Aurelia Metals Limited

I would now like to hand the conference over to Mr. Andrew Graham, Interim Chief Executive Officer. Please go ahead.

Thanks Rachel and thanks to everyone for joining the call. I'm joined today also by Peter Trout and Martin Cummings who will talk to parts of the presentation as well as be available to answer questions when we get to that point. For those who aren't aware, we'll talk to the presentation that's available on the ASX announcements platform. today and I'll reference slides as we go so that you can follow along. We'll open up on slide three for those with the presentation and I've chosen to open by talking about guidance and part of the reason is you may have when you looked and opened our quarterly today think the December quarterly looks a lot like the September quarterly and nothing's changed but I can assure you a lot's changed and a lot continues to change and our presentation today will take you through some of those things that we're working on. Firstly, on guidance, we are on track to achieve our guidance and I'll talk to that in some detail. On production, the four graphs to the right give you a good snapshot of why we're confident we're on track to achieve guidance with each of our major commodities sitting above the kind of halfway mark as we get to halfway through the year. There is some split quarter on quarter and variation between copper and lead and zinc and a lot of that has to do with flows through peak and a sequence of material coming through peak where, you know, we run batches of copper or lead and zinc ore. Also, we've had the lower lead and zinc production out of Harrah with the new mine plan. And we'll talk to that later in the pack. In respect of all in sustaining, you'll see that our actual for the quarter six above guidance, we are still very confident of achieving guidance for the year. You recall that we updated guidance on 19th of December and that was announced. And the timing that we put that out, we took account of the first five months of the year. And as we look through the pack and talk through it, you'll see December was an extremely strong outcome, all in sustaining around 1675. So on track to achieve our guidance for the year. Not saying that we're going to stay at that level for the rest of the year. We had a lot of things go right through December, but we're still very confident and achieving the guidance that we set with the full knowledge in December of where we sat. Turning on to page four then, you'll recall those who attended the AGM that Peter Botton and I spoke to you at the AGM on our near-term priorities. And I'm pleased to be able to report back positive progress against those priorities. Now, the slide title is CEO's Priorities. I mean, it's important to say priority is not my work and it's great to see the team across the business stepping up and supporting the change process. And we'll talk through some of that as I talk through the slide. Also, I'm only going to provide a summary here. Some of the detail that sits behind these activities and the work supporting those activities will be covered in a little bit more detail as we go through the presentation by both Martin and also Peter. Starting with safety then, TRIFR remains stable for the quarter. In all honesty, stable's not good enough. However, in a period of time where there's a lot of change going on, we were very pleased to see that that didn't go backwards or materially backwards. But as I say, it's not good enough and there's quite a bit of focus in the business coming into our lead indicator program and doing the work to ensure these injuries don't occur rather than just counting them after the fact including things like risk assessments and hazard identification, particularly in work that's not commonplace, a bit out of the ordinary. And we've had a few incidents in that regard over the quarter. The other piece of work we're doing is some early identification in the mental health space, recognising we're going through quite a period of change and some of that change, as you heard on the call in relation to HERA, materially impacts our employees. So we're being very conscious and ensuring we're on the front foot in that space. Moving to operational delivery and cash management. Peter will cover a range of additional topics for this, but in this point I'm going to focus on the error change we talked about in December. That change got implemented at the start of December and I'm pleased to say it really is delivering. We got very strong results in December. about 36,000, a bit over 36,000 tonnes from underground, which is really the target rate we want to be feeding into that plant. And we fed about 37,000 tonnes in the month of December. It really helps to reach fixed costs and help with a very strong oil and sustaining. For HERA for December, oil and sustaining sat around the 1400 mark, which was a strong contributor then to the overall December outcome for the business. And the credit for that really, you know, fits with Rob Walker, our site general manager, Nick McCloskey, the mining manager on site, who both put a lot of work into coming up with a plan that was deliverable and took account of risk and then actually worked through that in the period of the month of December and ongoing now. You know, it wasn't the smoothest of months. They never are in mining, but they had a plan. They had a backup plan. They were able to work through that and achieve what was a very, very strong outcome. Also credit to Justin Woodward in our mine planning department who really drove some of that early mine planning work. The other focus has been with HERA. We've implemented the plan. We're delivering the plan. Now we need to shift our focus to an efficient transition to care and maintenance. You'll recall that the plan shortened the mine life, focusing on higher value materials, which you're seeing the benefits of now through cash flow. But there's quite a bit of work we need to do to ensure a smooth transition to care and maintenance. The people part of that is very active