Aeris Resources Ltd

ASX:AIS

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Willie Labuschagne, executive]

Good afternoon, everyone, and welcome to the Aeris Resources Quarterly Results Presentation. I'm Andre Labuschagne, and I'm the Executive Chairman, and I will take you through the presentation today. We will allow questions at the end of the presentation, where you can either type your question in the Q&A or put up your hand and we'll unmute for your questions.To kick off FY '24 quarter 2, slightly lower performance there in the first quarter, but still with in line with our guidance. And as in the presentation, we will maintain our guidance, as it's set out.A few highlights for the quarter. We produced close to 10,000 tonnes of copper equivalent production at an all-in sustaining cost of $5.40 a pound. At Tritton, slightly lower performance in quarter 1. The biggest impact for Tritton was labor availability, specifically driven by COVID with quite a few COVID incidents in New South Wales, but also skilled label was also a challenge for the quarter. Copper availability for the quarter has been impacted by various outages on equipment and loaders, which had some incidences, which we -- which took them out of operations for quite a few -- for a quite a period of time.At Avoca Tank, we've updated the mineral resource. As you would have seen in the announcement, significant increase in copper metal by 16%. And the current drilling we're doing is actually showing consistent increase in the size of Avoca Tank with quite interesting result. So as we're mining and getting our head around Avoca Tank, we're also seeing a significant increase in the size of that ore body.At Cracow, once again, a very stable performance as the previous quarters. The TSF lift we did, as we said, was going to all be done in the first 6 months. It was done on time, actually ahead of plan and under budget. The guys did an amazing job to get that in place, and that now allows us to extend the Cracow life by at least another 2.5 years before we need to do anything else, but also allows us to keep the focus on exploration and keep the -- growing that resource, as we move forward.At Mt Colin, the actual mine production is going exceptionally well with a small cave. [ We're ] mining looks like we're getting really good grades out of it better than expected, and we're actually getting more tonnes than expected out of the cave. That said, though, the third-party ore processing is behind schedule, where we originally scheduled another run that hasn't happened. The new runs would be in February, as, in fact, starting pretty soon and then another one in May. But what we have agreed with Glencore is that there will be part payment for stockpiles on the wrong pad at Ernest Henry, which then allows at least to get part of the income for those stockpiles, but still at a significant discount to the value of those stocks.We announced this week or last week, the Stockman feasibility study update. As you would have seen, we have identified big opportunity to improve that feasibility study with different technology and a different flowsheet. Test work is underway to improve to get that under control, and then we'll update the market on that. Again, we'll talk a bit more about all of these.Jaguar is on full care and maintenance. The restart studies is already underway, and it really will be -- we will keep the market an update once we got those done.As you would have known, we raised $30 million in December, that was all for working capital to strengthen the balance sheet. And you would see later in the presentation that a lot of that money was allocated to credit and liabilities to get the balance sheet back on track. And as I said in the introduction, with the current performance and the way we see the next 6 months, we are maintaining our guidance for FY '24.This is just for those, who haven't seen this, this is just a snapshot of the business, 3 operating mines and 3 projects. The Barbara project will be coming into Mt Colin. Jaguar and Stockman is a project, Jaguar is a brownfield, [ so we start ] and Stockman is a brand-new greenfield development project in the business.Just diving into the different operations for Tritton. They produce 4,800 tonnes. So you can see they're slightly lower than quarter 1. Cost significantly better than what it was in quarter 1. So a really good control on costs across the business, in fact, on both copper and capital. The labor availability, some of it, as I said, is covered, but there is also a big recruitment drive on to bring some real technical skills back into the business or some of the operations, now that recruitment is already underway, and we're progressing that as fast as we can.But also from equipment availability, some of the equipment, as I said, we lost a loader in one of the stopes, which we built, which we're busy pulling out is really bringing in some additional trucks and loaders into the business in the short term to make sure we can step up production, especially as Avoca Tank and Budgerigar is stepping up into the production in the next 6 months.The Jameson cell, which we talked about in the last quarterly, which were installed, we've already seen a 2% improvement in the grade from the concentrate, and that was the whole aim is to get the concentrate grade up. We saw the impact on your costs or