Aurelia Metals Limited (AMI) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Aurelia Metals Limited June 2026 Quarter Activities Report. [Operator Instructions] I would now like to hand the conference over to Mr. Bryan Quinn, Managing Director and CEO. Please go ahead.

Thanks, Darcy. Look, thanks for joining the Aurelia management team June quarter results. I have with me today Martin Cummings, CFO and soon to be interim CEO; Angus Wyllie, the Regional GM for Cobar Region; Andrew Graham, the Chief Technical and Business Development Officer; and Leigh Collins, our future interim CFO. Today is a proud moment for me personally since it will be the last quarterly update I provide for Aurelia as CEO and Managing Director, but I'm also proud due to the extremely positive results we are releasing today to the market. Bottom line is that it's an exciting time to be investing in Aurelia Metals, with gold metal produced above our revised high guidance, strong metals production overall, costs in line with guidance and significantly improved operating cash flow. Over the last few years, it really has been on a deliberate strategy to grow our business in metal production and transform the portfolio, deliver operating excellence across our operations, strengthen the balance sheet through a refinance supported by a credible life of mine plan, generate strong operating cash flow from operations quarter-on-quarter, fill our mills with high-quality ore resource from the Cobar Region to maximize value for shareholders, which I continue to say we have filled our mill in FY '26, which has been a core strategy for Aurelia and allow us to operate at full potential. We've also been creating a growth pipeline from our resource base and existing infrastructure that's been self-funded, which is what we've demonstrated over the last 3 years. We can actually self-fund these growth options we've actually put forward. And importantly, we remain diligent looking over our shoulder for inorganic options that might add shareholder value but recognizing sometimes the best shareholder value and lower risk value is actually what we have in our portfolio, but also looking for the right opportunity that pops up externally. The focus has been to build our future in the copper ore from FY '28 while using amazing gold resource to fund our way and take advantage of the gold price tailwinds. It's fair to say Aurelia is well on its way to achieve this. I might just get you to review the disclaimer slide, and then we'll turn to Slide 3. So looking back now at the fourth quarter, I'm proud to say we've been successfully delivering our full year commitments, exceeding guidance for gold at over 50,000 ounces and meeting guidance for metals, as I said earlier. We strengthened the balance sheet, firstly, through achieving the highest operating cash flow from the operations since 2018 at $53.1 million in quarter 4 after all sustaining capital. This helps strengthen the balance sheet, but also we're successful in delivering a robust refinance of the balance sheet. And importantly, this has released $45.2 million of restricted cash back to the balance sheet, with the majority of that being paid for in FY '26. The result was a cash balance of $143.9 million, and Martin will talk more to this in his section. Notably, this year, we've also not drawn any debt to fund our growth, which is an exceptional result from the team. We've continued to ramp up Federation Mine tonnages and outperform on volume and grade with a result of the mine exceeding targets. Federation Mine operations and geology are very exceptional and great addition to the portfolio and have been blending nicely with the ore from Peak to optimize the processing plant throughput. The combination of South Mine, New Cobar and Federation Mine has meant that we've been able to deliver over 100,000 tonnes of ROM stock ready for the mill and also finish the year with over 40,000 of broken stocks underground. This exceptional finish to the quarter sets financial year 2027 up to success and supports the underlying strategy of filling the mill to maximize value. The Peak plant delivered monthly records and quarterly records on an annualized basis, which is exceptional in itself through operations excellence. But in addition, they've done this while achieving excellent recoveries. From last quarter to this quarter, the Peak processing plant improved from 197,000 to 230,000 tonnes, which is an annualized rate of over 900,000 before the expansions are completed. More notable is that it has been achieved while we've been doing brownfield expansion around the processing plant. We've continued to successfully deliver our Cobar Optimization Projects and Great Cobar projects in line with schedule. We announced on the 9th of June, the commissioning of the tailings thickener, which will assist reagent recoveries, copper recoveries and improved tailings management, and the ball mill project is progressing well also in line for commissioning in Q1 of 2027. The Great Cobar Project has continued to develop the declines towards the raised bore shaft chamber and remains within scheduled targets and complete complex ventilation changes to set up the decline work until the fresh air raise is completed. We released a positive and exciting results from exploration with the main resource of New Occidental reported to the market on the 16th of June 2026, which is an amazing project, which will deliver 32,000 ounces of gold with a capital cost of $3.3 million, subject to the feasibility study being completed and approved. And this will not displace the raw ore feed but will provide incremental on top of the 1.1 million to 1.2 million tonnes planned. And lastly, this quarter, we released some positive news on the earning agreement with Legacy Minerals, which are leases directly adjacent to Aurelia and between our processing plants. Andrew will talk more to this soon. So despite the challenging geopolitical environment and inflationary pressures externally, we've been able to manage the cost to remain in line with guidance across OpEx and CapEx, and Martin will talk more of this. Safety is a core value that underpins what we do. We've actually had too many hand cuts and slips and trips this year, and although we had some improvement in this last quarter, the overall results for the year have been disappointing. But I'm confident the teams and management will continue to use the tools and processes to stop this from happening. We successfully rolled out behavior-based safety in financial year 2026 and refreshed our flow risk controls. So I'm sure the team will get back on trying to take more care before starting the work to prevent more injuries from occurring. We want people to go home to their family every day without injury. It's fundamental. So with the tools and with the process we have in place, I'm sure that we'll be back on track and these injuries will be prevented. I'm going to hand over to Martin now, who will then run through the pack.

