Aurelia Metals Ltd

I would now like to hand the conference over to Mr. Brian Quinn, Managing Director and Chief Executive Officer. Please go ahead.

Thanks Darcy and good morning and thanks for joining the Aurelia Metals Quarter 2 update for FY25. I'm joined today on the call with Martin Cummings, the Chief Financial Officer, Andrew Graham, our Chief Technical and Business Development Officer and Angus Wiley, our Kovar Regional General Manager. Today I'll run through the slides. I'll call out the slides as we're going through them as per what's provided in the pack. Firstly, I'd like to call out that we continue to report results of strong underlying performance across the business this quarter through all of our metrics. Our cash position is looking good and delivering what we have committed to the market in terms of our various milestones. I'll just talk to slide three. Some of the key highlights that we've taken through today that I really want to call out will include that PEAK has continued to perform strongly to deliver cash, and we'll discuss some of these metrics in later slides. Two is we've delivered and processed a batch of Federation ore through the PEAK processing facility and have been very happy with the results, as has been reported before. Three, we've maintained a strong and healthy balance sheet while building our Federation project. With the cash from Peak funding this growth and other activities, it really shows we're managing the balance sheet very tightly and diligently. And four, with the benefit of the production lift at Peak over the last six consecutive quarters producing cash, Federation delivering stopes and production in line with the plan and managing growth capital within our budget, and with the resulting strong balance sheet, we've really been able to continue to pursue our growth projects and exploration options that will fill our mills with quality high-margin ore into the future. Moving on to slide four, we continue to be on track with our performance against guidance for the key metrics. A couple of call-outs I want to make is really during the first two quarters, we've been producing at peak. DAGs obviously shut down in quarter one. Federation Ore has been processed in quarter two at around 16,000, just over 16,000 batch And in the next two quarters, our production is set up to continue momentum and be stronger, as will our federation ramping up with zinc, lead, gold and copper, and Peak Mine will be running at full capacity also. Number two, sustaining capital is slightly higher due to the purchase of two new trucks of Peak, but definitely still within guidance on a four-year basis from our perspective. Our exploration capital is slightly behind, but will pick up in H2. A fair amount of detailed planning around NIMIGI and Federation were undertaken at the start of this year to get the program launched, and we've also done new competitive contracts for both the underground and surface drilling also. On the fourth point I'd like to raise really is the group operating costs is obviously looking good in terms of the full year. This does not include the Federation operating costs. And lastly, the Federation growth project capital is definitely on track to be within budget and for FY25 within guidance. So overall, when I look at the guidance metrics we have and we set out at the start of the year, we're looking very healthy and in the right direction for the full year. On sustainability, slide five, as I continue to reiterate every quarter, safety is our most important value, that we ensure our people work safely and return home with a sense of purpose and also return home safely. Currently the trends are in the right direction. but still there's a lot of work required to really get these levels to be operating in a sustainable way. Key issues currently underway in the first couple of quarters that we're continuing to work through is revising our failure risk control protocols, which is important to have the involvement of the workforce and management to really define what can fatally injure our people and what are the controls to prevent this so that we can systemise those and make sure that we prevent those going forward. This work is ongoing through FY25 and into FY26. We're also progressing our deep dives on risk management for high risks in our business to ensure that the right controls are in place, the right control owners understand their accountabilities and we're managing the risk to our business that allow us to keep looking around the corner to stop those sort of unknowns popping up on the business. And thirdly, and most importantly, making sure our leaders are spending time in the field with our people to ensure our people have the right tools, using the right processes and practices to do their work, and using things like Take Fives and JHAs to really ensure they're playing their work well and executing their work well. Getting initiatives for the quarter for environment community have really included the exciting new opening of our Cobar Community Hub for Aurelia. This is a new shop front of the centre of Kovar where our teams can sit with community members and discuss our business, talk about employment, learn about our growth projects and just to hear in general any of the concerns the community may have that we can address. We've also continued to work pretty intensively on our energy efficiency and water reduction projects from an environmental point of view to really look at how we can close some of the gaps on reducing energy and reducing water consumption in our businesses. which will have ongoing effects and benefits to our business, both in costs and in being more sustainable for the future. So in summary, from a sustainability point of view, definitely trends are in the right direction, but lots of work still to do to make sure we can sustain that direction and be the business where people can go home safely every day. In terms of slide six for peak production, there's been good performance uplift, but we're obviously wanting to to take us further and set up the business to make some step changes. Definitely all metrics are heading in the right direction as you can see from the graphs and we have a clear focus on driving productivity agenda harder the next six months to improve our unit costs and meet its advance above the current improvements. We continue to roll out our mine operating system, our MOS, and continue to focus on the north and south mine as two separate production areas with all the equipment and people and resources needed to make sure we can run those businesses properly on both sides of the north and south side of the peak. Our key focus is really on jumbo utilisation and advance rates, maintenance costs and delivering quality oil in line with the plan for mill for processing. On the processing side, the focus remains on squeezing more from the recoveries. So far, year to date, there's been some really good improvements, as you can see from the graphs on the slide. There's still a way to go to get the recoveries where we'd like to achieve this consistently. and importantly release some information on the Federation processing in this quarterly release. Very happy with the recoveries of these ores that are provided and also very happy with how the materials have flowed through the plant. Definitely this has exceeded our expectations and we'll continue to focus on these recoveries and throughput rates coming from Federation as we continue to ramp up the operation. Again, all these metrics are trending in the right direction and the team's focus is to make sure we continue in that direction. I'll just turn to slide seven. Slide seven is for Federation. It's another highlight for this quarter. Obviously, development has been performing very well. It's exceeded targets. Our stoke drilling has been on plan. Maintenance ventilation fans have been installed without significant delays. Our power systems have been installed for this current phase we're working through, and we're ramping up production to the capacity we've planned. It's very rewarding also to see some revenue in quarter two from Federation as a start of offsetting some of the capital costs we're outlaying in terms of building the mine. The project continues to remain in the side budget as was approved, which is something I don't hear from many other mining projects, and that's something we're going to continue to make sure we keep on track to the very end. Federation now continue to focus on development in the decline to set up platforms for our infill drills to help design our future stoves and understand the ore deposits better as we progress. As noted in our release, our scoping orientation has changed, and so have some of our development sequences, based on the detailed geological knowledge we've gained underground to date. And we'll continue to modify our plans with the new infield drilling information and mapping information that we have available as we progress. But for now, we're on track to ramp up the business for the next couple of years with the information we have from the infield drilling. So once again, Federation definitely on track to deliver what we said we're going to deliver. and with obviously more work to be done as we progress the mine. I'll hand over to Andrew to provide some updates on the works in quarter two for exploration, which is key for our options for our growth beyond what we have in our plans now. Over to you Andrew.