and we got going on that straight away as we talked about on the call in December, ensuring that people had some certainty about their futures. But the physical part of care and maintenance is our focus at the moment and really thinking about the sequence, the timing, the work. And then once it's in care and maintenance, what's needed to keep it in a reusable form when we're ready to turn it back on for federation. Another key program which is up and running and certainly kicking some goals is our Working Smarter program on continuous improvement and margin improvement. There's real credit there to Simon Young and our team who's really been pushing that and spending a lot of time across the site driving that program with the sites and it's really great to see the whole team coming together and being part of this change program. Shifting here then to Federation. We'll talk firstly about the optimisation work. There'll be more on this later in the pack. We talked about further optimisation of the feasibility study. That work's ongoing. There's a very active mine planning element to that, which we're doing currently as part of our life of mine planning process. We're also looking at optimisation of the capital to develop the project with the scope and schedule, all the usual elements that make up project delivery, recognising that most of What's left is either mine development or brownfield and smaller capital in relation to the existing plants. The other piece of work that's ongoing is some further metallurgical test work. You'll recall the plans to take the early ore from Federation up to peak. So we're doing some additional test work just to confirm that we will get the recoveries and the outcomes that we're expecting. Federation funding was talked about in quite some detail in the past and obviously everyone's waiting to see the outcome of that Pleased to say that we're on track to come to a solution there for efficient, effective funding of Federation in this quarter. And Martin will talk in more detail about that later in the pack. The other really key plus for us on Federation is regulatory approval, sitting certainly well ahead of where we had forecast this to be. And I'll talk a bit more about that later. But, yeah, we're really looking to have development consent in place during this quarter. Finally, just touching on the leadership renewal, which Peter particularly talked about at the AGM. A few changes and a couple of new faces in the business. Obviously, I'm talking to you today as interim CEO. We've got Pat Cummings on the call as our new CFO. And Richelle had her role broadened, I suppose, into a general counsel and company secretarial role, taking on from Ian Poole, who was CFO and company secretary previously. The other change which we're really pleased to welcome in, Matt Nuzzle has joined us as General Manager of the Peak Mine. He started last week and is really getting his feet under the desk very quickly. Finally, and I won't talk to it because it's Peter Bottons to talk to, but we are ongoing with the comprehensive search for a new CEO. Peter will have something to announce on that once the search is complete. Turning the page to slide five, and as mentioned earlier, we're particularly pleased with the strong result in December. And, you know, we're cautious to not get ahead of ourselves. We recognise one swallow doesn't make a summer. But we're certainly pleased to see where December came out and getting some rewards for the hard work that's been done across the business. Looking at production first, down the right-hand column, Peak was mainly mining copper ore out of Jubilee in December. Strong Gold came with that, which resulted in a good gold performance, a good copper performance, and a very strong and sustaining in the order of So a great performance there at peak. Will it stay like that for the rest of the year? As you know, peak moves between various oil bodies and various commodities. I think that was probably an exceptional month for what we have ahead, but we certainly see peak being a strong contributor for the rest of the year. HERA and the graph speaks for itself. We talked about the change in the mine plan and it really resulted in a step change performance in December. I think we're mining around 2.3, 2.4 grams gold. Not a whole lot of lead sink credit with that, which is one downfall relative to where we've been in the past, but certainly the gold speaking for itself and contributing very, very strong cash. And DAGs, we talk about it quite regularly. It's a good stable performer, delivers as it's supposed to, as it plans to, and there's certainly no exception in the December month. So if I flip across then to the left-hand graphs in the top one, first of all, you can see the result of that performance through December 1675, all in sustaining, you know, against the 2300 guidance. It was certainly a very pleasing performance. It somewhat came to average out or average down the first two months of the quarter, having us come in very similar to how we came in the first quarter. But obviously we're hoping now to... steady somewhere below that $2,300 to then achieve the all-in sustaining guidance for the year. Turning to cash, inconsistent with what we're talking about for December, it was a strong cash month for us in December, arrested that cash reduction that we've been seeing for a number of months. The other piece which makes this even more pleasing is you need to recall our bank debt repayments and there is a repayment each quarter which occurred in December. So on top of generating additional cash into that cash balance, we also included in there paid almost $10 million of repayments to the term loan and also cash backing of the closure facility. The other thing that occurred, which post-states December, although it was submitted in December, was our tax refund of almost $10 million came in in early January. It certainly helped our cash balances. I'm going to pass on now to Peter Trout, our COO. He's going to pick up from slide seven, talking about our operational outcomes.