TC/RCs and product handling, as you go forward.At Constellation, we have put another 6 holes in, which we have updated the market on in December, a very successful campaign. We've seen a significant extension of the mineralization along strike and down plunge, and it's still open. In the next 6 months, we will restart the drilling and then draw that out into an indicated results level for most of the projects.Avoca Tank is actually in quite a pleasing outcome, seeing the grade pickup and the contained metal and the current grade control drilling we're doing is seeing actually increasing size of that mine, not just down there, but also along strike. We will update the market we get those results back, but it looks like Avoca Tank is getting bigger, as we get a better understanding of the ore body.What we have seen though regionally, it's pretty complex geology. So a lot of grade control is going into understanding the shapes and the geology we saw then dive the mine planning, as we continue to bring more and more stopes online.At Cracow, as I said before, very stable [ prudent ] process and our mining and business over the last 18 months, we guys keep on delivering against the planned 11,000 ounces, all costs and capital under control. The fact that the tailings dams, you can see the photo down the bottom has all now been in place and commissioned and that was all ahead of time and below budget. The key focus for now that we've got the opportunity to extend the life and keep going.So Western Vein Field, [ which is ] to the area, where we're currently mining, and the way we're running it, there's one drilled rig. We're getting the geologists enough [indiscernible] to look at the data, look at new opportunities and they identified at least 5 new opportunities to test for further extensions in that Western Vein Field. Now historically, it's never had a long life. It's always been one of those, so you drill it and it extend. And we're seeing that and the confidence in being able to extend that by another 12 months is quite high, and you can see all those different areas.So the focus is on high-grade, smaller type ore bodies, but the work [indiscernible] indicated that there's a high potential. And then, we also now, will start drilling Golden Plateau again, and that would be one of the future mines we're bringing to production in the next 12 months to 18 months.At Mt Colin, as you would know, we're in the final stages of Mt Colin. It only got another 5 months or so left to be mined. On the mining side, the guys are doing a really great job there on target and [ above -- above ] project on both grade and tonnes. It is just the processing side of it. It's been slower than expected, which has previously impacted significantly on working capital. But with the agreement now with Glencore, which they'll pay at least a percentage of the stockpiles at the mines just help that working capital balance and management of cash. While we see the value coming in from Mt Colin -- Mt Colin is in the final stages. It's in a cash harvesting phase, cost and capital. There's no capital to spend. And really, the process now is, where do we go from once Mt Colin is done. It's obviously the Barbara project, which will come online at the back end of once Mt Colin is done, we'll start the approval process, and get into that in the next 12 months to 18 months.As of the end of the quarter, 133,000 tonnes of stockpiles left, which is about 3,000 tonnes of copper at a grade of 2.2%.Jaguar, as we said earlier, it's now in full care and maintenance. Everything is paid for. The feasibility study is underway that [indiscernible] currently this week to do some more work. It's all about how do we restart that on maximizing production rates, maximize the mill throughput. A lot of work historically was done on how do you optimize the throughput and recoveries through that process plant. So we're really going back to historical work, which was done already by metallurgical recovery processes to see what is the work we need to do to come out of the care and maintenance program with a 700,000 tonne [ mill ] and significantly improved recoveries for specifically gold and copper and zinc.Currently, we still have a small exploration team in place and really the focus is on the exceptionally good gold prospectivity in the tenement package, which we will -- which we're doing work on and hopefully, later this financial year or next year, we'll do a bit of drilling to see what is the gold prospectivity on the tenement package.Stockman, we gave a market update on Stockman the other day. We've seen a significant increase in the mineral resource, a 6% increase on contained copper. The new plan, which we're now working on is actually only mining the Currawong mine at 850,000 tonnes per annum. That will be a 12-year production profile. We still got Wilga to bring -- which you can bring in mining at a later stage. But really, we believe that setting this business up not for [ 1 million tonnes, 850 million tonnes ] is the right capacity to mine Currawong at a significant margin. And really, the work which we been doing is how do you improve the metallurgical recoveries.The feasibility study called for recoveries around 70%, 75% for copper and zinc. We believe the technology we're looking at the Albion process, if you look at what has been achieved through the Albion