Thanks Brian. As it has been for the entire business, it's certainly been a busy quarter in exploration. You may recall that we retended surface drilling in Q1. That's led to a slightly slower start up to the year, but that was planned. But certainly through Q2, all of the surface rigs were very active. We released a roundup of exploration results from peak on the 22nd of January. I'd encourage people who haven't looked at that to go on there and have a bit of a look. It provides more detail than is included in this quarterly report. Just to touch on some of that, various feedback that some people expect that every time we drill an exploration hole that we're going to get a spectacular discovery hole. The drilling that we released on 22nd of January at peak is pleading, but for a slightly different reason. So firstly, for New Cobar and Kairos, the drilling showed substantial depth extension of those two key copper mining areas. And when I talk depth extension, I'm talking 300 metre plus extension from current workings. Now you might recall that Cobar style ore bodies tend to be strike limited but depth extensive. So it's really great that these deep holes have shown that those ore bodies continue to depth. Secondly, in Jubilee North, you'll recall that we came out in July with extension to the north of Jubilee. Really good that that follow-up drilling has shown that that extends both up and down dip, and certainly not closed off. So, plenty more potential there around Jubilee. As I mentioned, look, all of that drilling was close to existing workings, so it can make its way into the mine plan very easily once we prove it up. Also, just to touch on Jubilee North and Eucoba, That's where we intend to access great cobalt, so the decline will extend from there. So anything we get in that region is certainly complementary to what we extract out of great cobalt. Turning then further south to the Nimigi district, we did the first stage of surface drilling at Nimigi, and that allowed us to then do downhole electromagnetics in December. which will help us target our subsequent drilling. Those results are still pending. Once we get those, we'll use those to help design further programs at Nimity. Late in the quarter, so in December, we relocated one of the surface rigs to Federation North Offset. You may recall an exciting announcement we actually put out in June, which showed the discovery of that offset to the west. It's a northern offset of Federation, and we're back in there drilling again currently. So we've got a busy schedule coming up in exploration for the back half. Nimeji will obviously continue that Federation north offset drilling, and then we'll intend to go back to Nimeji once we get those results of the downhole EM, which will help guide that sort of ongoing drill program there at Nimeji. In the Cobar district, From surface, we'll complete drilling at Young Australian, and then it's back to Queen Bee, which you recall we were at last year, and then on to Tharsis. Tharsis is interesting. It's an exciting maiden drill program for the company, a fresh target, so we'll see how that goes later this year. Underground, we'll be back in South Mine drilling at Kairos, and then also Perseverance S400 in Zone A. So plenty going in the exploration team. Turning then to the growth slide, Brian's obviously touched on federation. I won't go into any more detail, but he may want to add to that. But just to reiterate what Brian mentioned in relation to recoveries, albeit it's a small sample that we put through the peak plant, but recovery is higher than those assumed in the feasibility study across the board, which is definitely a great outcome in this stage of its development. Great, Tova. The study's progressing well. The team's focus has been on a lot on ancillary items, actually, so things like power and pumps and water and the like. So often overlooked in studies, the team has been considering owner-operator versus contract development of the mine, as well as pricing up some of the capital items for the project. All going well, definitely on track to bring this to a final investment decision during the half. Similarly, work on the peak plant optimisation has been progressing well. Two elements to that you recall, one on water management, and we've been pricing key items, the thickener, the flock mixing system, pumps, and pleasingly they've all come in line with the previous study work on that project. And the second part of that peak optimisation, the throughput expansion, the significant engineering ongoing focused on the installation of Darg's ball mill at peak and also the switch room from Darg's peak as well. And probably worth noting, we're also actively engaged with our permitting authority to the Kovachai Council on that change. So we're considering how we bring it forward on that planned expansion. It's likely, as I mentioned, I think earlier, that we'll bring that in two parts, particularly given there's a... There's a justification for the water management improvements irrespective of an expansion, and then we'll look to bring the expansion items as well. We're certainly on track for this half. Passing over to you, I think, Martin.