Thanks, Andrew. We've gained traction across several initiatives over the December quarter, and the strong production result in December has really set us up and been sustained into the new calendar year. If you look at our total recordable injury frequency rate slide on page seven of the ASX presentation, You'll see there that there's a slight uptick in the frequency rate, which is not a change in the number of recordable injuries, but more so responding to fewer hours worked across the group in the December quarter. As Andrew mentioned, we maintained high compliance with our proactive lead indicators and progressed our externally facilitated mental health program for our workforce. In terms of environmental performance, we had no reportable environmental events over the quarter, and that led to the improvement in the frequency rate shown in the chart. And that's a particularly impressive result given we had several high intensity rainfall events in the Cobar sites and the water runoff resulting from those events was carefully managed to prevent any water discharge from the Peak and the Herra sites. We turn to slide 8 and look at the performance out of Herra. You'll see the impact there of the modified mine plan that was introduced at HERA to bring forward the higher margin ore. The higher ore delivery and gold grade led to a doubling of gold production to 4,500 ounces, and that directly flowed through to revenue, cash flow, and oil and sustaining costs. Underpinning the strong ore delivery was having access to three stoking areas, including the upper hay zone, and that helped us get that 39% increase in mined ore tonnage relative to the prior quarter. It's also significant that development mining reduced over the quarter in line with the new mine plan and will actually finish this month and that will further reduce the operating costs at the Harrah site. The process plant performed particularly well with good runtime and metallurgical recoveries and the feed grades reflected the prioritisation of the gold dominant ores at the expense of the lower grade base metal ores. Changes have been through before to care and maintenance planning. We're well advanced now with our care and maintenance planning and activities. We're looking at redeployment opportunities for our employees at HERA and transferring them to other roles that are vacant in the business. We've already started removing some of the assets from the underground mine that are no longer required for its ongoing operation over the coming months. At our peak mine, activities progressed in accordance with the new operating strategy that was announced in the first quarter. Mining and milling operations over the first half of this financial year have achieved the 550,000 tonnes per annum rates that were targeted under the new operating strategy. The other significant change was the continued staged transition to majority owner mining at peak. We demobilised most of the contract mining workforce over the December quarter and have filled the majority of the new owner mining roles that have come about from that change. As a result, the labor hours in the mining department reduced by 47% over the six months from June to December, whilst mining expenditure fell by around 25% over the same period. And you can see in the chart on slide nine, the downward trend in the contractor costs. The mobile fleet transition is largely complete with the demobilization of hired equipment and the introduction of the first of two haul trucks that are owned by Aurelia. and delivering immediate productivity benefits. We're confident that these and other initiatives provide us with a platform to drive further productivity and cost initiatives across the site over the coming months. With reference to metal production, the timing of our ore campaigns led to the higher proportion of copper ore in the mill feed and hence higher copper production with lower gold, lead and zinc production. We also did take some adjustments to concentrate stocks following the clearing of high concentrate inventory that accumulated at the end of September. Turning now to slide 10 at Dargs, our team there delivered another consistent quarterly result with gold production just below 8,800 ounces for the quarter. In the underground mine, good development and oil production rates were sustained and the gold trade continued to reconcile well against the geological model. That really highlights the value of the infill diamond drilling program that's been underway over the last two years or so. Pleasingly, we received regulatory approval for modification five of the DAGS 9 development consent, and that was received on December 20. What that does, amongst other things, is allow the processing rates to increase up to 415,000 tonnes per year. Without that approval, we would have hit the previous limit in December and been required to suspend processing operations