Aeris Resources’ Andre Labuschagne on the growth potential of its Australian gold and copper mines
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Gold producers have been trapped in a funk over the past year while the rest of the metals complex has been dining out on a (maybe hastily called) commodities super cycle.
One emerging mid-tier that has proven an exception to that rule is Brisbane-based Aeris Resources (ASX:AIS), which is up 111% over the past year and 73% to date in 2021.
Its executive chairman Andre Labuschagne barely escapes any mining conference without a quip from the presenters about how his cricketing skills pale in comparison to his son – Australian Test star Marnus.
But the $400 million capped Aeris has been putting its own runs on the board lately in the form of operational and exploration success from its copper and gold mines in New South Wales and Queensland.
The Tritton copper mine in the Cobar Basin has given Aeris exposure to record prices for the base metal in 2021, producing within guidance at 22,987 tonnes at $3.70/lb in FY2021.
Shareholders have also piled into the stock on the back of the high grade Constellation discovery 45km away, where drilling has struck ripper intersections like 61.6m at 5.12% copper and 12.5m at 11.14% Cu.
Meanwhile Aeris also produced 73,685oz of gold at AISC of $1483/oz in its first year as the owner of the Cracow gold mine in Queensland, acquired for $75m plus royalty payments from Evolution Mining (ASX:EVN).
With two-year mine life extensions announced for both assets at the Diggers and Dealers Mining Forum this month, Aeris is now debt free and looking forward to its future as a growth story.
Stockhead caught up with Andre Labuschagne to talk about what is next for the emerging producer.
“I think it’s partly the history of Aeris over a nine year period. We had to sort out a lot of balance sheet issues around debt, and get the balance sheet to a point where the company is sustainable.
“Last year in July, when we bought Cracow was when the whole transformation started.
“We always had Tritton copper, it was doing really, really well, but there were some challenging copper price times where you know the copper price was at $6,500 a tonne Aussie, which is challenging.
“And when we bought Cracow there was immediate change in cash flow coming into the business and then that combined with a big uptick in copper prices and the market picked up on that. In July this year we announced we’re debt free.
“And then the other thing, which was really a great kicker was the finding of the Constellation deposit at Tritton.
“So when we announced that in November, you can see the share price starting to respond, because it’s a super exciting discovery and it will become a future mining project and every time we announced results they got better and bigger.”
“I think so when you look at Constellation, it is going to have quite a high grade, big or medium size open pit to start off with, low strip ratio and starts five metres below surface.
“Look at some of those intersections: 61m at 5% copper, 24m at 2.9%, so you’re going to see some really good grades coming in.
“That will generate a significant amount of cash and it will be able to fund and have some leftovers in my view for the underground development.
“We have traced that down 1550m so it’s already come down quite a long way, 300m of strike, so it is becoming very sizable, and yes, I think you’re right – it can be a step change, bringing that into the production pipeline.”
“Absolutely. The two sides is Cracow needs nearby exploration to keep extending the mine life and there’s a lot of opportunities for you to identify purely by drilling near the current mining workings and re-looking at the cut off grades and sort of extending that mine life, so there’s an ongoing process to extend the mine life at Cracow.
“But what also we’re now starting to invest in is the Greenfields side of Cracow and looking outside the current workings and that is where where we will find potentially new big ore bodies.
“When you look at Tritton and you’re spot on when you say look at worldwide (copper) discoveries and grade keeps on coming down and it becomes more challenging.
“Tritton has got a big package but hasn’t been explored much to the north. And for us it’s important to see how we can bring better quality tons into the production pipeline in the life of mine of Tritton.
“So currently Tritton underground mines at about 1.4% copper so it’s deep and the grade is not spectacular, but it’s good enough to make money from. But if we can bring in new projects, better tons and better grade, that’s where the value for the long term of Tritton is going to come from, so exploration is key.”
“It’s key that we finish the drilling and bring Constellation into the production profile as quickly as we can.