Thanks, Bryan, and good morning, everyone. So turning to Slide 4. And as Bryan has introduced, this has been a very strong finish to FY '26 for us. Gold production was a standout. Our original guidance range of 35,000 to 45,000 was revised higher to 45,000 to 50,000 ounces in the March quarter and we ultimately finished just above the top end at 50,400 ounces. And this was driven by a prioritization of high-value gold ore at Peak, supported by strong recoveries through the plant and our increasing mine volumes from Federation. Our copper production at 2,500 tonnes was inside the bottom end of the revised guidance and was accompanied by strong results for zinc and lead production, which remains within the original guidance ranges. Our group operating costs did finish in line with the top end of guidance but was consistent with the ramp-up in activity underway across the business. Firstly, we have deliberately invested in labor, equipment and contractor support to debottleneck our mining, particularly at Peak, which supported a strong lift in mine tonnes and the building ore stockpiles. Federation costs were also higher, but that is in part driven by the outstanding performance achieved this year with mined tonnes approximately 30,000 above what we planned. Secondly, labor availability continues to be a factor across our sector, and we have engaged some roles with higher-cost contractors where we've been unable to source employees directly. These contractors often require associated travel, accommodation and mobilization costs. Thirdly, our higher production, sales and stronger commodity prices this quarter have naturally resulted in higher royalties concentrate transport and refining costs and our third-party smelting and refining charges. And finally, our diesel and freight costs have also been higher, particularly at Federation, which isn't connected to the electricity grid. The June quarter also included higher freight transport and charter flight costs. While price has been an impact, pleasingly, there has been no interruptions to our supply chain for diesel, which is operating as normal. So in summary, while cost did experience some headwinds from higher input costs, a significant part of the increase was driven by higher production. Our focus on mining smaller but higher grade gold stopes at Peak our desire to maximize our ROM stocks ahead of the plant expansion and our above-plan performance at Federation. Our sustaining capital of $58.8 million was towards the upper end of our guidance range, reflecting ongoing investments in our fleet and our processing infrastructure to derisk operating performance. And gross capital of $50 million was within the revised range of $45 million to $60 million. The Great Cobar Project is tracking in line with the original spend plan, but there were some capital spend for the process plant upgrades that shifted to early FY '27, particularly for the ball mill. And finally, our exploration programs continue to deliver exciting outcomes, as Bryan mentioned, which Andrew will talk to in more detail. For FY '27, we will continue to focus on prioritizing these high-value gold stopes in the Peak South mine that will support strong gold production. We are in the process of finalizing our FY '27 guidance and expect to release it with our FY '26 financial results in late August. So turning now to Peak on Slide 6. And as I said, it was a very strong finish to FY '26 with mine development higher at 1,528 meters and ore mine increased to 160,000 tonnes. The key driver was that productivity work focused on resourcing production drills, which resulted in sharply improved drilling rates and mining rates. And this was supported by improved equipment availability and better access to developed areas resulting from investments in additional service crews. The plant performed really well with a record 230,000 tonnes processed in the quarter, up from 197,000 in the March quarter. But just as importantly, our recoveries remain strong with gold, zinc, lead and copper recoveries, all holding as throughput increases. But the real story of this quarter was the ability for us to materially increase our ore stockpiles. The combined Peak and Federation ROM stocks increased to 104,000 tonnes at quarter end. In addition to these surface stockpiles, Peak had more than 40,000 tonnes of broken stocks underground. And this is really important as we now have over 1 month processing capacity sitting in front of the plant, ready to be processed as the throughput expansion projects come online, which really derisks our ramp-up profile for the processing plant. Moving on to Slide 7 at Federation, and it was a fantastic year for Federation with mined ore in this quarter increasing to 112,000 tonnes. You can see quarterly that the mine has been ramping up in a sustained and controlled manner. But ultimately, the most pleasing outcome was that above planned performance. Grades were significantly higher this quarter, which is driven by the mining sequence. We'll continue to see great performance like this at times from certain areas of the mine as we mine deeper into the ore body, informed by our focus on infill drilling, which gives us confidence in our resource models. But the broader trend through FY '26 is clear. Federation is now a key ore contributor to the processing plant, with grades performing well as we mine further into the orebody. Our focus for FY '27 is to keep lifting those mining rates, advancing the decline further to establish those additional drilling platforms deeper in the mine and lower our operating unit costs. Turning to Slide 9, and there has been considerable progress this quarter on the plant upgrade projects that are key to our strategy of increasing Peak's throughput capacity from 800,000 per annum to 1.1 million to 1.2 million tonnes per annum. The new thickener was commissioned in June and is now operational. And work continues on some of the other scope items of the process water management project that ultimately will support improved water management, enhanced metal recoveries, reduced sign-in consumption and more effective tailings deposition. The tertiary ball mill project is progressing well with the concrete foundation forward and the steel structure currently being installed. And as Bryan said, commissioning of this ball mill is expected in Q1 FY '27. The significance of these projects is that we're building processing capacity at a time when the mines are building ore availability. The building of our ROM stockpile and the broken stocks underground at Peak are crucial to that uplift in volume once these projects are commissioned. Turning to Slide 10 and the Great Cobar Project continues to progress in line with our schedule. Mine development of 438 meters was completed slightly higher than the prior quarter and takes total development to date to 1,823 meters. Key milestones achieved this quarter include the installation of vent fans, which now provides sufficient ventilation at the face as we progress towards the location of the fresh air raise. The raise bore tender for the fresh air raise was awarded, the shaft collar design progressed and the recruitment of our owner's team manager to oversee the shaft works was also completed. This is the manager that oversaw the construction of the surface shaft at Federation that was successfully completed in 2024. So we're very much looking forward to having them back with us. So with that, I'll just hand over to Andrew now to take you through the next couple of slides.

