Aurelia Metals Ltd

I would now like to hand the conference over to Brian Quinn, Managing Director and CEO. Please go ahead.

Thank you. Welcome to everyone for joining this call to allow us to present our June quarter results update for 2023. I'm actually dialing in from the Noosa mining conference today where I'll be presenting tomorrow actually. more detail on Aurelia Metals and our quarter results. So please look at this information as it will be registered tomorrow on the ASICs. On the call joining me from Aurelia Metals, I have Andrew Graham, who is the interim CEO, Martin Cummings, Chief Financial Officer, and Peter Trout, the Chief Operating Officer. We're actually excited to present to you the fourth quarter results today, and I'll continue to commence by talking through some of those highlights for Aurelia. It's actually been a very strong quarter and a half year from earlier in terms of financial improvement and setting up for FY24. Firstly, I would like to emphasise the outcomes of safety at the operating assets. The operating assets and projects have managed safely exceptionally well, with major step changes achieved in reducing total recoverable injuries. And in fact, I was on site this week celebrating DARD with a 12-month entry-free lunch, followed by an underground visit to the operating stoves. Production from the operating assets are delivered in line with our financial year 2023 guidance and so has the all-year sustainable cost for the business. We've experienced some welcomed tailings and prices from some of the commodities, for example, gold, balanced out by some of the softer prices in other commodities like zinc. So Martin will talk through some of these details in a couple of minutes during the presentation. Obviously, we'll provide the full year results, financials, on these outcomes in our reporting period in the next couple of months as well. During the quarter, some material activities have been completed, including the HERA care and maintenance. And as we report in the March quarter, we've also now transitioned the owner-operator at peak and resourcing up to delivering to FY24 with Aurelia employees and equipment. We've also made some excellent decisions to fully pay back all debt on the balance sheet in the June quarter. which puts Aurelia Metals in an excellent position to take on the new financing facility for our next major Federation project. It's also good business to us very well to look at project pipeline itself on our next projects after Federation is successfully completed, which obviously kicks off in August 2023. We'll provide more details on these sort of outlook in the full year results. To set up for Federation during the June quarter. Once the funding solution was delivered, we've been focused on remobilisation of Bread Path, one of our construction contractors, in addition to tendering our packages and focusing on critical path items to ensure we deliver the project on time and cost. We've also appointed a very experienced project director, Michelle Tracy, who will report to myself and lead the project, who is on the ground at Federation as we speak. Lastly, I've spent the last five weeks here to know the people, the assets, the potential in our in our resource and some of the shareholders and investors, and thanks to all those who have provided feedback. And as a result, I've developed a focused 100-day plan, which I'll talk to you towards the end of the call. This is aimed to really leverage the improved performance over the last six months and set up our company for exciting outcomes over the coming years. So in summary, a very good finish to the year in the last half of FY23 in safety, operating, production, balance sheet and cash. setting up Project Federation, and importantly, setting ourselves up for an exciting financial year 2024. So to get run through some of the details, I'll firstly hand it over to Andrew Graham, who is the interim CEO, to talk in more detail on the guidance outcomes for the past quarter. Over to you, Andrew.

