Aurelia Metals Limited (AMI) Earnings Call Transcript

Thank you for standing by, and welcome to the Aurelia Metals Limited Fiscal Year '25 Full Year Results. [Operator Instructions] I would now like to hand the conference over to Mr. Bryan Quinn, Managing Director and Chief Executive Officer.

Thanks, Kate, and good morning to everyone who's dialed in this morning. We appreciate your time. Today, with members of the executive leadership team and Board, we're proud to share our financial year 2025 full year results with the market. Today on the call with me is Martin Cummings, the CFO, and we will take you through the results, which sort of reinforced the strong message we've been presenting on our performance. And you'll note from the presentation, all our key metrics are trending in the right direction. These results highlight the strength of our strategy and the dedication of our people. We have delivered outstanding safety improvements, while substantially increasing earnings and profits, while maintaining a strong balance sheet. Importantly, we've achieved this while also investing in our future through the development of our new Federation Mine and also many projects in our portfolio. We are building a business that's safer, stronger and positioned for sustainable growth in a very stable mining region in Australia, which is a great new story for Aurelia. I'll be referring to the slides as we move through the pack. So on Slide 1, firstly, our forward-looking statements. I'd just ask people to please reference these at your leisure. They're important to obviously recognize what's in those. On to Slide 2, financial year 2025 has been a year of delivering our production guidance with the improved safety and also delivering our strategy to really improve our operational performance while growing our business. Firstly, we've improved our safety performance, as I just said, from FY '24. And as I continue to say, nothing is more important than our people going home every day safely, and all jobs can be done safely. And we've achieved also our guidance targets, which is an excellent result for all of these metrics. We continue to progress with our focus on operations excellence to deliver higher profits into the future and we believe there is more we can unlock still as we progress. Federation Mine has successfully commenced production and is progressing well in the ramp-up and the Peak processing plant has been enjoying the high quality and good throughput from the ore from Federation with some excellent recoveries. Importantly and notably, the Federation project has remained under budget, which was approved by the Board and we intend to replicate this outcome in Great Cobar Project also. The Great Cobar Project was approved and now has started execution of developing twin declines towards the ore body from the new Cobar operating pit portal entrance and we're using whatever infrastructure -- existing infrastructure we can to build this business. This will allow a medium-term deliverable to progress towards more copper and gold from FY '28 as we've committed to the market. Our Board has also approved the upgrade capacity for the Peak processing facility, which will enable our strategy in the Cobar region to go from up to 1.1 million to 1.2 million tonnes capacity using very capital-efficient methodologies, repurposing equipment both from Dargues, but also giving great financial returns for our investors through these projects. We've also continued exploring the region, both in the vicinity of Peak and Nymagee along the fault lines that run between Great Cobar down to Federation with a clear focus that we've reported to the market on Nymagee Resource and also the Federation West to name a few priorities. We'll talk more about these later in the presentation. And lastly and importantly, we've been successfully and sustainably closing the Dargues Mine and obviously progressing remediation works and continue to sell the assets to the market or transfer and repurpose to Peak, Great Cobar or the Federation Mine, which obviously saves us capital. As I stated upfront, this has been a very successful year for delivery for the company the size of Aurelia and can only be achieved with really good people and leaders working hard in the background, all working towards unlocking our full potential. I'll move on to the next slide, which is the FY '25 highlights. This slide really demonstrates some of the metrics on how well we're progressing. We'll discuss these metrics