Thanks, Andrew. So just turning to slide 10 just to take you through the balance sheet. I'll keep my update fairly brief this quarter. We finished the quarter with $96.7 million in the bank, pleasingly operating cash flow from peak of $20.6 million, more than offset our investment in Federation. I will point out that this quarter's result at peak takes cash flow to $37 million for the half, and that was the same cash flow that peak generated for all of FY24, demonstrating that the operational stability we're achieving is now enabling us to take advantage of these higher commodity prices, particularly for gold. For DAGs, we are reporting a small operating cash flow reflecting the finalisation of shipments. At the end of the quarter, we did have three shipments remaining that will finalise likely during this quarter. So going forward, costs from DAGs this quarter and going forward are now reported within the care and maintenance column in this chart. For Federation, as we've said, we've spent $18.8 million this quarter, and it takes spend to $36.7 for the year, which is on track as part of our guidance of $70 to $80 million for the year. Not in this pack, but in the release, I made some comments just around how we're going to report Federation, given we have actually started producing and selling concentrate from that operation. So in summary, when we come to our statutory accounts, we will report revenue. for those sales and we will take up an offsetting cost of goods sold amount in the P&L. So that will result in zero earnings from those sales reported. Given the operation isn't commercial, there is a balance of cost that we will be taking up within our capital and there was an allowance in our growth capital guidance for this year for those costs. So essentially from a guidance perspective, there is no change. But important to note that when we reference group operating costs in the context of guidance, we're not including these Federation costs in that assessment. We're also not including outcomes from Federation in our group all in sustaining cost metric, and we'll keep excluding that until the mine reaches commercial production. Just a few other comments on the balance sheet. So we did make a tax payment this quarter relating to our provisional tax payable for FY24, and that was $2.2 million. Tax losses relating to the closure of DAGs were not actually taken up in our accounts until the operation closed in the September quarter. And so we'll be flowing this through our first half FY25 accounts. As Brian mentioned, we purchased two new trucks at peak and we did finance those on leases. So we have reported that capital expenditure within peak's operating cash flow for the quarter and we'll unwind those leases through financing cash flows over the term of the lease. And finally, not on this slide, but in the report, you will have seen we did add a very small amount of gold hedging to our book. It was actually within the December quarter, FY26, and 1,800 ounces were added at a very attractive price of 4,435 an ounce. So our strategy hasn't really changed in terms of hedging. These additional hedges were put in as part of our rolling management of our hedge books. and you will know that we still retain significant exposure to both precious and base metal commodity prices. So in summary, a really strong cash flow outcome from Peak, which was on its own able to fund the investments in Federation this quarter, which meant we maintained our very strong balance sheet in terms of cash. Our loan note remains undrawn, resulting in a total liquidity of $135 million to support our growth plans. Thanks for the time. I'll hand it back to Brian now.