Thanks, Brian. And also, like Brian, I'm at the MISA conference this week, so if there's a bit of background noise, I certainly apologise for that. Those who joined us at the AGM in December or November would have appreciated at that stage that there were a few things absolutely critical to me in my time as interim CEO. One of those was doing what we said, so delivering on guidance. And those who were following along on the presentation on side four, we provide a summary of that and very, very pleased to say that we have achieved guidance across the board on all commodities and also on long-sustaining costs. for the full year. Talking a little bit more detail about that, March was very strong. So when we look at the June quarter compared to the March quarter, it does seem a bit softer. The first thing people should be aware of is that we didn't have error in the June quarter. So March includes three operating assets. June quarter includes two. So therefore, we did see a reduction in production of commodities. That said, Particularly peak was making a lot of base metals, less gold, and therefore we did see a shift to base metals in the June quarter when we saw, say, gold. I'll look at costs. It was probably the one that was concerning me most. And when we talked in the March quarter, we looked at the commodity graph. All were on track to achieve guidance and I'm pleased to say that they did, and gold at the top end of that range. You know, price, cost was probably the area we went to focus to achieve our target of $2,300 a year. Please just say the half year came in below $2,000, which I recall travelling through Sydney, meeting investors very early in my time as interim CEO, and that was the one area most people believed wasn't achievable because of that we need to achieve below 2,000 all in sustaining as you can see on the graph on the right we did that and therefore came in on guidance on around that 2,300 all in sustaining per ounce. Critical to us as a business demonstrating that we say what we're going to do and then we do what we say and that's something you can expect from us going forward. Similarly around the time of the AGM and in the same scene of doing what we say I did say with people that safety was a key item for me. I'm a strong believer that safe production and production go hand in hand with safety. It's certainly what we've seen and I'll talk about that in a moment in relation to DARS. But across the whole group, we had a very pleasing result for the six months in that we had no recordable injuries through to the end of June. That has meant our total recordable frequency rate has dropped into the fives, which is a fantastic result when you consider we're operating three underground mines. The other thing to consider and keep in mind there is that it wasn't steady state. Things weren't stable. The business was going through quite a state of flux corporately, but also operationally. And Brian touched on it. We turned off HERA at the end of March. and had to take that site to care and maintenance and the site moving to the end of its period of operation into care and maintenance and certainly weighing on the minds of people as well as introducing a whole bunch of work to business as usual. The other item that Brian touched on is we took people who only operated mining as well through that period and it was extremely pleasing to see it come out of Piedmont and move into owner operator and not have any safety incidents in that period of time. Everyone touched on in slide five is our recorded environmental incident frequency rate. Just saying that our group manager of environment, John Thompson, effective as the architect of that, and it has been recognised as a finalist in the Youth of Wales Mining HSEC Awards. Please remember, this is our target for the year of three, and we've come in at 2.9. So as well as not harming people, we're pleased to say we're having a new impact on the environment as well. I did talk about good safety results, going hand-in-hand with good operation results, and the reality, we moved to a side six, which is the DARS result. And for an underground mine in Australia, this is really quite incredible, in that they have not had a record of an injury in 12 months. And therefore, total record of an injury frequency rate, which is a 12-month breathing average, has moved to zero. That's something, you know, that's incredible. But if you think about what that actually means, it means we haven't hurt people to the point of a record of an injury in the last 12 months. And that's what safety is all about. People come to work. do their jobs and can go home in as good a state or better state than they arrived. And the photo on slide six of a chunk of our workforce, underground workforce particularly, all very pleased with our outcome. And hats off on the safety outcome to Peter Trout as well as our three operational general managers for driving that. It doesn't happen with no work. and it's really great to see everyone focused on their own safety but also the safety of their workmates to ensure continuity of operations in the production performance that we saw on achieving guidance for the full year. That's all I'm going to cover and to cover the assets in a bit more detail I'll hand across now to Peter Trout.