Thanks, Martin. For those following along, just turning to Page 11 of the slide pack. Two things I'll touch on today, which Bryan's briefly introduced. They were both exciting releases we put out through June. The first of those is on the 16th of June, we released the New Occidental Tailings pre-feasibility study as well as declaring the maiden mineral resource or reserve for that project. So what is it? So effectively, there's 2 stockpiles about 3 kilometers north of the Peak processing plant, the historical dry stacked tailings stockpile, and we've declared a resource on those 2.6 million tonnes at 0.65 grams per tonne gold. So good gold, good quantity, just 3 kilometers from the plant being on surface. So the intention of the pre-feasibility study looked into bringing that down to the plant down in the internal haul roads that already exists. We look to put the trommel in place ahead of the plant to take the feed to screen out organics and other things. And then the intention is to feed that straight into the Dargues ball mill, tertiary ball mill that's being installed currently. That isn't used when we're running lead zinc because we don't need that grinding capacity. So it's going to available and the intention will be that we put the tailings material through that ball mill and straight into the CIL circuit on the back of the Peak processing plant. So it's largely using the plant and the road that already exists, which is why the capital is so low at $3.3 million. As Bryan touched on 32,000 ounces over 10 years, $3.3 million spend. NPV, we're saying $42 million at $5,000 of gold. So quite a reasonable gold price, quite conservative against spot. IRR of 258%. So this hugely makes sense. The other benefit we get from this is those stockpiles would otherwise need to be capped on project. So this cleans up those stockpiles. The intention is to mine them entirely put them through the processing plant, put them through the CIL plant, extract gold, make revenue at the same time, we're cleaning up that site. So 2 things needed in order to move to production. So first is the feasibility study, which we're intending on doing through this half to FY '27, half 1, assuming we get board approval for the project then we've moved to construction in the half to FY '27. At this stage, the intention is to be operational through FY '28. Turning then to Page 12 of the pack. The second important release that went out through the quarter on the 2nd of June was an expansion of our exploration tenement package in the Cobar Region. That was largely through an earning agreement we have with Legacy Minerals. Importantly, their tenement package is contiguous with our own directly to the West and runs about 78 kilometers down around our tenement package. So we picked up some great ground, which is right there amongst our own and importantly, right next to the Peak processing plant. There's also some interesting structure on those tenements, so the Myrt Fault as well as the CSA Fault, and its ground directly south of CSA. So it's a 2-stage earning. The first stage over the 2 years is to spend $0.5 million for 51% and in the second stage over 5 years from signing to spending a further $1.5 million to go with 90%. The other thing in that release that we announced, and you can see it on Slide 12 in the orange shading is we picked up 2 vacant tenements, applied for those, we granted those, which fit very well with the work that we're doing in the region. So going forward on the new tenements as well as some of our own, the intent is to fly FALCON airborne gravity in the coming months. So we're in the process of finalizing that engagement at the moment, and that will cover quite a piece of the legacy ground as well as some of our own ground that we didn't fly in that previous slide. I'll pass back over to Martin, and then he's going to talk through the balance sheet.