in more detail. But I really want to call out this really shows the strength of our business and the performance for this year and disciplined delivery of our strategy that really our management are pushing forward with some really strong EBITDA numbers, good EBITDA margins, good profits, good margins on our sort of products, improved safety and a strong balance sheet supporting our business going forward, which we'll talk more about. Just moving on to the next slide, which is on sustainably delivering value. We're very happy that we've improved our total recordable injury frequency rate, which means we're having less injuries, which is fantastic and definitely our key priority. We still had too many injuries in FY '25, mainly hand injuries, people putting their fingers and hands in pinch points and lines of fire causing cuts and abrasions. And through improved field leadership and focus on hazard identification and our Take 5 process, we will get better at this. But obviously, we've still got a way to go with people having hand injuries. We also delivered a really good environmental incident reporting outcome as well, which you'll sort of see on the presentation. Importantly, our social capital is our license to operate and we continue to work with our community. We have established a community hub, which has been a great success for the company. We've also continued spending money on local procurement for the region and have been very diligent in our donation process in the Cobar region. Obviously, Cobar is very central to our business and some of the spending items that have gone through donations committee this year included bringing the [indiscernible] attended the Cobar High School to perform with the students. We've done sponsorship with the Copper City Men's Shed, really supporting the local Cobar Roosters League Club across all ages, but also proud to sponsor 2 women teams this year of under 13s and under 15s. And we also put money into the Lilliane Brady Retirement Village Brady Retirement Village, the only aged care center in Cobar. So really making a difference with the money we're generating from the business to really put back into the community and make it a great place to live and work. On the next slide, I move on to production guidance achieved. In terms of our production guidance, all commodities were within guidance, again, showing the disciplined delivery of our team to ensure we meet these targets we present to the market. As we don't report all-in sustaining costs anymore, I thought it's just worth calling out though that we did actually achieve AUD 2,037 per ounce and FY '24 was AUD 2,035. So pretty much the same result, but with headwinds of higher costs and obviously less gold produced in FY '25 compared to FY '24. So it really shows the performance of the business to deliver our cost structure and also to get our volumes up for other commodities since Dargues is closed. So pretty robust effort overall for the full year for our production guidance and really sort of shows the potential of our business. A couple of key drivers not shown on this particular page for production guidance, and it's not a guidance set of numbers, but I want to call them out nonetheless. And that is we've really been focused on increasing our development meters at Peak and at Federation. And obviously, we're going to continue to push that into FY '26, especially as we bring Great Cobar meters into our business as well. The team has achieved several monthly records throughout the year at Peak over the last 6 months, which has been great to see as we continue to ramp up the meters, which provides support for our mining. Federation also delivered better development meters over the year than was budgeted. So once again, showing that we're making a step change in our performance, really looking at how we can get the development progressing in front of our working areas to provide suitable areas for production that can be set up safely and with enough time to ensure that we can meet our target guidance numbers. Beyond just the results, we're also putting a large focus in FY '25 and into FY '26 on utilization of available equipment and the implementation of our mine operating system. This will all work towards supporting our AUD 100 a tonne aspirational target that I've set for the teams to really increase our cash margin and deliver our guidance going into FY '26. So I'll hand over to Martin to talk through some of the positive results from our financials.