process, historically, it's plus 90% recoveries. Now you can think for yourself, moving from 70% to 90% recoveries would make a huge difference to the economics of this mine.The idea would be to have a producer on-site clean concentrated bulk and then truck a bulk concentrate or clean concentrate, which you'll sell and then a bulk concentrate down to the Albion process, where there's cheap power closer to the coast, which you can then put through the Albion process and get final recoveries. We're targeting the feasibility study of all of this to be -- to become -- bring it back to the market the second half of calendar 2024.As we said before, all the primary approvals is in place and for the -- for both mining and on-site processing. If we do install a plant down the coast, that would be a separate process for approval, but we don't see any issues with that because it will be just a normal industrial area, where you will have this plant running.At a corporate level, we have seen receivables, cash receivables increased to $44.7 million with cash closed at $22.7 million. The $30 million equity raise for that working capital, you can see most of that directly went to creditor balances, which is reduced by $33.5 million, which brings that creditor balance to a normal base, which we expected to set at with the total trade payables and other creditor balances sitting at $87 million, which previously was $122 million or $112 million. So a significant improvement in that liquidity [ with it ].The debt position is still unchanged at $40 million, as we would have seen before. And as we announced in late December, early January, that Sylvia Wiggins, Non-Executive Director has resigned due to personal reasons.So next 6 months, we see -- we are expecting a significant improvement on production from Avoca Tank and Budgerigar, as they ramp up. A lot of focus is going into development to get more and more stopes open. Understanding the Avoca Tank ore body better, is allowing us to replan the design and then with the potential for increased tonnes coming out of Avoca Tank. And as I said, Budgerigar ramping up.So Tritton, we do see a much bigger second half than the first half. Drilling at Constellation, we're now targeting to drill it out to an indicated level of most of it so that we can finish off the feasibility study. The scoping study is done. There's significant value in Constellation and bringing that into the business in a shorter space, as possible. But the current round of drilling, which we will start, we will put as an [indiscernible], where we can bring that feasibility study to market to talk to everyone to show you the value, where Constellation is setting. It's still open at depth. We're still looking at the standup zone, which will be part of the drilling program in the next 3 months.For the future of Cracow, we will start drilling Golden Plateau, again. Get into resource definition, so that we can plan for the future mine to come into production in the next 18 months.Western Vein Field, it just comes down to process, keep looking, keep drilling, keep the one rig, keep the geologists on to look at what they see and through that process, we keep on seeing extensions of that [ Vein that field ], as we go forward.In the next 6 months, we will finish off Mt Colin. The Barbara study is already underway. There would be a gap between Mt Colin and Barbara, and it's [ purely ] driven by the time we will take to get the approvals to start Barbara. But it will once again be a simple process. Contract is to mine it. This will be -- this has been mined before [ at mineralizer ] or processed [ at mineralizer ], so it will go to the [ mineralizer ] smelter and process facility, as part of the extraction of copper.Stockman, really the next 3 months, 6 months is all about the test work, making sure that alternative flowsheet work. That will be updated in the feasibility study. Most of the work in the study is already at feasibility study level. It's really this alternate flowsheet to finish off the final recoveries and capital cost for the flowsheet.The Jaguar restart, that should be finished by the second half of 2024 with an investment decision than for us to the time to restart Jaguar, as part of the ongoing growth in the business.We have appointed Burnvoir, which is a financial debt adviser group out of Sydney to help us to assist with refinancing options for both the current debt with Washington Soul Patts, but also looking at refinancing options for our environmental bonding facilities for both Tritton and Cracow.I guess, in close, as you all know, 3 operating mines, all with good potential to extend specifically at Cracow and Tritton with Barbara as an option at Mt Colin. Jaguar in care and maintenance, which we're trying to -- as quickly as in fact, we can bring that back into production and then deliver on the Stockman project. A lot of focus is obviously on delivering on the guidance, current guidance between 40,000 tonnes and 50,000 tonnes copper equivalent production. And currently, we are on track to deliver on that number.With all of this, there's a lot of potential for organic growth in the business through Jaguar and Stockman, but also, we believe this company is set up on a good and excellent growth platform to look at how do we keep growing this business to where we aspire to be.Thank you very much. Any questions we can.

