Monsters of Rock: Trafigura backs Aurelia to rebound as it bankrolls Federation copper
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Aurelia Metals (ASX:AMI) can lay claim to enduring one of the most cringeworthy days of ASX trade in recent memory, when the leak of a heavily discounted capital raising to fund the development of its Federation mine in New South Wales led to bedlam.
But with few copper production or development stories on the ASX, there was always going to be a glimmer of hope for the $140 million capped miner.
And it has come in the form of Trafigura, one of the world’s biggest commodity traders, which will provide the bulk of the funding to get Federation up and running.
A mining contractor will be remobilised to the suspended decline this quarter after Trafigura agreed to advance $100m in funding including a US$24m ($36m) loan note and $65m environmental bond.
In exchange Trafigura will take up an offtake deal for 700,000dmt of any combination of zinc, lead and copper concentrate from the Peak processing plant owned by Aurelia.
Trafigura will have a bit riding on Aurelia’s success. It currently trades at 11.5c, with Trafigura to be granted 120m warrants with an exercise price of 25c a share over a four year term.
A $40m, 9c per share equity raising will also be completed via a $10m insto placement and $30m 1 for 3.72 pro-rata non-renounceable entitlement offer. With the funds from Trafigura to help pay a $9m term loan and replace a $57m guarantee facility, Aurelia will also have $46m of restricted cash released.
Both are, of course, underwritten.
AMI was trading as high as 89c in March 2019, having delivered a $26.4m profit for the FY2019 half year.
Tasked with getting the company back in form is new MD and CEO Bryan Quinn, who has hopped over after 12 months with copper miner OZ Minerals and 27 years including a number in executive roles with BHP (ASX:BHP).
“Mr Quinn’s extensive experience in business improvement, operational excellence and project delivery is an ideal background to help Aurelia deliver on its exciting development pathway for Federation and Great Cobar, whilst optimising value and performance of our existing assets,” AMI chair Peter Botten said.
“On behalf of the Board, I would like to thank (interim CEO) Andrew Graham for his commitment and dedication in
leading refinancing efforts and transformation of the Company over the last six months.
“He has been truly professional in driving the business forward and will continue in an important strategic role
within an optimised management team.
“With the refreshed management team and a competitive and flexible financing package now in place, Aurelia is well positioned to deliver on its value-adding growth trajectory. This represents a pivot point for the Company, and we look forward to providing our shareholders with reliable value enhancement.”
Federation will cost $76m to bring to first production, with $108m to bring it to commercial production, an NPV of $354m and IR of 58% on spot prices.
It will dramatically change Aurelia’s sales mix, going from 56% precious metals to around 80% base metals, important for energy transition technologies.
Development, which boasts a zinc equivalent grade of 16.7%, is expected to restart early in the new financial year, with commercial production at the start of H2 FY2025 and full production in H2 FY26.
The Greater Cobar copper development is expected to be funded from cash flows, with construction to start in mid-2025.
AMI expects to produce 83,000oz of gold, 2300t of copper, 21,000t of zinc and 20,000t of lead in FY23 at AISC of $2300/oz, after turning out 26,100oz gold, 600t copper, 5100t zinc and 4800t lead at $1884/oz in March, a near $800/oz improvement in operating costs QoQ.
It was, in general, a dreadful day for the materials sector, down 2.18% as the iron ore majors fell hard.
At a 2.52% loss, energy was even worse.
Only a handful of gold stocks and mid-tiers shone a beacon of light on a dark and stormy day both over West Perth and the market more generally.