Thank you Andrew and good morning to everyone on the call today. As you can probably pick up from Brian and Andrew's comments, it was a very busy quarter across our business and all the sites. So I'll discuss each site's results for the quarter with reference to the presentation slides released this morning, starting with slide seven for our peak operation. Over the quarter, the volume of ore mined and processed at peak was stable relative to the prior quarter. This quarter, though, the majority of the mill feed was sourced from lead vincore, which made up around two-thirds of the feed tonnage. compared to about 50% of the tonnage in the prior quarter. And that then flowed through into the metal production reported today. Zinc-to-lead metal production was high, with a substantial semi-8% increase in zinc metal, which is due to the higher grades we saw from the Kronos deposit, in accordance with the mine plan, and also the greater proportion of lead-zinc ore in the mill feed. Correspondingly, copper metal production was down about 453 tonnes, And that was because less copper ore was processed and we treated lower grades over the quarter. And gold production reduced by 37% to 6,400 ounces, which is in line with the lower mined feed grades. During the quarter, we completed major plan shutdowns on the shaft hoisting system and the process plane. And more work is planned during the September quarter to replace structure steel in the mill and perform remediation tasks in the south mine shaft system so I can bring it back into full personnel riding capability. I would like to comment on underground mining performance at peak because whilst we've completed the owner mining transition, it's not where we want to be. So there's been a series of initiatives in place to lift productivity and ultimately our oil production rates, which are the important drivers of unit costs and operating margin at peak. As part of this program, development rates were ramped up from the March quarter and will increase further into the current quarter as we establish access to future stoking areas. And these include the recently delineated Chesney East zone at the North mine. We've seen positive results from these initiatives across the site and we'll continue to pursue them over the current and future quarters. If we move now to slide eight, which talks to our Dargs mine, produced a bit over 9,000 ounces of gold for the quarter, and that contributed 57% of the group's total gold production for the quarter, remembering now that we don't have HERA as part of the mix. Strong production volumes at site were maintained, slight increases in the tons mined and processed, and we've made full use of the development consent modification received in mid-December last year to increase volumes through the process plant. As we mentioned in the March quarter results, development rates have reduced in line with the mine plan and this is contributing to a reduction in site spend but also unit cost. We've now completed development of the lowest mining level and are now focused on development in the upper remnant mining areas where we are seeing some good grades come through there and we'll set that area up for production over the coming quarters. Another important activity during the quarter was the update to the Darg's Life of Mine Plan, which consolidated the results we've received from the infill and extensional drilling programs that were completed in the March quarter. The Life of Mine Plan confirmed that mining and processing will finish during the first half of FY25 and shows we can deliver a strong cash contribution from Darg's over the remaining period of its mine life. Turning out of slide nine, We transitioned the Heros site to care and maintenance during the quarter and completed demobilisation of contractors, personnel and plant. That process went very well and as Andrew noted, it's not an ordinary activity for us and the effort from the site management team there and the contribution from our contractors and employees was key to delivering that result. The final process point clean-up delivered 540 ounces of gold which provided a nice revenue contribution. And the slide you can see there, or the photo you can see on slide nine, just shows that final bar pulled from HERA. Activities at the site are now focused on preservation of the existing assets for use in the Federation project and future processing operations. I'd also like to comment on the Working Smarter program, which is covered on slide 10 of the presentation deck. This is a real highlight for the business over the last eight months or so. We've seen a number of cost and efficiency benefits banked from this program, which was launched in November last year. And this is all about drawing upon the knowledge and ideas from our workforce. So it's really good to see over 600 ideas submitted and 220 of those validated and taken through to implementation. An example on slide 10 shows members of our underground service crew at PEAT who had just finished setting up a 3D load scanner. It gives us real-time feedback and the volume of rock load in each haul truck tray. And by use of this data, we can provide feedback to our loader operators so they can fully utilize the tray capacity and thereby improve the payload moves per load. Just a small example of one of the many productivity and cost initiatives underway at PEACH at the moment. And when we stand back and look at the Working Smarter Program, we set ourselves a really challenging target back in November with a $24 million of benefits, and we We really knew that was a stretch for the business. So getting to that final result of $25.6 million in benefits is a real credit. Everyone has contributed to that program across our entire organization. On that note, I'll hand over to Brian to talk to the Federation project. Yeah, thanks, Peter. Look, Federation is a very exciting project for Aurelia Metals and supports our ambition actually to take, my ambition to take Aurelia Metals to be a development operator of choice in base metals and namely copper and zinc. So we are resourcing our project with very experienced leadership and contractors to ensure we can meet our schedule and costs safely that we're committed to. So the operating model that we're setting up really will be something we'll replicate for our future projects with a very experienced team. At present, the team is on remobilisation, getting the safety management systems in place, vent shaft planning and tendering for various critical path activities, including rail upgrades, etc. I was recently on site and can report the site is well set up for remobilisation and Workforce Camp is also ready to go and in very good condition. So with the appointment of Michelle Tracy, that's a massive opportunity for us to leverage her experience and her contacts and obviously be able to deliver this project in a very disciplined way in line with our targets. We'll obviously be providing more updates on a quarter-by-quarter results basis on how we're tracking against these projects But once again, I'll just reinforce it's a very exciting opportunity to really build this mine in a very, very good location and close to our facilities in the Cobar Province. So I'll hand it back to Martin now to talk to the financials. Thanks, Brian. So I'll be turning to slide 12. And in addition to the great outcomes on safety and operations that the team has taken me through, The June quarter also included our significant milestone of announcing the new traffic era funding package and completion of the equity raise. This will now enable us to restart development of Federation, as Brian has said. I'll now step through the waterfall items on this slide, and then I'll update where we are on the refinance process. So we finished the quarter with a cash balance of $38.9 million, and as outlined in the June operating performance, we continue to focus on ensuring our assets are cash positive with just under $15 million of cash flow generated. As we flagged in the March quarterly, operating cash flow was expected to be lower this quarter with cessation of operations at HERA at the end of March and due to the March quarter including some additional concentrate sales related to prior period production. In addition to those items, this quarter at peak we did incur some higher concentrate treatment charges with some of that due to the higher sales in the prior quarter, and we also invested in a new haul truck for the underground fleet. The DARG's operating cash flow remains strong. It is benefiting from the current favourable gold prices and from the planned reduction in mine development. In SY24, our focus really is on continuing to maximise the operating margins of our assets, in particular at peak. A key enabler for lowering peaks unit costs is to increase volumes, particularly given there is spare milling capacity available. And our attention as a management team is now firmly on realising those activities improvements, as well as right-sizing the operating cost base. And asides with the life of mine now forecasting the end of operations in H125, as Peter mentioned, that asset really becomes an important cash contributor for the remainder of its mine life. Given those strong gold prices, and the lower development requirements. And our plans are now focused on realising that cash contribution through continued predictable performance and cost management. We'll be pleased to give you more detail on our operating plans for FY24 as part of our FY23 results announcement, which we planned for late August. As mentioned, HERA has now transitioned to care and maintenance, and pleasingly, we did recover that 540 ounces from the final clean-up of the plant The HERA operating cash flow was modest this quarter, obviously, and it was impacted by some revenue adjustments from prior shipments and the final costs for the operation through March. We incurred a $4.8 million cost for care and maintenance transition this quarter. This was in line with our plan and did include just under $2 million for redundancies paid to staff. The other one-off costs relate to demobilisation of contractors and service providers, as Peter mentioned, And it does include the commencement of some of the ongoing care and maintenance costs at that asset. Those ongoing costs are expected to be less than $1 million per quarter going forward. HERA was actually the main contributor of the unfavorable $2.9 million working capital movement as well. And within that, there's about $3.3 million in payments that we made for HERA suppliers. I do want to point out, though, that these movements are just the cash flow impact from the working capital unwinding. and they are not additional costs to what has been reported as operating cash flow for HERA previously. Growth capital, exploration, and corporate costs were up slightly, driven by some higher corporate costs. And as you will know, the growth capital will start to ramp up from this quarter with the recommencement of development at Federation. So on the waterfall, the final movement relates to the refinance process with a positive movement of $1 million for the quarter. And with that, I'd just like to turn to slide 13 to take you through where we're at with the refinance process. So the steps on this chart are in line with the refinance steps that I outlined on the call on 31 May. So during the month of June, we did receive the proceeds from the institutional placement and entitlement offer of $23.4 million. As Brian said, we also repaid our term loan in full, which was $8.6 million. and we fully cashbacked our performance bond facility for another $10.6 million. These were critical steps that allowed our existing banks to release their security, which will now clear the path when we come to reach financial close of the new Trafford Europe facility. We paid $3.4 million in fees in June, and they relate to the institutional equity raise and part of the debt-arranging fees. So that was the positive $1 million net movement during June. But as you can see, there are some significant cash flows that will come in through July. So in early July, we received the proceeds from the retail entitlement offer of $16.4 million, and we also paid the balance of the fees relating to the retail offer and the debt arranging fees of another $2.5 million. So those fees were all in line with the fees outlined in the equity raise presentation. So where we are now is that we're focusing on finalising satisfaction of the conditions precedent for the Trafigura facilities. and that will allow us to draw down on the performance bond facility. We expect to satisfy those CPs very shortly, within this month. Once we replace the performance bonds, the existing bankers will then return the $56.8 million they're holding as cash backing. And along with the cash on hand, the $38.9 million that we have, we'll take our cash on hand to around $110 million. And as I've outlined previously, we do have the long-noted grants facility, and we'll keep that undrawn for now, but that facility provides further liquidity up to around $145 million. So in summary, it has been a transformational quarter for Aurelia and for our balance sheet, with the balance sheet now set up to fully fund this next stage of growth. Thanks for your time. I'll hand the call back to Brian. Thanks very much, Martin. So if I just move to the slide which describes the 100-day plan, really how are we unlocking future value for the company and for our shareholders. So I described at the start of the presentation, and as my colleagues have actually presented as well, we have a more stable platform in the last six months to build our full potential for our shareholders going forward. So using the feedback and information I've received, which I'm still gathering as I progress, 100 Day Plan is very focused on five areas in the immediate period, not in any order of priority, but one, really is we need to continue to attract and retain and develop quality people and this is the key for our long-term success. We need to safely deliver a step change in our cost base and hire throughput to fill our mills so we can deliver a higher share of value through all the commodity price cycles at peak and obviously we're working through a plan to understand what's required to deliver a lower half the cost performance in the medium term. Number three is really safely maximise value from DAG's operation over the remaining life of the asset. Obviously, we're running the business very well there, management's doing a great job at DAG, and we just need to continue to make sure we maximise the value to the very end of that business and do it in a sustainable, safety way. Four, setting up Federation for success to deliver safely on time and budget, but importantly, make sure we set up for long-term success for Federation as well, so we can maximise the value of that full resource. And fifth is to optimise our cobar province and consolidate all of our organic options to fill the mills with good quality ore which will deliver a superior share of value in cash, including completing studies on grade cobar which will form one of many of our future projects in our hub and spoke model in the province. We'll talk more about this in upcoming presentation releases against those sort of focus areas and against our business plan, but in summary, A very good finish to the year in the last half and the last quarter for FY2023 in both safety, operating production, balance sheet and cash and setting up Federation project and importantly setting ourselves up for exciting financial year in 2024 and one of the most important is people are going home safe every day as they come to work. They're going home better than they actually started the shift with. That's very important to us and something we very much value as an organisation. So I'm really excited by the opportunity we have ahead of ourselves in the business and now I'll hand over for questions.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Will Serlo from Ordner Nat. Please go ahead.

