Stellar March quarter delivers record EBITDA and 158pc lift in cash flow for copper miner Austral

Austral Resources has underlined the quality of its Anthill project near Mt Isa in Queensland, boosting operating cash flow by more than 150% in a stellar March quarter.

In a massive turnaround that came despite being inundated with over one metre of rain, Austral (ASX:AR1) and its tier 1 contractor Thiess were able to produce more than 30 tonnes of copper a day, with Thiess exceeding its material movement target despite wet weather constraining access to the Stage 1 East Pit.

The 14% lift quarter on quarter in daily production underpinned a 24% drop in all in sustaining costs to US$2.79/lb, with 2818t of copper cathode sales generating “outstanding” net revenue of $35.55m, up 17% QoQ, at $13.6m of operating cash flow, an improvement of 158%.

All in costs of US$3.14/lb came in well below Austral’s achieved copper price of US$3.83/lb, delivering strong cash flows despite a relatively unchanged copper price on the previous quarter (up 3% to $12,601/t), when the company sold ~2393t of copper metal.

Austral had $6.1 million in the bank as of March 31 – roughly four times higher than the $1.53m in its bank at December 31 2022 – reducing its senior secured debt to $21.1m and repaying Thiess $8.18m for the first quarter, with total 60-day payables to other suppliers falling to $8.9m.

“This quarter has been outstanding as our team successfully navigated a challenging environment not only for the company, but all associated with Austral Resources,” AR1 managing director and CEO Dan Jauncey said.

“With over one metre of rain over the three months, we delivered better-than-expected March quarter results and a great start to 2023.

“The fact that we continued production and processing is a testament to the team on site, management, contractors, and suppliers. We couldn’t have done it without them rolling their sleeves up.”

Austral delivered a record EBITDA of $8.7m for the quarter with a margin of 24.5%, up $8.5m on the December 2022 quarter, with sales and production up 18% and 6% respectively and costs down 10% QoQ to $24.3m.

Austral Resources ASX AR1 — Ore stacked on the Mt Kelly leach pad. Pic: AR1

Exploration and growth on the horizon

Growth capex and exploration costs fell 69% QoQ to $0.7m, with the extreme weather conditions a major factor.

But Austral has $7m of exploration planned for 2023 to grow its resource base, targeting an increase in inventory of more than 40,000t of copper oxides or sulphide discoveries focusing on deposits on existing mining leases within 50km of its Mt Kelly plant.

It has also outlined plans to grow production to upwards of 25,000tpa in cathode and concentrate through the “transformational development” of the Lady Colleen open cut mine, which a scoping study by CSA Global showed would boast an NPV of ~$60.5m and IRR of 38.9% on a pre-tax basis.

Containing a resource of 3.15Mt at 1.73% Cu (91% indicated), part of Austral’s total JORC resource estimate of 410,000t of contained copper, Lady Colleen would deliver around 44,000t of copper over 3.5 years from heap leach and flotation processing delivering $91m in cash flows at a cash cost of US$2.78/lb.

Work is ongoing to add mine plan tonnes and increase the Lady Colleen mine life.

Copper prices are currently almost $1000/t higher than the $12,000/t Aussie assumed in the study.

Lady Colleen is just 1km from the Mt Kelly plant, making it an ideal development option for Austral, but CSA has also started cutback studies on previously mined high-grade pits at Lady Annie, Brenda East, Brenda West, Mt Clarke and Flying Horse which could add 7000t of copper production and grow oxide output by 60% between 2024 and 2025.

“The exploration season has just started for us, in the June quarter Austral will be looking at oxide extensions at Lady Annie and Anthill and also continuing drilling at Lady Colleen, Lady Annie, and Flying Horse,” Jauncey said.

“I could not be happier with how things are tracking currently, and this will be another solid quarter with strong news flow.”

Drilling to begin in June quarter

With wet weather delaying its exploration plans, a 22,400m drill program across 20 oxide and sulphide targets both on mining leases and at regional prospects is due to take place from the June quarter.

That’s more than double the 9125m drilled across Anthill, Flying Horse, Lady Colleen, Dividend and Amy’s Pocket in 2022, though daily rates last year came in at an annualised rate of over 30,000m.

A single RC rig has been drafted with more to follow depending on success.

“The exploration team has assembled a program over 2023 that is balanced between the two priorities of both increasing economic mineral inventory on Austral ML’s and evaluating regional prospects,” Austral exploration manager Ben Coutts said.

“Integrated into the 2023 exploration program is a thorough evaluation of Austral’s extensive legacy dataset, and the geology knowledge gained by the exploration team over 2022.

“The resource development processes applied to Lady Colleen over 2022 with such success will be repeated over other oxide and sulphide development options on Austral MLs in 2023.

“Austral will continue to engage proactively with our peers evaluating JV opportunities to both monetise Austral tenure, and also gain access to copper prospects currently held by others.

“I am confident that we have the right ground, the right team and the right focus for discovery in 2023, and look forward to sharing results with the market as our program is executed.”

This article was developed in collaboration with Austral Resources, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.