Thanks, Andrew. So I'm now turning to Slide 14, which shows our cash flow, and it really has been a fantastic quarter in terms of operating performance, the completion of the refi, which has resulted in cash increasing from $94.7 million at the end of March to $143.9 million at the end of June. As we mentioned earlier, Cobar Region operating cash flow was $53.1 million after sustaining capital, which is the highest quarterly operating cash flow result since 2018. The revenue result was supported by strong metal production and sales that I discussed earlier. Gross sales revenue increased to just under $161 million, with 55% from precious metals and 45% from base metals. The refinance was completed in June resulted in a release of $45 million in restricted cash. You will note in the chart, there's a net movement of $36 million, which relates to the timing of some cash backing that happened early in the quarter before that $45.2 million was released in June. But along with our strong cash balance, I'm really thrilled that we were able to achieve in the refinance, having such high-quality partners in Citi, Credeq, which are agent for Swiss Re, and HSBC, which is a testament to their confidence in our business and their desire to partner with us. We now have a larger, longer-term performance bond facility and revolving credit facility at significantly lower cost. And crucially, these facilities have no limit amortization or cash-backing requirements for the terms of each facility, which means we get access to that balance of each facility for the term, providing us with high flexibility as we execute our strategy. So in summary, we now have our operations generating meaningful cash and ramping up volumes and our financing structure is now in place with a high-quality syndicate who can support our next phase of growth. And that does really provide us with flexibility now to consider our forward capital management plans. So moving on to our key focus areas. And for FY '27, our priorities remain clear. We will continue to safely prioritize the highest value production and cash flow outcomes, particularly for gold, which has been central to our FY '26 result. We will progress the Peak processing plant expansions to commissioning to lift our throughput rates, and we'll benefit from the ROM stockpiles that are in front of the plant to support that higher rate this quarter. We will seek to maintain momentum we have in Federation in terms of mining and lowering our operating unit costs as we move deeper into the orebody. At Great Cobar, we'll focus on progress in line with our plan with this project, the primary contributor to our copper ore future. And finally, we will ensure we have a strong balance sheet while also assessing organic and inorganic growth options. So in summary, as I take over from Bryan for this next period, I will benefit from the work he has completed over the past 3 years to take Aurelia to a position of strength. Getting the Federation project restarted, constructed and now in production, progressing to approval and the commencement of development of Great Cobar and the commencement of the Peak Project plan expansions that are now well underway were all achieved during his tenure. And to bring all that together with the creation of the Cobar Basin operating model and the development of our management operating system. For FY '26, it was a strong year. We delivered gold production above revised guidance, base metals within guidance, our cash flow was the highest quarterly result since 2018, and the balance sheet is stronger following the completion of the refinance. We are well set up for FY '27 with a clear set of growth projects in execution. So thank you. I'll hand it over to you, Brian.

Yes. Thanks, Martin. We might move to questions, so we'll pass back to Darcy, and then I'll summarize at the end of the questions. Thanks, Darcy.

[Operator Instructions] Your first question comes from Adam Baker with Macquarie.

Just firstly, on operating costs, a little bit higher. You noted some of those reasons controllable -- I guess, controllable for investments in contract labor and increasing stockpiles, and then you also seem to have a bit higher operating cost due to the escalation in diesel costs and royalties, et cetera. Just wondering how much of this escalation in operating cost is, I guess, controllable versus uncontrollable like heading into FY '27? Is $95 million the new normal? Or is there still kind of work to do or scope to get this level back down again?