Yes, good morning, Brian and team. Just a couple for probably a self-paper. At peak, just wondering, how should we be thinking about mining rates between the copper and the lead-zinc portions of the aster? Are they going to deplete in lockstep, or will the lead-zinc get depleted at a higher rate than the copper? It will on that one. depends on the timeframe we're looking at. So over the next couple of years, we'll continue to feed a mixture of lead-zinc ore and copper ore sourced from the South Mine and North Mine. Beyond that, when Great Cobar in its production, we'll see the lead-zinc contribution decline based on current outlook, but much higher copper volumes coming in. But as Brian mentioned before, that's just the baseline, and we're looking at other options in the district with our hub-and-spoke model to get the best mix of feed into those process plants. And maybe switching to Doug, how should we be thinking about the grade profile there to the end of mine life? Is that going to be broadly reflective of immediate history, or could there be some kind of reversion to the grade in the 2022 production target? Well, I think probably the best response there will come out in coming weeks when we release our mineral resource and oil reserve update to the market and the production target, and that'll give you a more quantitative feel given the horizon of the mine life at dark and what those grades are going to be. I will say though that this random area we're back into in the upper levels of the mine, we're already seeing some grades from development there that are higher than the quarterly grades we've seen in the June quarter. Okay, no doubt. Of course, without that, I'll pass it on. Thank you.

