© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Thank you for standing by, and welcome to Aurelia Metals Limited March 2020 Quarter Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Dan Clifford, Managing Director. Please go ahead.
Good morning to all, and thank you for your time this morning. I also have Peter Trout, our Chief Operating Officer, participating in the call this morning as well. I'd like to summarize the results covered in the quarterly report and then open up to some Q&A after that with some closing comments as well. There's certainly been a challenging quarter for Aurelia and below our expectations coming out of what was flagged as a soft quarter in December. While the mill operating time at Peak was planned and well executed, we were expecting a modest improvement over the December quarter in the March quarter. In comparison to the December on a quarter-on-quarter basis, ore mines and material build was largely in line or slightly below, resulting in our cost of tonne of operations marginally improving over that period of time. The combination of the lower head grades at Hera, the notified shaft outage at the Peak operation and the onset of COVID-19 and subsequent implementation measures on our operations affected our plant and metal production resulting in just over 14,000 ounces of gold and slightly lower copper counts for the quarter. The impact on the all-in sustaining costs is a key issue for the business. In conjunction with the lower sales, it was also heavily impacted by a 30% reduction in base metal products through our all-in sustaining cost structure. Just noting here that while the all-in sustaining cost is calculated on sales, which were, in fact, down 24%, production was only down 6% against the prior period. But as I said earlier, it certainly below our expectations for the quarter. Combination of these drove lower cash generation, particularly -- with certainly lower cash generation to operations, but particularly the Peak operation as the main variation to the plant. Other expected cash flow areas, particularly the Peak the -- tail end of the Peak, mill upgrades, exploration and the hedging position are generally in line in the plants for the year -- sorry, for the quarter. Exploration through the quarter has been very successful with a particular focus on results from Federation in and around our Hera operation and Peak North, very close into our -- the Peak operations, particular the base metal and gold numbers out of Federation are very encouraging for us as to the high-grade golds in a sense at Peak Gold. We are in the process of reprioritization of exploration through the year, we had deprioritized, in particular around the Hera operation, the Hebe and Main Southeast targets. And our focus now has very much shifted towards Federation as the opportunity for Hera in the coming years. At the corporate level during the quarter, particularly with the onset of COVID-19, management team and Board took prudent steps in our view based on the ongoing impacts or potential impacts of COVID-19 in the early stages of the onset, we initialed discussions with our banks to ensure to put into place a working capital facility. Those discussions are continuing. So we're speaking, we'll continue to move down that line. Looking ahead now, outlook for the business, we're very focused over this next 3-month period on our life-of-mine planning. This is in conjunction with our reserve and resource review for the year. A key piece of work for the operations team and the management team in setting up ready for next year. Our views here that we're taking is that we're -- it's rather than [ money ] of 2 mines, we're really running 2 mills and multiple ore sources, very much focused on a rate of return on those assets. In more particular view for the rest of the year now on full year guidance, as a result of the situation, the dynamic situation that Aurelia finds itself, including our contract partners, we don't believe we're in a position to be able to accurately provide guidance to the market. We still remain in a position of unpredictability with COVID-19 and particularly on our reliability of resourcing at the underground operations and the inefficiencies or lost time due to the social isolation measures that we put through in the business. Countries fared well, has had way in respect of no infections on our sites, but there is, for us, particularly 2 underground operations in Western districts to East Coast of Australia, there is consequences for us with the travel and efficiency restrictions on our business. We have the -- in this report, you will see, whilst we want be providing full year guidance, we had given the preliminary group numbers for April being the first month into the quarter and we are expecting improvement through the June quarter. And April is starting to show those signs now, which is encouraging for us in terms of full year. Okay. That's a quick summary of the quarterly reports. I'll now open up to questions and answers.
[Operator Instructions]Your first question comes from Brian Chu from Australian Gold Funds.
A couple of questions to ask in relation to your -- the cost that you have reported in Peak mine, the all-in sustaining cost is $4,239. And I want to -- even though you've provided the breakdown on this, I want some bit more clarification as to why it's gone up that much? And were there any costs that allocated to as a result of the processing plant ramping up? And my second question is with regards to the processing plant upgrade. When will we see the effect of the upgrade coming through in the ore processing, and therefore, the production being higher as the cost coming in?
