Monsters of Rock: Aeris Resources puts up double ton to buy copper miner Round Oak

Andre Labuschagne’s Aeris Resources will pay $234 million in cash and shares to buy copper miner Round Oak Minerals
Nickel Mines hits record quarterly EBITDA at Indonickel operations
Sandfire shares up ~12% on strong production report

Aeris Resources (ASX:AIS) is plotting a path to the base metal big leagues after announcing a $234 million deal to buy Soul Patts’ Round Oak Minerals business.

It’s a bold step for the $270 million capped miner, which was a big mover last year but has fallen almost 30% year to date.

The deal will include $80 million in cash backed by a $117m equity raising and the issue of shares to Washington H. Soul Pattinson (ASX:SOL), which will make the investment fund the major 30% owner of Aeris.

Aeris, led by Andre Labuschagne (yes, the father of Marnus), already owns the Tritton copper mine in New South Wales and the Cracow mine in Queensland, also a relatively recent acquisition from Evolution Mining (ASX:EVN) in 2020.

It follows Soul Patts’ decision to dump a $200 million IPO of Round Oak last year.

The deal, which comes with copper and zinc prices trading around all time highs, will bring the Jaguar copper-zinc mine in WA back to the public market for the first time since its sale by IGO (ASX:IGO) a few years ago.

Round Oak also owns the undeveloped Stockman copper-zinc mine it bought off IGO in Victoria and the Mt Colin underground copper mine and Barbara deposit in North-West Queensland.

Collective the mines are forecast to produce 18,000t of copper equivalent in FY23.

“This transaction transforms Aeris into a mid-tier copper, gold and base metals producer with multiple operations and exceptional growth potential,” Labuschagne (Andre, not Marnus) said.

“The Round Oak asset portfolio is an excellent fit with Aeris’ stated strategy to acquire advanced copper, base metals and gold assets in Australia that are strongly cash flow generative with attractive exploration upside.

“The introduction of the Stockman Project provides us with a second long life project, alongside Tritton, to underpin the group’s production into the next decade.”

Aeris Resources (ASX:AIS) share price today:

Quarterlies you may have missed today

It was a damn busy day for quarterlies. Here is a pick of some of the big boys.

Newcrest Mining (ASX:NCM)

Australia’s biggest gold miner produced 480,000oz of gold and 31,000t of copper in the three months to March 31 at all in sustaining costs of US$1008/oz and an AISC margin of US$809/oz.

It expects production to keep rising in the June quarter after narrowing FY22 guidance to 1.925-2.025Moz of gold and 125,000-130,000t copper, up on previous estimates thanks to the acquisition of Pretium Resources and its Brucejack mine in Canada.

“Newcrest delivered an excellent operational and safety performance during the quarter, building momentum for a strong finish to the financial year and positioning us well to meet our updated Group FY22 guidance, which reflects the addition of Brucejack and our operating and financial performance to date,” NCM MD Sandeep Biswas said.

“With the Cadia SAG mill motor operating at full capacity and an improved performance at Lihir, gold and copper production increased for the third consecutive quarter, driving the continued decline in our All-In Sustaining Cost.

“It was also very pleasing to see further reductions in our injury rates and progress made against our sustainability commitments.”

Newcrest Mining (ASX:NCM) share price today:

Nickel Mines (ASX:NIC)

Nickel Mines shares charged by over 6% after a strong March quarter, which included a record $81.7 million EBITDA haul from its Indonesian nickel operations.

NIC produced 11,166t and sold 10,089t of nickel on a 100% basis in the March quarter, with its rotary kiln electric furnace operations at Hengjaya and Ranger generating an EBITDA margin of US$7386/t and lower operating costs than the December quarter.

The company also received FIRB approval for Tsingshan’s Shanghai Decent to take a larger 22% stake in the company off the back of the raising it completed to help bankroll the purchase of the Oracle Nickel Project.

NIC has seen its value tumble this year despite higher nickel prices because of its connections to Tsingshan, widely reported as the short holder that prompted the LME nickel market’s brief squeeze to US$100,000/t in March.

The company has also commissioned three of the RKEF lines at its new Angel project, with the final line to come online in May along with the project’s commercial sales licence.

Once Oracle is developed in February next year NIC expects to boast nameplate capacity of 78,000tpa of nickel metal, up from 24,000tpa currently.

“In an environment where rising energy prices have severely impacted numerous operations globally, the stability of our production and the resilience of our margins highlight the enormous advantages of being a bottom-quartile cost producer and operating out of two world-class industrial parks,” NIC boss Justin Werner said.

“With ANI’s production set to increase materially into Q2 and beyond, and with ONI’s construction progressing well, the Company is highly confident of delivering a tremendous level of volume-driven growth over the next 12 months at strong margins that can be sustained throughout the commodity price cycle.”

Nickel Mines (ASX:NIC) share price today:

Sandfire Resources (ASX:SFR)

Sandfire chief Karl Simich said the macro environment is lining up for the copper miner after it secured the keys to Spain’s MATSA copper and zinc complex in February.

He says an annual supply deficit of 6Mt of copper a year for the next decade estimated by CRU Group would be equivalent to eight of BHP and Rio’s giant Escondida mine.

“CRU estimates that an investment of over US$100 billion will be needed if the World is going to meet soaring global demand for copper,” he said.

“The outlook for many other metals is similar, with zinc (which accounts for around 26 per cent of our revenues from MATSA) rising to the highest level since 2006 and inventories falling to historically low levels.

“All of these macro developments provide a very powerful backdrop to Sandfire’s growth strategy, with a rising production profile being delivered into historically strong metal markets.”

Sandfire produced 18,675t of copper, 8739oz of gold and 83,245oz of silver to maintain its production guidance of 65,000-68,000t copper and 30,000-34,000oz gold at the DeGrussa mine in WA, which is due to close in September.

Meanwhile MATSA delivered 12,536t of copper, 16,027t of zinc, 1901t of lead and 551,011oz of silver in the March quarter, against FY22 guidance (five month basis) of 27,000t copper, 38,000t zinc, 3000t lead and 1.1Moz silver.