these. If you look at this slide where the blue is indicating the resource currently on all those assets, the brown is the current declared reserves. And what we've seen, for example, so far at Constellation, everything which has been in the resource in the mining area we're mining has turned into a reserve. It's just a lack of drilling and further work, which is the reason why it hasn't converted. Malibu, there's significant opportunity to improve and it's Avoca Tank, very small reserve. You'll see in the slides coming up. Avoca Tank is actually bigger and as we go deeper, so a lot of that resource will convert to reserve through the drill program we're putting in place for FY '27. And the same for [Budgiga] there's been a significant resource update or upgrade in this latest results. The drilling program will improve that reserve position in any way in FY '27. So overall, I think from where we were and where we are now and the amount of money we spend on exploration and also the M&A transaction has really set Tritton up for this 10-year mine plan once we see we get a Malibu and constellation into full production, we clearly see a potential for Tritton to go to 30,000 tonnes and a significant life as we move forward. Now looking at the quarter results, although it was improvement quarter-on-quarter and the mill were running at 1.8 million tonnes in quarter 4. So it's a mill nameplate capacity. We did add a few days where we had crusher challenges and mill challenges, so it even can do better. But it's the first time in a very, very long time where that mill was running at capacity. And that's because of the ore tonnes delivered from our pit. We ran at 1.8 million tonnes, and we still had over 200,000 tonnes of stockpiles from the Murrawombie pit production. I think a key thing we're missing in all of this is the underground mines actually outperformed all expectations. And that was all to do with -- we knew that we lost time at the Murrawombie pit. The team looked at any and all opportunities to make some of that shortfall up through underground mines. And they were -- they produced over 2,000 tonnes of copper metal additional to what they plan to do. So overall, the underground team has shown that they can really step up and give us what we're looking for. So we were very happy with that as an outcome. On the operating costs and the capital, capital was slightly higher. We already said in the third quarter, we are bringing forward some capital for Constellation to ensure an early start, and there were some additional tonnes or waste tonnes through the Murrawombie pit when we had the [wall] failure. So there was -- and also an accounting readjustment resulted in additional capital for Murrawombie pit. We talked about exploration success. I'll show you a few more slides. But clearly, for Tritton, it was a big step up and the underground mines once again showed that they can deliver when expected. This is sort of the results from the drilling. As I said earlier, we spent a significant amount of money on exploration. Now the slide on the left-hand side, that's the results from the December 2024 reserve resource update. So that's the size of Avoca Tank when we started mining it. Now where we are, you can see we already mined more than what was in the original resource, but the drilling down below Avoca Tank is exciting bit where you can see eventually that resource is now doubled in strike length and it's still open and still continuing. A drilling program will define that into a reserve in FY '27. We are keeping the development going so to ensure that we can access those tonnes in FY '28 as we move forward with the Avoca tank. The other one is Budgerygar. You can see once again on the left-hand side, that's when we started Budgerygar and the size of the resource. Since then, we've mined most of that. We also added and drilling has added significant additional resources at Budgerygar, and there's no reason why we don't believe that it continues at depth. It's actually wider and thicker than previously expected. So it is a better results in our view than what is expected -- was expected when we started drilling. So it just shows you in the Trittton assets, the more you drill, the more you find every single one of the mines -- ever mine orders covered is still open and depth. Nothing has closed off. Tritton is already -- we've got ore down to 1,300 meters already, and it's still open. We're still getting high-grade intersections at Tritton. This is just a few images of constellation. As I said, we started early. We're already -- most of that trench for infrastructure for water and air and comms, and comms is now done. The roadworks have started. The office is set up. The mining lease was granted last week. So within the next week, there's already -- the trucks is already on the go line. They're putting the biggest together, and we will start as soon as we can to start with the pre-strip with the aim of having first ore on constellation in quarter 3 to the mill. When you look at Krakow, as it has been for the last probably 2 or 3 years, consistently producing on cost and capital and production. Production was in line with the plan, delivering 100 ounces and basically 41,000 ounces in line with plan