Thanks, Brian. I'll start with that. If there's any further detail, Peter, will also add. The all-in sustaining costs for us based on our revenue mix, particularly out of the factor been polymetallic ore bodies, their revenue mix during the March quarter was about 65% golds, the balance base metals. The impact of lower base metal volumes and prices significantly impact the byproduct credits that are calculated into the all-in sustaining costs. So not only gold was lower than our expectations, particularly driven by as flagged like last quarter, the shaft outage, gold production was lower than expected, so has the denominator effect, but also a 30% -- on a quarter-on-quarter basis, a 30% decline in byproduct credits goes right to the heart of an increase in all-in sustaining costs. And just to -- I think just to balance that question off, Brian, I'll take you back to my comments and also in the quarterly report where on a cost per tonne basis at Peak, we actually did see a reduction over quarter-on-quarter from June. And apart from September -- the September quarter in 2020, so first quarter this financial year, the costs, whilst they have slightly increased on an average basis over the prior 12 months, they're certainly not out of line the products achieved in the December quarter. So in regards to your -- the second part of the first question, the plant upgrade costs, all-in sustaining cost is only sustaining capital. It doesn't include growth capital. The plant [ crossed ] $53 million, which was just under $6 million for the final quarter and not included in our all-in sustaining cost number. Moving to the second question as to when we will expect to see the benefits of the mill upgrades at the Peak operation, as flagged into the final stages of the report here, we are expecting a general improvement on the March quarter in the June quarter. And that does includes increased billing fee. So we're expecting to see those benefits through the June quarter.
Okay. And in terms of the grades that we are seeing in Hera and Peak, would you be -- would this be -- would the trend be changing? Or is this the new normal that we should be expecting?
I think I'll start that answer with Hera. The Hera is in the second half of its life, and we will naturally start to see head grade reductions at Hera over the medium term. We are expecting an increase in head grades at Hera in the June quarter. Therefore, an improvement in the NSR, all the material at Hera in that June quarter. So I don't expect that to be the norm that the constant decline now, but we'll certainly see improvement into the June quarter. For Peak, based on the fact that we're now in 7 -- we're drawing ore from 7 sources at the moment, 6 to 7 sources, it's very, obviously, characterized by the polymetallic base of the business. We will see -- over immediate term, we will see movement in NSR or head grades as ore bodies come on and come off, but we are expecting an improvement over the June quarter again. We were -- towards the late part of the March quarter, we were just getting into some of the higher grade gold [ blending ore ] bodies at Peak. Some of those were pushed out. We have seen improvement in gold coming through. As a result, we've been just under 6,000 ounces on a month-to-date basis in April -- quarter-to-date basis in April. So at Hera, if I summarize my answer to your question over the medium to long term, we will see head grade reductions at Hera. I think that's to be expected. And -- but at Peak, we will see variability in NSR as ore bodies come and go. So for example, through FY '19, perhaps in the early stages of FY '20, we saw the benefits of the Chronos ore body. They are coming off as we deplete that ore body, but we are -- we had 2 decline entries going to the high-grade Kairos deposit below Peak. And we will then see the measured increases in NSR as that ore body is opened up over the course of the first half of FY '21.
Okay. And all the best in the coming period. Welcome on Board as CEO.
Thanks, Brian.
Your next question comes from Mike Millikan from Hartleys.
Just a very quick one for me. Just talking about growth CapEx coming to the June quarter. How is the development across the Kairos zone? Is that largely the spend for growth CapEx for the Kairos? And also what's the exploration kind of expectations?
So Mike, in terms of growth capital, the mill has come off, as you can expect. And capital now -- it's -- the capital expenditure now that we are forecasting, particularly through the June quarter, is primarily from a mining perspective is primarily the ventilation, raise bore requirements required to the development of the Kairos ore body. And those contracts have been committed, and we will be expecting expenditure on those during the June quarter or commencing expenditure on those during the June quarter, more heavily weighted towards Q1 of the next financial year. Exploration. The second one of your question, exploration, we'll be continuing, obviously, in the business. And if I think about it from a growth perspective, we -- as I already flagged in the quarterly report, we've reprioritized -- in essence, we have reprioritized some of the areas around Hera in terms of the immediate reserve extension. And reprioritized that focus now on to Federation, and that drilling will continue to assist us in parallel with the bedstock studies, environmental studies that have been initiated.
So if - so we're still on track with Kairos to explore this ore early in FY '21?