[Willie Labuschagne, executive]

There's already a question from [ Peter Cooper ]. So Peter just want to understand the mineral process by Glencore after each run notwithstanding partial payment?So Peter, what happens, they pay us for 85% of the tonnes and a 1.5% copper, although we're mining copper at 2.2%. Once the run is finished, we get paid for the actual copper in, which has been mined and processed at the end of the run. I hope that answers your question.Are there any other questions from anyone? I don't see anyone raising a hand. If you are raising your hand, please, maybe just drop it in the Q&A.Well, [ Tim ] is asking, what do you think is a maximum normal level for tonnes out of Avoca Tank can deliver?We're targeting 30,000 tonnes to 40,000 tonnes out of Avoca Tank, Tim. That is sort of the level. We are looking at opportunities if there's more opportunity. We changed the stope designs a bit, but that is of roughly the number we are looking at. But remember, Avoca Tank runs at 2.5% plus copper grade, so a significant value in grade coming out of Avoca Tank.I'll give it another minute if there's any other questions from anyone. [ Atish ], I think, can you hear me? You could talk. [ Atish ], I can't hear you. But there's [ one other ] questions from [ Owen Tan ]. Any concerns around cash flow and debt?Owen, the cash flow is managing, obviously, very tight. But according to all our forecasts and plans we're doing, there's no concerns around that. And the debt is in place. Currently, we're paying interest. There's no repayment on debt in the next 2 years, at least as we move forward. And as I said earlier, we are trying to refinance that debt, as we understand the debt we have in place is quite expensive. We are trying to refinance that under better terms, as we move forward.[indiscernible] got a email question from Jason. Did you consider narrowing the production guidance range? If so, what are the risk to take you to the top or bottom end?I guess, Jason, that's an interesting one we learned over the years that if you close it too much, it doesn't allow you any scope. We're quite comfortable with the guidance, as it sits, and we are targeting the higher end of the guidance in any way. For production, we're targeting the upper end, and obviously, the lower end on cost. So we're quite confident that we should be around those [ both ] levels.We've got a few questions from [ Atish ]. I address some of it, but I'll just touch on some of the issues.There is, as I discussed, the skill labor and mining equipment availability is being addressed to a recruitment campaign on the labor side. COVID is a lot better in the last few weeks, so we don't see that as a major issue going forward. And on the equipment side, we are in the process of renting -- short-term renting for 6 months additional trucks and loaders to help out on the production ramp-up for the business.The Avoca Tank ramp-up production has started. As we discussed, the Jaguar mine is now in full care and maintenance, and there's no -- nothing left. It's just a normal monthly running costs on an annual basis will be about $4.5 million to $5 million to keep Jaguar in care and maintenance.On the Burnvoir time line, look, we are targeting the next 6 months, but the time line to do the refinance, but that will all be driven by how quickly we can get things moving.Are there any other questions. So there's another one from [ Tim]. Look, Tim with the -- Tim is just asking what's the expected grade coming out of Tritton?It obviously depends on the blend between high-grade and low-grade deposits with Avoca Tank running [ above 2% ], some of the other runs around [ 1.3% ]. So we're targeting that average grade of around 1.6%, 1.7% copper through the process plan.There is a question from [ Anthony ]. Is Aeris still intended to work on exploration with Helix again, in the future?Anthony, yes, we are working with them. We are just making sure we focus on our own exploration owned opportunities first. And then obviously, Helix is still a joint venture partner and will still contribute in making sure that, that we deliver on those.[ Atish ] also ask trade payables and other creditor balance $87 million, does that include Washington Soul Patts [ $40 million ]?No, it doesn't. That is not a current liability. It's a long-term liability. So it's not part of the $87 million. $87 million consists of royalty provisions, accrued costs because you accrued your cost for the next few months and employ entitlements [indiscernible] liabilities and those sort of things is in the other payables.Well, there's no more questions. Thank you, everyone. I appreciate your time and your -- and to look to listen to the Aeris quarterly update. Thank you very much.