for FY '26. The guidance has been met and the key focus there is obviously Golden Plateau. We talked about it a lot. That is where we see the potential significant extension of mine life through the development of Golden Plateau. So the drilling we're doing is really confirming historical data to make sure we can use those old data in mine planning. You can see some of those results, 40 meters at 9 gram a tonne, 6.7 at 5. So really good grade intersection. This is a mine, which was mined in the 1930s at 10 gram a tonne, anything less or sort of left behind. In the 1980s, as you can see in that image, there was an open pit over the top. They mined 2.5 million tonnes out of that at around 4.5 gram a tonne. So significant grade. So we don't expect this year to see the same grade. But we are now modeling an open pit and underground option on the back of the drilling we're seeing, and we will communicate those results and mineral resource update in this half with the aim of starting this mine in FY '28 if everything comes together. On the project side, we have now put Jag into the lowest care and maintenance costs. We drilled 8 holes. They are in for test. We're waiting for all the assays to come back. We also did down and all 8 of them to see ensure that we look around. Once we get those results back, we will decide on the best way forward for Jag in terms of base metal drilling, but also one of the big opportunities we keep on talking about is the gold exploration on the tenement package. There's 62 kilometers of gold, never really been tested between 2 of the big gold miners in the region. Clearly, we see a significant potential and option value for gold in the Jag tenement package. On Stockman, we're busy finalizing the feasibility study. We will bring it out within this half and communicate that to the market once it's in place. And then we'll decide on what's the best way forward for Stockman in terms of final feasibility study and financing options. What's ahead of us for FY '27, we will bring out our guidance next week. The clear focus, of course, for us is Murrawombie pit will finish off in November or in quarter 2. There will be over 1 million tonnes on stockpile once it's done. Constellation will be in production by quarter 3, and we already did the reserve and resource update, including the field assets. And we will later this year within the next few months, release a 5- to 10-year with the aim of putting a 10-year mine plan out for -- at Krakow, Golden Plateau is critical for us, not critical, but it's a key operational value for us. We will get ready to drill the Southern Maine field, which is purely an exploration -- greenfields exploration. We are busy with the tailings dam lift. And it is a 3 years ago, we sort of 4 years ago, we debated do we lift the tailings dam. We not, we lift the tailings dam and now it's the third lift already because everything just keeps on extending as expected at Krakow. We always review the portfolio, so we will continue to see how we get best value out of our assets. We talked about Jaguar. We talked about Stockman. On the exploration side, we will always keep drilling the Western Maine field and targeting that less than 50,000 ounces as we extend the Western Maine field. Drilling of Golden Plateau will finish off in the next few months, and then we'll bring that study out. At Tritton, conservation was a greenfields discovery we made 4 or 5 years, probably now more than that, probably 6 years ago. And the team there still believes that there's a lot of greenfields exploration opportunities. So we've restructured the business to clearly focus on greenfields exploration and then brownfields as a separate team. So the greenfields team are relooking at the whole region, the structures and identifying new targets for us to test on the greenfields exploration side. On that, we are proposing to do some gold drilling as well in this financial year. And obviously, as we all know, there's big capital management programs coming on with what we're doing with constellation time. So clearly, for us, capital management is the key focus for us in FY '27 as part of the implementation of the FY '27 plan. I guess to sort of summarize it. I think summarizing FY '26, it was a very successful year. The company is in the best position it's been in my time with the company, which is over 12 years. Strong balance sheet. We're ready to fund the growth internally. And as we bring these bigger assets online at Tritton with Constellation and and the current increases we see in the current mines, clearly, there's a great future for Tritton. And Krakow is never disappointed. It always continue to grow, find more, but Golden Plateau might just be the asset which can put you in that 5- to 10-year life of mine horizon, which it really never had. It always had about 2 years in reserves and nothing more but always replace it. So the company really looking forward to FY '27, getting Constellation up and running, keep the balance sheet strong and deliver results from the operating mines and show the market the value of the projects in the business. That sort of summarize that. So we'll take some questions. I've got hands up here from David Coates. David, I'll put you up -- can you hear me?