Development, we're forecasting to be developed to the region at the back end of this financial year. And then each of those ore body regions during the first half of next year, including all the ventilation raises [indiscernible], we will give more accurate guidance on that into this year as part of the normal business.
Right. So timing for the life-of-mine plants, reserves, resource pretty much July? Is that what we should be expecting?
Yes.
Yes. And the final one for me, just on the working capital facility, has that in place yet? And if it is, do you have a rundown?
No, it's not in place, Mike. We -- as I mentioned earlier, we took a view -- well, I think -- I don't think there would have been a business under the sun that was looking at the degree of uncertainty with the onset of COVID. So we -- this is an approved move, we took a view, we looked at our own balance sheet and initiated those discussions. So those discussions are ongoing, positive and we'll inform the markets once that facility is finalized.
Okay. Cool. I'll just finish off on the last one. We've obviously got the April numbers. Is that pretty much in line of schedule? Are you pretty happy with that? And then would -- is there going to be a slight improvement on grades coming into the later couple of months?
We're expecting a general improvement. I think it's fair to say April is a reasonably good indication of that improvement just on a run rate. As I mentioned earlier this month on a conference call that what we are very much focused on this is establishing very clear understanding of run rate such that we can underpin the reliability of the business. And without giving the market clear guidance at the moment because we don't believe we're in a position to do that, we will be expecting an improvement through this quarter.
Your next question comes from Mike Munro from Hartleys.
My question was just about the byproduct credits. Just with March 31, was there a timing issue with any of the credits there where things actually rolled into the next quarter where you would have expected the sales to be in March quarter? Or is that some timing issues that would have impacted those numbers? Because that would, I guess, affect your all-in costs?
You are breaking up a little bit there, but I'll get to that. So byproduct credits at the moment, we have paid traditionally on byproduct sales at the point they get to ship. So there isn't a huge delay on those. Across the end of a month or a quarter, we will always see some movement in our working capital, but you should see that in the working capital -- in the quarter cash flow waterfall at the end. And some of that will be sales timing. And because we'll pay traditionally, the key pay timing can sometimes swing winners against us over a quarter. So at this point in time, a proportion of that working capital movements in figure 4, this is a result of sales timing, but it's pretty much in line with the expected -- with our expected ranges in run rate on the end of the period.
Your next question comes from Jay [ Han from Rest ] Investments.
This is [ Josh Shea ] from Rest Just a quick one on Peak and looking into next year. So we're still on track for that 800,000 tonne per annum figure that's being talked about previously. The mining rates look like they're sort of running at 600-odd at the moment. So trying to understand the pathway to be to nameplate?
Good afternoon, Josh. I think look -- as I said, we're not in a position at this point to be giving guidance. But certainly from an indicative perspective, the LOM period that we're going into now, and I will -- I put this in for a reason because the LOM period to us is not just an exercise to lock down on the reserve and resource for this year, it's also the strategic positioning of our ore sources and our mills to maximize value. And the nameplate capacity, the mill, the liner, the mines, et cetera, are all quite well understood. The combination of all those that we'll review through this long planning process to ensure we get the right mixes and across volume and return at the end of the day. And what I will say though is that we were expecting a modest increase in December [indiscernible] by the way, and we're expecting a modest increase in the throughput rates in the March quarter in comparison to December. That would have been the highest quarterly mill throughput pretty much for the year rather than perhaps September. With that mill upgrade now completed, hopefully, that shaft -- well -- definitely, that shaft interruption behind us, we are expecting volume increases out of the Peak operations during the June quarter, and that then allows us to establish what that run rate looks like and strategically review what it looks like for next year, and then we will give that guidance. But we're confident that capacity is established through the more line item.
Okay. So just -- Dan, just to dive for a second. So are you sort of saying that the March quarter mill throughput had there not been sort of shaft issues and the like might be more in line with the mine tonnes?
Yes, pretty much. That's right. So we had -- we lost from the point of shaft out to having it commissioned back up and running, we're roughly 10 days. And so 10 days by 2,000 tonnes a day. You can see what value impact would have been on us.
Yes, yes. And then so had do you deliver that 150,000 tonnes through the mill, for example, in March, you would have still then expected an improvement on that in June? Or are you saying June, you expect to improve on what March actually did?