Thanks, Brian. And just moving on to Slide 7. And really, this slide captures the improvement year-on-year that I'm pleased to report today. Our Group EBITDA is a 69% increase on the prior year at AUD 122 million and that equated to an EBITDA margin of just over 35%. I guess the pleasing bit for me is within that EBITDA result for the Group was the performance of Peak this year. Peak's EBITDA increased from AUD 55 million last year to AUD 122 million this year on the back of higher gold production, and of course, higher prices. This really was a fantastic result and was able to offset the impact of closing Dargues in the first quarter, and that did result though in lower gold production for the year. But as you can see on the donut chart, gold remains really important to us and is the dominant revenue source in our revenue mix. But as we outlined in the Investor Day, we will now start to transition with Federation ramping up to a higher proportion of base metals production. Just within our Group EBITDA result, you may notice we also did recognize some sundry income of AUD 7.3 million is the item relating to sale of excess biodiversity credits that we've been reporting through the quarterlies. So that is a one-off that we've taken through EBITDA, but pleasing that we can realize the cash on those excess biodiversity credits. It was also great with our Group EBITDA higher and lower depreciation and amortization with the closure of Dargues that we were able to return to a profit after tax this year. But this is a significant milestone for us. It is actually the first full year profit that we have recognized since 2021. So from here, our focus is on cost reductions and they are now in full swing at Peak. It's pleasing that our all-in sustaining cost was able to be maintained even on lower gold production and generated great cash flow for the year. But now we're going after the AUD 100 a tonne mining cost target that Bryan has taken you through. And that team is in place and the work is underway. Just finally, you may note some comments about Federation and commercial production. So we do intend to report Federation as a commercial operation from the 1st of July, and that's based on actual performance so far this financial year, but also our outlook, particularly for this quarter. I will stress that the EBITDA that Federation will generate in the early periods will be modest, but that will build up over the year as mining tonnes ramp up. So just shifting to Slide 8, and I have talked a lot about the balance sheet this year and it's something we're very proud of. But just to recap, we finished with over AUD 110 million of cash in the bank and over AUD 145 million in liquidity and no drawn debt. Peak's operating cash flow and that's after sustaining capital of AUD 96 million was a huge jump from the AUD 37 million it generated in the previous year. And along with a small contribution from the remaining Dargues production more than funded the combined AUD 84 million in growth at Federation and for exploration. I might just focus on the last item before the June cash number in the waterfall around restricted cash. So during the year, we did reach the credit limit on our Trafigura performance bond facility, which meant we had to post an additional AUD 17.5 million in restricted cash. So the tracking facilities are now into the third year. And with that, the cash backing on the performance bonds starts to be -- requiring us to put cash up and also the loan note starts to step down. So this year, right now, I'm going to commence a refinance of the facility. That's both the performance bond facility and the loan note. The main objective is to get that higher performance bond facility and get that restricted cash back. But I'm also looking at a facility at a lower cost than what we have at the moment. So we'll start the preparation work on that this month and I'm looking to close that new facility sometime during H2. But what that will mean is we will continue to cash back some of the performance bonds in line with the Trafigura facility. And then ultimately, as I say, once we close that facility, that cash is intended to be returned. So look, in summary, a really satisfying year from a financial perspective, where we returned to profit, we generated excellent cash flow and we have a strong balance sheet there that's able to fund our investments in Great Cobar and the Peak expansion. I'd just like to thank the Aurelia finance team and the EY team, many of you are on the call today for your efforts putting this together. It has again been quite a smooth financial year and that's the result of your hard work. So thank you from myself and from Bryan. And I'll hand back to you, Bryan.