Thank you. Your next question comes from Cass Petropalo from Canaccord Genuity. Please go ahead. apologies. Your next question comes from Wolfgang Kissel, private investor. Please go ahead.

Yeah. Hello. Thank you very much for the presentation. I have a question to your zinc production, which you highlighted as very positive. Now, as a side product of zinc production, we have gallium and germanium. Have you any plans to utilize your zinc production to to produce also gallium and germanium, especially that these two rare earths are considered in the forefront of high-tech production of hardware.

No, we don't. Our processing facilities at PECA are set up to recover a concentrate we don't have the ability to extract any further metals on site, apart from the gold that we produce. So the extraction of any of those other elements really is something that happens with the smelting and refining end.

Okay, thank you.

Thank you. Your next question comes from Cass Petropalo from Chemical Genuity. Please go ahead.

Cass, I'm a shareholder. It was a company that had been there a long time. This question is directed to Brian Quinn. So just previous managing directors have sort of run this company from a head office and not got their hands dirty and go to site and meet and build confidence within their employees. What's your plan, Brian? Are you going to go out to site? I know you've got managers on the ground and supervisors and all that, but how actively are you talking to employees? to build up morale and just to put your presence there and get a bit of confidence for them to improve productivity?

Yeah, thanks for the question. Look, so I've been with the company for five weeks and I've been outside for two of those weeks, two and a half of those weeks. Spent two weeks out to Cobar for one week each and also been to Dards this week and previous weeks as well. So my intention is to work with the teams, to support the teams, Obviously, I've got many stakeholders I need to work with and employees are definitely one of those stakeholders. And our role is to obviously hold them accountable, but also support them so we can maximize the value for the company. So in answer to your question, definitely we'll be around the sites on the projects in Brisbane and with the stakeholders and investors on a very sort of routine basis.

Okay, thanks.

Thank you. Once again, if you wish to ask a question, please press star 1. We'll pause for any further questions to register. Thank you. There are no further questions at this time. I'll now hand back to Brian Quinn for closing remarks.

Well, thanks everyone for joining the call today. We look forward to presenting the four-year results in the coming weeks and look forward to further questions. And just want to reiterate, I'm really, really happy with the quarter results and the last half results, the teams being able to work together with. So we look forward to speaking to you very soon about the four-year results and the guidance going forward. That's all. Thank you, everyone, for joining and we'll speak soon.

That does conclude our conference for today. Thank you for participating. You may now disconnect.