Well, naturally, we will because during that March quarter, if you remember that we had a schedule mill shut down for the final timing. So the interruption in December for the -- I guess, the construction-based interruptions were effectively repeated in the March quarter with the final time. So because we don't have -- and I don't think nor is it affected to hold large [indiscernible] on the surface, there was an impact to that production.
Your next question comes from Kevin Cairns from Ord Minnett.
Dan, I noticed you're hedging due to running out in the June quarter, I think what's your attitude toward hedging going forward?
Kevin. Thanks for the question. Look, I think when it comes to gold hedging, that's very definitely a Board decision for us. There's no doubt in that. We are very aware that people invest in Aurelia for the gold exposure. So we're obviously very careful on the basis of how we look at hedging. I'm not going to give the market any clear guidance on this at this point because it is a topic with the Board for discussion as we speak. Although we are very clearly in the understanding people invest in us for gold exposure. We don't carry any debt. So when I look at a need to hedge, we -- there have to be a very positive reason for that. At the moment, I think everyone can see what some of the international banks are calling for shortly unmediated term gold prices. So I think at this point in time, Kevin, we will be happy to see our current hedging position being wound out.
Your next question comes from Mark Fichera from Foster Stockbroking.
Just a couple of questions. Firstly, on Peak, your gold shipments were lower than the production. Do you expect in the current quarter that sort of reverse your shipments will be higher than production?
I'll just play that back to you, Mark. Sorry, you were breaking up a little bit there. I think what you're saying is that our sales were lower than what we produced for the March?
Sure.
Yes. I think, look, gold -- for us, gold is pretty much sold when we produce, if that makes sense. So it goes through as that will sell. And I don't expect on a quarter-by-quarter basis any large swings in last month, certainly, from a working capital flow perspective. But I assume you were talking gold there, is that right?
That's right. Yes.
Yes. Probably, the difference for us at this point in time was copper during the March quarter.
Right. And on the -- on for Hera, would you expect the grade to lift in the current quarter? Can you give an idea of the quantum for that?
Look, I think at this stage market, I've been pretty clear here, we won't be providing guidance on that. But we -- as I have generally stated that we are expecting an improvement.
Okay. And just a final one, just on the life-of-mine segment and review. When do you expect the results of that sort of be finalized and maybe release to the market?
Well, I think the life of mine for us is it's quite an internal process. There's any substantial changes that come from that review on a chance of publicly stated strategy direction or physical guidance for a period that we would release or disclose what those changes in direction have been. We'll see that period come up over the next 2 to 3 months. Primarily, what we will see as an outcome of that is the annual reserve and resource review, and that will be published very early in the year. In terms of the LOMs, if there is a substantial change of what we're looking at, the change in direction, we will inform the market at that point.
[Operator Instructions] Your next question comes from Sam Berridge from Perennial.
Just on the zinc prices -- sorry, the achieved prices you've disclosed for the quarter, is there anything else in there besides the periodic pricing adjustment? Like does that achieve price include like a TCRC adjustments as well?
Yes. Well, I may have to confirm that we do, Sam, perhaps if it just specific in detail on that, perhaps, we may take that offline as another point, but there is -- the pricing for tonne for us is usually quite long down in that regard.
Your next question comes from Bill Murray, a private investor.
What are the impurities like in your lead and zinc concentrates?
Sorry, Bill, just to point out that the impurities in our lead zinc concentrates?
Yes. Do you have any penalties? That's what I may be asked.
No, we don't know. Just remembering, Bill, we're selling that separate concentrates now out of Peak, lead, zinc and copper, and certainly off the back of the mill upgrades. But we don't receive the market penalties on those. And at Hera, we're a bulk -- it's a bulk con production, not a separate commodity count.
On Page 3, you said you had -- your first zinc concentrate shipment. However, on Page 10, it doesn't actually show a separate zinc concentrate production. I assume it's covered in that bulk concentrate, lead, zinc of 3,090 dmt. I'm just wondering it must have been a terribly small shipment. And also, on your actual payable zinc sold was 217 tonnes, which I find very strange.
Well, I haven't got the individual shipping details on me for separate counts. And I think it's fair to say that we've come out of the upgrades -- I'm assuming you're talking Peak there, we've come out of the upgrades and have balanced things out. In that regard, we have seen certainly over the quarter in terms of the grades, certainly an improvement. And the production that actual metal zinc con production through that period, which we would expect to see.