Thanks, Martin. As Martin just spoke through, if you go to the next slide, our pathway for 40,000 tonnes. So FY '25 has been a very important year for us to reshape our business and have Peak Mine working well, getting Federation now ramping up and delivering EBITDA. And while we start commencing our next set of journeys, which is really to get Great Cobar developed and obviously get the optimization projects well underway, which I'll talk to in a few minutes. But as you can sort of see from this slide, we have a clear pathway where we really are taking it step by step sequentially, making sure that we can obviously fund our growth in a very clear way and being very clear with an intentional around how we manage the balance sheet to get there. And obviously, with the focus we have right now and with the plans we have right now, we believe that well and truly we can self-fund that growth and maintain a strong balance sheet over the period of time. So that pathway of 40,000 copper equivalent tonnes is definitely in our sights and all the various projects are approved by the Board that have allowed us to move in that direction over the next 2 years. So very exciting to be part of Aurelia when we can actually generate this cash at these profits now and look at how we can actually optimize our business going forward in the next couple of years and a strong position we actually have with the pipeline to support this also. So I might just move on to the next slide, which is the Great Cobar Project slide. So in FY '25, we did approve the Great Cobar Project. I just want to call out some key highlights of this project. It's very exciting for us and our investors. Obviously, at spot prices when we presented this, the rate of return -- IRR was 33%, NPV was AUD 164 million. Obviously, prices have improved since then. And capital AUD 92 million, obviously, that hasn't gone up since then, which is great. What it is going to give us is 3.6 million tonnes of production target, 2.3% copper and 0.9 grams per tonne gold. And that's really as we know it now and as we presented during the presentation of the Great Cobar Project and Andrew Graham alluded to, there is actually exploration holes that are under the production area that we've identified, have good grades. And really, we're limited by drilling to know what the full potential is beyond what we've actually declared to the market. As we progress down the twin declines and get closer to the ore body, we'll be setting up a drill platform to start punching holes down under that area to open up the potential for this particular project and operation for the future. very Exciting for us as we progress this project as it is. And as I stated earlier, we have all the approvals in place now and we intend to run this project very tightly like we have for the Federation project. So there's no surprises to the market. I'll move on to the next project, which has been discussed and presented on the next slide, which is a project we had approved by the Board in FY '25 as well, just to recap for those who may not be up to speed with it. Importantly, the optimization project was all about how do we grow in the safest and most efficient manner that we can use our existing infrastructure and allow us to present the best returns we can for the business from our investment. That includes getting better recoveries, getting better throughput, being able to utilize the resource in the area, both in Federation and Peak and Great Cobar to really maximize revenue potential. And the optimization study really highlighted that if we went to do the work on the Peak processing plant rather than reusing Hera at this stage, then we'd get better returns for our investors. And that's what the project was all about. So the 3 parts of the project are in the slide and they're really -- they've been approved by the Board and are in execution phase now as we talk. As you recall, FY '25 was a major milestone with getting our government approvals to haul the 600,000 tonnes from Federation to Peak that was previously 200,000. So now we have that sort of haulage capacity. And really now, as Federation ramps up, we intend to have these projects in place to be able to deal with the increased volume. And hopefully, we'll see this towards the end of this year and then start of FY '27, really ramping up nicely in line with both projects and Federation to get progress towards that 1.1 million, 1.2 million tonnes and ultimately move into our 40,000 copper equivalent tonnes into the market in FY '28. So very exciting times for the company, very sequential. We have a project team dedicated to this to ensure we can deliver it very much using similar principles that we've done inside the company already. I'm just going to move on to the next slide, which is exploration. Just a recap for FY '25. Our exploration team have continued to deliver excellent results this year to really unpack the potential for the region. As I've said and Andrew Graham said in the past as well, what limits us with our potential is really just drilling. And so as you can sort of see, we are continuing to drill Federation West and Nymagee in FY '25 and that's also progressing in FY '26. But you just got to look at the various sort of numbers that we have presented on the drilling. It's really amazing the sort of potential we're dealing with. We just need to continue drilling those regions to continue to unlock them and see what we can make for a potential pipeline for our future. So the main focus will be in FY '26. We'll continue to search additional lens around the main ore body at Federation West -- like Federation West around Federation. And similarly for Nymagee, we're going to focus on the north areas and the central areas between the main ore body and the North sort of area. This will unlock very low-cost organic options for us if we get the resource that we're looking for, makes some good results. So just a recap on those results. Those announcements we did on Federation West and Nymagee have basically been June 2024, February 2024 and also June 2025, just for your reference, if you want to look back and understand what the results have looked like in the past. So that's FY '25. Martin has highlighted the really good financial results. We've talked about our guidance and operational results. And obviously, we believe we have a lot more to give and we will be pushing for a lot more in FY '26. ELT is very committed as so as the leadership teams on site to make this business really sort of hum in a really good way in terms of delivering shareholder value. So our key focus areas in that light for FY '26 is really about increasing our cash flow from the gold and base metals production and develop our copper growth options as we move forward with Great Cobar and having our facility -- processing facility at Peak set up to really take the ore and generate lots of value for that. So really, when I call out these key points on the slide, it's really around making sure that we continue to really focus on disciplined capital delivery and making sure we retain our strong cash balance sheet. And obviously, as a leadership team, we have developed contingency plans and we have got options that we're looking for and levers we can pull as we need to, to ensure we deliver that strong balance sheet. We obviously want to continue safely delivering improved productivity from our existing operations to really maximize that potential of cash flow to fund our growth and hopefully have excess. We want to make sure the balance sheet remains strong. We want to make sure we can safely ramp up Federation in line with our production and if not even go beyond that by bringing more production online in FY '26 and FY '27. We want to make sure that we can deliver Great Cobar Project development milestones, similarly deliver the project like we did for Federation and hopefully have FY '28 set up for success with Great Cobar kicking off. And we want to focus on our pipeline of organic options. That's really our exploration, looking at what we can do from a regional point of view. We still have the Hera plant available at some stage if we want to look at that as an option to grow. But right now, for the next 2 years, it's really about making sure we deliver what we've committed to the market and do it with a good profit and good cash flow outlook. And to do that, we really need to make sure we continue attracting and retain the right people in our business to really make sure that they are with us, they grow with us and we become the company people want to work for in the region because of our delivery and our sort of pipeline of options to grow the business sustainably. So with that said, I'd like to thank once again you guys for dialing in, and I want to hand it back to Kate, and we might move to some questions.