Thanks, Martin. And just to recap, when we talk about the great and exciting opportunities we have in exploration, the two FIDs coming forward for the project this half and also the ramp-up of Federation, I guess it's really key to understand these things are all going to add value to our business. And with the balance sheet to support it, that's obviously a very strong position we're in relative to some of our peers. Look, in terms of the final slide, 11, Our key focus areas for the remainder of the year is really to deliver an outcome which gets us to be improving our margins, delivering strong cash flow in the medium term and also delivering our growth options into copper, which is really supported by our resource base. Therefore, there's really nothing new in the focus areas. They're sort of the same focus areas we've had. It's really about ramping up federation in line with our targets, which will bring cash to the business. If we can bring it forward, cash forward to the business through better commodity prices or more volume, obviously we will. We're improving productivity through operational excellence, focus on the jumbos and on the maintenance at the peak operation. We continue to maximise cash through all activities to really keep the balance sheet strong, which will enable our growth options we've just discussed, and obviously completing the two studies that Andrew talked about is going to be fundamental this half and obviously involving a lot of the team reviewing those and being involved with having input into those as well to make sure that we own it and take it forward. And while exploration programs are opening up opportunities to grow our business organically, which will add further shareholder value in addition to what we're doing with these various projects. So we have a very, I guess, a solid outlook where we're going, I guess, in terms of the strategy and in terms of the The purpose of the organisation, we're very much aligned with that. And on that note, I will hand it over to the 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 Adam Baker from Macquarie. Please go ahead.

Good morning, Brian and Tim. The great cobalt study and peat plant expansion, I see that FID is expected before the end of FY25 for both of these. Just wondering if we should expect to see these in conjunction or separately?

Basically, we'll have those studies completed and then it'll be, depending on timing, obviously we want to have both those projects sort of put to FID in H2 and obviously the sooner we can do those the better in terms of knowing our direction what we're going to do and we release the information once we have that information for both of those projects once FID has gone through.

Thank you. And speaking on both of those studies, I know you've disclosed the $20 million to $25 million outline for the plant expansion at the peak to get to 1.1 to 1.2 million tonnes running capacity. Just wondering about the capex required at Great Cobra. I know there is an older PFS which outlines growth capex of about $50 million, but I think it's a little bit stale as you're running through the numbers now. But, you know, is that number current at all or have you got to completely re-evaluate it, do you think?

The project's currently going through that review. So once we have those numbers finalised, we'll come back and provide that information to the market. Obviously, the project was done at a very good level. There's obviously been price fluctuations in various areas, and we're working through each one of those to bring back the best competitive project we can. Andrew, any additional information?

No, I think that pretty much sums it up. Brian, it's been a while since that great KBAR PFF that you referenced, Adam, so obviously there's been quite a bit of cost inflation in the industry. We're also thinking about how we go about it. For example, the work on ventilation shows that we can actually change fan blades on an existing fan as opposed to installing a new one, so there's certainly scope change as well that we're working through, and as Brian says, once we have that in a more complete form, we'll bring it back to the markets.

And then that's similar to Federation. The Federation project, we've obviously found things have been over cost compared to what they were, but we've found ways of bringing things under cost. So we'll do the same for Great Cobra and we'll publish those numbers once we're happy with what they look like.

Thanks for that. And maybe thirdly, if I could, just on potential funding for the peak plant expansion and great cobalt development, if it does go ahead, you're in a pretty enviable position with cash and $97 million. And I know you've still got an undrawn loan at your disposal as well. So I guess from a funding perspective, you know, you're sitting pretty right now. But, you know, is there anything else we should be thinking about? if you do pull the trigger on FRD for those projects.