The actual zinc production in April and it's not really sort of that flash in that if you're not producing from Chronos, so I would expect a much greater increase?
Yes, I think, well, certainly, the lead/zinc levels, they do vary a little bit, I guess, pending ore bodies and head grades that we're getting into. So it's -- the nature of these ore bodies is generally not flat line. I can't stress that enough. Certainly, the numbers that we put in for the early stages, well, certainly the first month of the quarter being April indicative of the improvements that we targeted for the quarter. But just drawing flat lines from month-to-month on certainly base metals from Peak is generally not that accurate.
Yes. Just one final one. The treatment charge on zinc concentrate has been very high. It's around about USD 300 a tonne. Do you have a yearly contract on these things? Or do you sell on a shipment-by-shipment basis?
Usually, we will be on a yearly contract. We have 2 marketing arrangements, the bulk con coming out of Hera has offtake arrangements with Glencore. So those contractual terms are set. But certainly, out of Peak with the separate cons, they are on an annual basis. And the TC, in particular, have just been reset, and we will -- contract -- our offtake contracts will respond to those benchmarks that are set.
The yearly contract was set early this year at about USD 300, it's come down to about USD 260. Are you getting the benefit of the USD 260 or thereabouts?
Well, our -- the way our pricing mechanism that works, we did close with benchmark. We've just extended there for a short period of time, such that the timing of our offtake arrangements dovetailing with the timing of the benchmark settlements such that we can have a clear factual base in which we're negotiating for.
Your next question comes from Roy [ Leonard ] Gillespie, a private investor.
I have a question about fly-in, fly-out staff being impacted by the COVID-19 restrictions and our staffing levels in general adequate for ongoing processing.
Thanks, Roy. I think just 2 parts to that question. We do have a proportion of fly-in, fly-out across both operations. And naturally, on the basis, if you just look across Australia now that the disruption to domestic flights and border restrictions certainly did impact us. And to an extent, we'll continue for a little while. So we do get a -- I think a variability in our resourcing capability as the situation either it develops or unfolds or is pulled apart again as we come out of this. So yes, we are impacted by the fly-in fly-out. And second part of your question, are we adequately resourced? That's actually almost a week-on-week challenge for the company because it does move as to whether we are or we not. It depends on the restrictions that are put in place and how individuals handle their, I'd just say, personal lives as to where they are living and when they'll travel and if it's up, they will travel on a week-by-week basis. So I think it gets to the heart and for all shareholders to understand this that gets to the heart of our ability to predictably or accurately forecast what our business is doing. In a general basis, we're not going to stop, but we are running as efficiently as we could and resourcing levels will vary across, particularly the underground processes on a week-by-week basis. So I think I'm hopefully articulating that it is still dynamic as much as we see the country starting to -- I think, nationally, the country has done exceptionally well, but it is not [indiscernible] settle consequences at an efficiency level on a day-by-day basis for a mining operation.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Clifford for closing remarks.
Okay. Thank you, everyone. Just a couple of closing comments, I can. It certainly has been a challenging quarter for the business. And our expectations are those for the June quarter an improvement over both December and March. The situation -- and hopefully, I've articulated again now for a second time, particularly off the back of the first call this month that it does remain on a -- certainly, from underground human resourcing perspective and efficiencies, quite a dynamic situation, whilst everyone looks at the situation say it's starting to calm down, at which I think we're all very pleased that we hope it is, there's still consequences on the mine sites. We're working -- we've worked well with that, and our teams have done well, but as I said earlier, there's still consequence to that. We do though and are definitely looking forward to setting a path of coming out of these restrictions. And we have to do that it very carefully considering the exposure to our operations in the widespread basis in which we draw people in, but we will set that path. And we also particularly aware of the impact we have on our community around us because there is a fair proportion of people that are coming from interstates to come out and help us in our operations. We'll establish that path out. But more importantly, what we are focusing the company on is what is already a well-established base to get into higher-value areas, particularly in and around the Peak ore bodies and that's focusing of our exploration effort now around the Federation deposit for the benefit of Hera.So we're confident it has been tough. There's now an air of optimism as to what's coming at us and our ability to handle that. And we are seeing now the green shift of that improvement. So I can assure everyone that the work and effort that's going into the business. Thank you, everyone, for your time. There's no further questions, and we look forward to the next quarterly update. Thank you, everyone.