[Operator Instructions] Your first question comes from the line of Adam Baker with Macquarie.

Martin, obviously, been a lot of comprehensive updates from you over the past couple of months. So I've just got one question. Martin, I think you mentioned about the debt facility refinancing plan during FY '26. You mentioned the second half. Is that the second half of calendar this year or are we talking the first half of calendar next year?

Okay, Adam. No, I was referring to H2 of the financial year, so before June '26.

Okay. And just wondering -- on the debt refinancing, just wondering what can it incorporate? Are you looking at crushing the undrawn loan note, the Trafigura performance bond facility has been mentioned and obviously reached capacity there. Will those get tied up together with a new facility? What sort of facility you're looking at? Would you be looking at a project finance facility or are you looking at other options like a revolving credit facility like some of your peers have done? And just wondering if -- how you're thinking about hedging, which may or may not go along with the future debt facility?

Yes. So I am looking at more of a corporate facility. And I am -- it's really quite open at the moment, Adam. We sort of haven't even gone to the market yet. So we're just -- what I'm looking for is ideally a revolving credit facility, an upsized performance bond facility that we can roll the AUD 7 million, AUD 7.5 million that we've got in restricted cash at the moment into, but also gives me a bit of headroom as well for any other increases. New South Wales are reassessing how they do rehab caps at the moment. So I just want to have some headroom available if any increases come through from that. But yes, more of a corporate facility. In terms of counterparties, yes, it's quite open in terms of whether it is something similar to what we've got or whether it's more of a bank club style. I'll really let the process go through and we'll see what the best deal we've got. So I know that's a bit of a loose response, but right now, we're sort of preserving all options. But the intention is to have an upsized revolving performance bond facility and a bit of a standby credit facility.

And you're pretty open to hedging that may or may not go along with the facility?

Look, we're sort of open and maybe lonely in this camp, but we use hedging to protect our balance sheet. And I'm not sort of thinking about hedging in terms of mandated through debt facilities right now. I'm sort of thinking about it more in terms of the balance sheet and delivering the growth projects. So I'll continue to consider hedging definitely.

Your next question comes from the line of Roy, a private investor.

Roy here. Thanks for delivering a profit for the full year. Congratulations. Well done. My question is the infill drilling at Federation produced a change in mining plan. Has that altered the amount of ore that was estimated in the Federation body? And the other question I'd like to ask is, will the upgrading of the plant at Peak have an effect on the processing rates and for the year that that's done?