Yes, Adam, I'll take that one. So look, as I said, we'll come out with our cost guidance in August around what the operating cost looks like for FY '27. It's probably of the increase this half. We did make those concerted -- sorry, this quarter, we did make those concerted efforts to really build that ROM stockpile, get that contract labor in. Not all of that contract labor stays around with us. This is about building those ROM stockpiles to get us to the point where we can turn the plant expansion up. We are looking at, hopefully, a lower longer-term diesel price going forward. But as I say, and probably the last bit is we did do more operating development at Federation, as I said, which reported to operating costs. So we'll come out with that, but not all of these costs are sticky and stay around.

Okay. That's clear. And you hinted on the prioritization of the gold stopes heading into FY '27 as well. Just wondering if you could talk us through the change here and I guess, how does that potentially change versus the 3-year outlook that you provided in June last year?

Yes, I guess when we put the outlook out last year, we had gold production over the medium term stepping down. And that really was a function of retreating out of the South mine, which is primarily where these smaller high-grade stopes are located. So with the gold price now and the new prices that we're running through our life of mine plan, we see a longer life in the South mine, which is really the main contributor to that higher gold production, which means we can stay in there longer and prioritize that higher production. So that's probably the main change. What it won't change, though, is our focus on getting over to Great Cobar and getting that production online and also ramping up Federation, but certainly provides a lot of optionality now where we see a longer life in the South mine.

That's clear. And I just sneak one more in just on Federation, appears to be going pretty well. I mean, referring back to the older outlook. I think the target was 320 to 340 for FY '26 and you managed to deliver 360. I guess the ramp up to 600 kt, how we've seen that run rate, I guess, over the next 12 to 18 months?

Yes. So I'll hand over to Angus in a minute, but just to introduce, I mean we are still focused on mining -- on ramping Federation up. But I guess, as I said, with the additional life out of the South mine, it really lets us optimize at the process plant rather at the mine. So we have that optionality now to match the Federation mining rate to the spare capacity in the Peak plant, given there's that additional material coming out of the South Mine. But Angus, I just hand that one over to you for any other comments?

Look, certainly, we now have the flexibility with all streams from the North Mine and the South Mine and Federation and with the large stockpile on the ROM, we are able to focus on the areas each month that provide the best value for the business. And as I said, remaining focused on copper and gold, for example, last month, and we'll continue that gold focus and providing the best value to the business through blending those different options. But yes, certainly, Federation continues to ramp up next year. We continue to push that decline down as Bryan and Martin touched on.

Okay. And yes, thanks, Bryan, for you efforts over the last few years. Maybe not here to the call next month. I'm not sure if you'd be around after that.

Your next question comes from Peter Kormendy with Shaw and Partners.

Maybe another one on cost consideration. Can you give us an idea for connecting to the grid time frame for that and the cost of that just to mitigate some of the higher diesel prices that you're seeing there?

Peter, so we'll continue to run Federation on diesel power. It's not a feasible option to connect Federation to the grid. We have -- what we have done in this quarter though is awarded a contract for a longer-term power solution at Federation which will meet our demand requirements as more equipment enters the mine look to improve on diesel burn rates, that sort of thing, but we will remain on diesel power.

Yes. Okay. Through the quarterly run of the numbers that really stood out to me was the incredibly high IRR on the New Occidental, the tailings retreatment. Can you just talk through, I mean, as soon as I see those words, just remember from past experience, it's been notoriously difficult projects to manage just in terms of logistics and bypassing bottlenecks? And how easy do you think it's going to be to actually achieve that sort of outcome?

I'll hand that one over to Andrew. You made some comments earlier to build on?

Yes, no problem. Peter. Yes, the IRR is extremely high when you run it through a model basically because the CapEx is extremely low. So the real benefit to New Occidental is we're not doing much at the plan. We really just need to find a way to get it into the plant, which is the trommel, more than comfortable with that kind of capital number that we can achieve that and then we use the existing plant. The other key differentiator of this project against typical -- when you talk about tailings reprocessing. It's not a wet tailings dam. These are effectively dry stack tailings sitting there in 2 files ready to be excavated with the B-double trucks. The haul road already exists. We've already all material down that road, when we did the bulk sample. So that effect has been proven. So we're pretty comfortable with this whole arrangement to the project.

All right. Congratulations to you on a really strong quarter.

Your next question comes from Paul Kaner with Ord Minnett.