“But on top of that, it’s important that we don’t stop the greenfields exploration. So that northern side of the tenement package, as I said, hasn’t been explored much.
“We’ve got some new tenements which are on the boundary of the current Constellation discovery, which we will do EMs and start drilling there as well.
“On top of that we’ve got various current exploration targets or projects which just need to be drilled out and bring into production profile as well. Kurrajong is already a 2-4 million tonne exploration target at plus 2% copper.”
“It’s awkward to answer without getting in trouble. We’ve added two years of guidance on both operations, but that doesn’t mean that’s the life of the operations.
“So we’ve added another year (at Tritton), so we’ve given a guidance of two years. And the production over that two years mainly comes from Tritton and Murrawombie ore sources.
“Then you’ve got Budgerygar, Avoca Tank and Murrawombie, all three of those is what we’re planning to invest in this year, around $15 million.
“So Budgerygar, we’ve already done the development to get there, we’re busy drilling it out and that will come into the production pipeline. That’s about 1.6-2Mt (of resources).
“Avoca Tank is an 800,000 ton ore body at 2.6% copper. Remember we’re mining at about 1.4% copper so it’s displacing low grade tonnes with better grades.
“And then Murrawombie is a cutback.
“Currently, we’re targeting to bring Constellation into production in two or three years and Constellation currently looks like a plus 10 million tonne orebody and there’s Kurrajong.
“So you can easily see there’s a significant life at Tritton needed to bring all those projects on board. And as you bring them on board, you’ll see the production profile starting to pick up because you’re getting better grade into your process plant.”
“A lot of exploration activity is happening currently and that’s on the back of copper price and exploration companies have got the capacity to raise money to drill them.
“And if you look at the areas around us, everyone drilling is finding stuff.
“So if you spend the money, you probably find something.
“To answer your question around, do we see opportunities? I do think there will be opportunities in the future.
“Right now. I’m not sure where they sit, but we have enough to keep us busy at Tritton for quite a long time.
“It’s about does it make sense to look at some of the exploration plays? Maybe one day in the future there will be opportunity, but for us right now the focus is on our brownfields and greenfields exploration.
“If you’re in mining, you’ve got to be positive. To answer your question? Absolutely. I think copper, there is no commentary and there is no news out there which shows or indicates that copper is going to go the other way than what it’s currently going.
“There is a definite forecast in in a deficit in the supply and I don’t see that pulling back soon.
“You just talk to the general market, you look at where the market is supporting copper companies, there’s a lot of money being thrown into copper companies from investors looking for copper exposure.
“On the gold side … it’s hard to say if it’s going to go up or down. You just saw the last week it dropped by 100 and something dollars and we’re back up to where it was a week ago.
“I think that’s more driven by international markets and international sentiment. So it’s a hard one to judge but I’m feeling confident there’s more upside potential to gold than downside.
“We’re living in a bit of a funny world with COVID and everything else happening. When you look at copper, it’s a pure supply-demand driven commodity and I think we do see a lot of upside.”
“You manage businesses to go through tough times and good times. Cracow as 1550 and that’s a pretty good cost.
“We do see a big cycle in the gold space and the company will respond to that as we always have done.
“But the guys at Cracow are doing a great job looking at costs, cut-off grades and how to push more tonnes through the process plant.
“They are pushing from 570,000t now to 650,000t, so it is changing the paradigm of how we operate Cracow and the guys are doing a very good job there.
“When you look at the areas which we are focusing on, we call it the new space or areas which are not currently in the in the operating field.
“Cracow South West is one of the key areas we’re targeting.
“We’ve done 2D seismic, then we will narrow that down now and start to drill that out. The same with Ballymore and Boughyard.
“So those three all have got the potential to become another significant ore body. Cracow South West can become another Cracow field.
“This year we’re putting $4 million into that to get that exploration plan going and moving forward.”