Yes. So thanks for the questions, Roy. Firstly, on Federation. So we've been drilling the infill drilling and obviously doing grade control work over FY '25. As we report to the market, we wanted to understand, obviously, the change in direction and the impact of it, if any. So we are in the process at the moment of working through our MROR, which will be delivered in October. And so that will actually have all the calculations. The reason I answered that question that way is we finished -- we closed the drilling off at the end of June, which is when we said, okay, that's how the assays will take from here and put into the models and the models get done and then obviously the engineers will put the shapes for the stopes around it and we'll get sort of some feedback in the coming months as we move forward. So I guess that one is a bit of a work in progress and as we get towards our MROR process. As we've said before, obviously, what's important to us is that we're delivering the metal. So as we discussed with the information we did tell the market that we had was that the area that we drilled and mined in the top part of the mine, the payable metal was actually -- was there. And obviously, that's the most important thing for us. If the metal is there and we can truck it to Peak and truck less tonnes at better grades and better payability, that's obviously a big win for us. That's what we have referred to the market, but we haven't sort of come back with any new information until the results are finalized in the models over the coming months. On your second question regarding the throughput, yes, so the design of the 3 projects that we're putting in place at Peak, one is obviously the thickener, which does give us a better back-end capacity, gives us better recoveries and also of different consumables. But at the front end, we're putting in a materials handling crusher, which will actually allow us to reduce the size of the ore coming in from both Federation and from -- in the future Great Cobar and from the North Mine. So that will actually allow the size to come into the mill and actually will allow us to increase our throughput. And that's one of the key components of both the materials handling and the ball mill is to basically allow us to definitely increase our throughput through the plant and really take out all the latent capacity throughout the plant by maximizing the input to the maximum level effectively. So as we get towards the end of this year and FY '27, those items will be installed and we'll basically start seeing those volumes ramp up in line with that throughput that's in those projects effectively. Just wanted to check, Roy, did that answer your question you're asking?

Yes. That's a good answer.

In addition to the projects, which aren't on the page, the team on site also installed additional filter plates for zinc and lead at the back of the processing plant and that's also going to help us as well. They have a major project that just sort of one of those things they need to install to get obviously better throughput at the back end of the plant. So that's installed and working now and working very, very well to give us -- especially with the high grades we get out of Federation, we obviously need to make sure the filter plates at the back are working effectively. So it's definitely helping us.

I gather from what you say that the upgrading is not going to affect the throughput substantially. Is that right? It's going to increase when it comes in.

This is all about increasing the throughput. Everything we're doing is about increasing the throughput to 1.1 million to 1.2 million tonnes coming in the front end. And obviously, we want to increase the throughput but also make sure we increase the recoveries as well. So we want to make sure at least maintain or increase recoveries. Metallurgical is a key outcome by what we do inside the plant as well as the frame of the plant.

Our next question comes from the line of Hamish [indiscernible] with Jefferies.

I just had a little follow-up from Adam's question just on, I guess, the -- is there any potential, I guess, the increase in environmental bonding requirements from Great Cobar and the Peak plant expansion? And is that going to kind of be captured inside of, I guess, the refi and corporate facility as well? And I guess, is that going to -- do you see a potential timing of, I guess, cash release as part of that?

Yes. So look, we're still working through. I mean, the Peak plant expansion, there is -- it's within the existing footprint. So that's not going to drive an additional disturbance area. I guess the point I was making just with the rehab calculated work that's going on with the regulator at the moment, we're just keeping an eye on what that will mean in terms of whether it is additional bonding that we have to put up. So there's probably a few moving pieces in rehab, but I don't think it will be materially different to what we have now, but I expect it will be a bit higher. And the Great Cobar Project is using the existing infrastructure and footprint of New Cobar, which is the open pit at New Cobar. It accesses that portal. It uses the stockpile facilities there. Any additional activities that are planned for Great Cobar is really a vent shaft which will basically obviously be part and parcel of shutting a mine down, you basically have that process anyway. So a lot of the work we're doing, which is really a good place to be in is really around repurposing or using existing footprints, give or take a, few small items. So what Martin is referring to is if there's a change in the New South Wales process, which is obviously being rolled out, we have to just account for whatever those changes may be. Not necessarily massive changes in footprints or any other disturbance areas that we're talking about.

Yes. And then just to follow-up on the cash flows. So the anniversary of the tracking facilities is August. So we've just passed the 2 years. So it's a 4-year facility. Essentially, the cash backing steps down quarterly over 2 years. So we've got around AUD 62 million drawn on that facility right now. So come November, there would be 1/8, come February would be another 1/8 and then that's the sort of window that we're looking to close a new facility sometime mid-H2. And then all of that cash would then flow back, including the AUD 17.5 million that's currently restricted. Did that answer your question, Hamish?