So we saw an immediate benefit from that approval by being able to process an additional 2,000 tonnes of ore in the December month. And looking forward there, those higher ore processing rates will transfer the production bottleneck to the underground mine. So in anticipation of that change, we commenced a stope backfill optimisation program. It's designed to reduce our cement consumption, which will directly benefit costs, and shorten the filling time for stoves, which will allow us to cycle stoves more quickly and sustain higher production rates. The underground infill and essential diamond drilling program is now drawing to a close and the latest results will come into the geological model and we'll use them for mine planning work that will dominate the economic depth extent of the underground workings and potentially the inclusion of the ruby load into the mine plan and those results will be coming through in the coming months or two. I'll hand over now to Martin, who will cover the financial results for the group. Thanks Peter. As you saw earlier, while our cash was lower this quarter at $23.7 million, it did grow from November to December. It is important to reiterate here that the cash balances we report exclude a further $41 million that we're holding as restricted cash to back our performance bonds. And as Andrew mentioned earlier, this is after almost $10 million of payments to the banks in December to either reduce our term loan or to further cash our bonds. You can see the chart on the bottom right here, just the rapid repayment over the last 12 months of our performance bond and debt facility. And our term loan is now down to $12.7 million. And we only have a gap of $16 million of performance bonds that we haven't cash backed. And as Andrew also said, again, this cash performance really does exclude the $9.8 million tax refund that we received in mid-January. So I'll just work through some of the movements in cash for the quarter. Peak had a very strong quarter, as Peter mentioned, and $19.8 million of mine cash flow. Concentrate sales were higher this quarter, and it did include sale of production from September quarter. But pleasingly, mine operating costs were also lower. Dargs was a solid contributor again. Cash flow was slightly lower than the prior quarter, but this is really due to the timing of shipments from Dargs around that Christmas New Year's period, which we will sell this quarter. HERA was slightly negative, but it is a material improvement on the prior quarter, and that really is a result of the actions that we've taken at HERA to maximise remaining value, and it resulted in a much improved cash flow in December of $6 million. Our growth capital was lower this quarter with the suspension of development and federation and we expect that this will remain relatively low for the next quarter before we expect to restart development in the June quarter. I've mentioned debt and cash backing so I'll just now move to the largest bar in this chart which is working capital and just explain that unfavourable movement. There really are two main drivers to that. The first one was about $13 million in higher trade payables paid during the quarter, and these were payables that were built up over the June and September period. And with our spend slightly lower in the December quarter, some of that working capital has unwound. The second part is related to the revaluation of our shipments. So we actually value our shipments each month, our shipments and our QP hedges, and we report that revenue within the operations. However, the cash for those movements isn't settled until the quotation period has completed, and therefore we report those overs and unders through Working Capital during that period. We'll talk about Federation a little bit later, but I'll just make a few comments on the balance sheet and the funding. Our existing bank syndicate have demonstrated they're keen to support the company through this funding process, and during the quarter they provided waivers of our covenants through to March to give us some space to complete the financing. This also included an extension of $10 million working capital facility out to March. The funding process is very active, as you can imagine, and we've noted in the pack we've now received a number of term sheets. The funding package will incorporate a requirement for a performance bond facility, and that's going to be around the same level as the current facility, about $65 million. The other limb of the facility will be funding for Federation, for the Federation development, but noting that the $41 million we're currently holding as cash backing will be an important component of that funding requirement going forward. We're continuing to evaluate the funding options across multiple forms, and we remain on track to finalise this by the end of this quarter. With that, I'll now hand back to Andrew.