Thanks. Martin, any comments at all?

Yeah, Adam, look, you know, as you say, our balance sheet's strong at the moment and if, you know, where commodity prices are and we've got some hedging locking in those prices, you know, I'm feeling comfortable but, you know, we've got to go through the study and actually firm up what the capital requirements are and then as part of that study we'll wrap a funding plan around that but, you know, I'm pretty happy with where the balance sheet is right now but We'll assess it as those studies are firmed up.

Great. Thanks, guys. I'll pass it on to you. Thanks, Adam. Thanks, Adam.

Thank you. Once again, if you wish to ask a question, please press star 1 on your telephone. Your next question comes from Paul Caner from Ordmanet. Please go ahead.

Yeah. Hi, Brian, Martin and Andrew. Thanks for taking my questions. A few, if I may. Firstly, on Federation, that performed above expectations in that campaign program there at peak. I guess moving forward, what's your blending strategy there with the peak zinc material or will you sort of continue to sort of keep it separate?

Angus, do you want to answer that question, the strategy for delivering the plan?

Yeah, so certainly we're looking at just to continue to firm up exactly the recoveries. We're very happy with the performance through the plant at this point. But, yes, as we move down the track, we'll certainly be looking to blend that as we go forward. But certainly at the next lot, we are looking to batch through again.

And once we understand the batching and once we understand the recoveries, it'll help optimise the blending, which is going to add more value. That's the ultimate answer for us.

Yep, too easy. And assuming the sort of recoveries come up given that recovery performance there with that Federation material. Exactly. Yep. And then just moving on to, I guess, costs and looking at those development meters and unit costs, both of those significantly improved this quarter, I guess. Is there anything specific to call out there and and how should we be thinking about this moving forward? I mean, what's your goal, development metres per quarter and, I guess, unit costs? Angus, want to talk to that one?

Yeah, as outlined in the presentation, again, our next target is to ramp up over 1,000 metres per quarter with development. We're just working across optimising that along with recruitment and getting the right people and the right resources. In terms of cost, yeah, we continue to focus aiming down to $100 a tonne from the mining side, and that is across the board between our maintenance fleet and our people, and just making sure that the right... Getting the tonnes out as well at the right cost. So there's a lot of work around the efficiency piece that we are focused in on this half.

Too easy. And I guess how you transition... As you transition from the south mine to the north mine, I guess, better ground conditions in the north mine should aid that cost improvement?

Yeah, certainly. We're working on transitioning there at the moment and setting up for success in the north mine. So that's part of where we're looking in this quarter to set ourselves up for when we get approval to get on with Great Cova.

But generally, you're right, Paul, the conditions will improve. provide a lower unit cost, which will help us get down towards that $100 a ton that we're internally targeting. It's not what our budget number is, but it's what our internal target is to try and strive towards that, which is what Angus is talking to.

Yep, great. And then last one, if I can squeeze it in, just on guidance, that's unchanged. You seem to be tracking ahead on copper and maybe zinc as Federation ramps up, but slightly below on gold. I guess how should we be thinking about mine sequencing and I guess commodity contributions in the second half? I guess you want to talk to that one?

Yeah certainly again yeah we're to be honest we're having a very good gold month right now so yeah we're certainly tracking and around sequences and it does very much depend on what we're feeding the plant in the particular time frame so We expect to track back on the gold this quarter and make up any deficit we've got there, but we're tracking well for the guidance.

But generally speaking, Paul, I think the sequencing, you know, if you look at our mine, it is all about sequencing, so we're still on track. It's just the timing of when they come through. Too easy.

No, that's it. Thanks. I'll buzz it on.

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

Thanks, Darcy. Well, just to reiterate, obviously going forward for us, We've obviously right trends in place for our safety performance, our operating performance metrics, starting federation up and getting up, ramping up. It's all in the right direction right now, which we're happy about and is a highlight for this quarter. So is some of the background work on the projects that Andrew talked about in exploration. Our key to this is going to be obviously continuing to build our people capability up to support our organisation going forward so we have the right people with the right mindset, really making sure we can deliver this business at the highest performance possible. So I guess thank you very much for your support today. Thank you for the questions and we look forward to providing further feedback over the course of time on how we're delivering against the FY25 budget. Thank you very much everyone for joining us and we look forward to speaking to you soon. Thank you.

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