Thanks for the presentation this morning and rounding out, it's been a pretty transformational year, particularly through Tritton, so well done. A couple of questions from me. Just on Tritton, saw the cash cost very handily dropped below the $4 a pound, which was great to see. Can you just run us through like the key drivers there of that reduced cost? Is it just volume or there are some other factors involved there as well?

Look, the biggest part of it will be cost -- will be the volume with increase in copper tonnes it's probably in my view, 2 things. One is the additional copper tonnes obviously makes a huge difference, but also open cut mining, it tend to be cheaper than underground mining. And the stockpile buildup results in a bit of those -- the costs getting carried over. But in my view, it would be 80% plus just because you mine more tonnes. That just shows you the flexibility, the high level of fixed cost, I guess, in these businesses, more tonnes just clearly go to the bottom line.

Excellent. And you just touched on the building the stockpiles. Can you just run us through what your -- what strategies you guys are considering for stockpile processing? I just going to be about grade first or recoveries come into it?

IT would be -- obviously, underground ore goes first because that's your highest grades. And then the stockpiles are getting managed between high grade, medium grade, low grade and mineralized waste and the highest grade goes in first as we put it back in. So it's really driven by grade. The recoveries are once we get through, it's an area now where we're getting slightly lower recoveries. But as we get more deeper into the sulfides, we expect the recoveries to recover. So we don't use recovery really as the drivers about grade going in first with the underground, obviously, the highest grade going up.

Okay. And just quickly, one last one. You mentioned all comes together for Golden Plateau at Krakow, you'd like to be sort of starting there in FY '28. Is that a development start or a production start? And I understand guidance is coming out, but what are you kind of aspiring to the...

We're aspiring. So it will take us once we make the decision that it's -- that the project makes sense, which should be in the next, let's call it, 3 to 6 months. Getting approval to start mining is about 12 months. Now we already started that process just from approval because it will be a major amendment and major amendments in Queensland is about 12 months. So the aim is to really to start working there as a strip in early FY '28. Are there any other questions from anyone? I've got some, which came through earlier, which I'll just touch on some of those questions. If you want to ask any questions, just put up your hand, and I'll take those questions. While we sort of wait, I had a few questions online as well that the feasibility study update at Stockman, as I said earlier, that will come out in the next -- in this half. Once we get it out, we will decide which is the best way forward. Currently, my view is it looks very strong. But depending on where we get to, we will decide what's the best way forward from finalizing the feasibility study, and we will communicate that to the market. We talked about some of the other questions already. We talked about tonnes coming out of Murrawombie. As I said, there will be over 1 million tonnes by November. The key for us at Jag. I've got a question about Jag and what do we do with Jag. So the key is we have got the care and maintenance costs down now to about $2.5 million per annum, clearly waiting for the base metal results. And as we touched on, we are contemplating doing some gold exploration at Jag as well in FY '27. Those are some of the questions I had. I had a question, can we speed up Constellation open pit and underground because there's cash available. We are going as fast as practical possible already. There's no real opportunity. We need to get to the first year of production out of the pit, so we can start the decline. We will -- as I said earlier, we start the pre-strip pretty much in the next few weeks, and then it's all about getting that in place. Speed up conversion of resource, reserve drilling, you can only put so many drill rigs into these mines and without wasting money. So the aim is to try to drill 2 or 3 years in reserves ahead of us and then 2 or 3 years in resource ahead of ourselves. So that is the plan. We also will put about the same amount of exploration dollars, as I said earlier, around $25 million to $30 million in exploration back into the business again in FY '27. So there is significant money going in already. That's all of the questions we had online. I don't know if there's any other questions from anyone. Richard, I think you're open to talk.

Yes. Can you hear me, Andre?

Yes, I can.

I'm just interested with the Murrawombie pit, what the geometallurgy of that look like? Is there a transitional zone -- how far through that are you?

We're basically through the transitional zone, Richard, we're now in [ox sulfides]. So there's not much more to go. We basically -- for the next few months till November, it will all be sulfides.

All right.

We got Alan, I think you -- Alan, can you hear me?

Yes.

You got a question?

Yes, Andre, this may be a bit early, but I was wondering if you had a broad estimate of the full year cost of depreciation and amortization and also full year finance costs.

That's a bit early. So look, a lot of that or some of that will come out next week. I can't give you the numbers off the cup, and I think it also maybe until the guidance is out, we probably just need to get that out first, and then I'm happy to -- for you to make contact and we can help you with some numbers.