ACE Investors

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By Team Ace Investors

COMPANY OVERVIEW

Aeris Resources Limited (“AIS” or the “Company”) is a mid-tier base and precious metals producer. Its copper dominant portfolio comprises four cash operating assets, a long-life development project and a highly prospective exploration portfolio, spanning Queensland, Western Australia, New South Wales and Victoria, with headquarters in Brisbane.

Aeris has a strong pipeline of organic growth projects, an aggressive exploration program and continues to investigate strategic merger and acquisition opportunities.

On 13th July 2022, the Company announced an update on FY22 production and AISC performance at its Tritton Copper Operations and Cracow Gold Operations. The Company’s turnaround strategy at Tritton continues to deliver with 5,126t of copper produced in the June quarter, enabling the production guidance to be achieved. Tritton recognized the need to change operating strategy mid-year and has delivered improved production performance. Life extension (Budgerygar and Avoca Tank) and exploration projects (Constellation) at Tritton were progressed during the year and the Golden Plateau deposit at Cracow is an evolving exploration story that we are quietly excited about.

Tritton Copper Operations: FY22 copper production was 18,581t at AISC A$5.10/lb. FY22 copper production guidance: 18,500t – 19,500t @ AISC $4.60/lb - $4.85/lb
Cracow Gold Operations: FY22 gold production was 53,920oz @ AISC A$1,911/oz. FY22 gold production guidance: 56koz – 59koz @ AISC $1,775/oz - $1,825/oz

INVESTMENT RATIONALE

Acquisition of Round Oak Minerals – In July 2022, the Company completed the acquisition of Round Oak Minerals Pty Ltd (the Transaction), announced on 28 April 2022. This marks another pivotal event for Aeris, transforming the Company into a mid-tier Australian focused base and precious metals producer. The Transaction significantly improves the Company’s cash flow generation and risk profile, with four operating assets and a long-life development project. In the near-term, Aeris will be focused on delivering the operational targets across the expanded operating portfolio; continuing its aggressive exploration program; and finalising the feasibility study for the Stockman Project. Aeris is well positioned to deliver its organic growth pipeline with a strong cash position and no debt.

Since acquiring Cracow on 1 July 2020 the Company has been focused on extending the mine life through brownfields and greenfields exploration and reviewing economic cut-off grades around the known Mineral Resources. Work on all these fronts is on-going and in the first full year of ownership, contained gold metal in the Mineral Resource estimate increased by 30% (compared to the prior year) and held steady for the Ore Reserve. The Company anticipates the Golden Plateau mine project will supplement production from the Western vein field deposits, extending mine life. $6.6 million was spent on life extension projects (including exploration) during the quarter
High-Grade Gold Intersections at Golden Plateau – The Company provided an update on resource definition drill results at the Golden Plateau deposit, located within the Company’s 100% owned Cracow tenement package in southeast Queensland. The Golden Plateau deposit is located 1km north from the Cracow mill and is situated along a regional northwest trending epithermal quartz vein structure that has been traced along a total strike length of 7km to 10km. Anomalous gold mineralisation has been traced along most of the prospective northwest trending corridor. Resource definition drilling program targeting remnants and extensions has provided exciting results with high-grade drill intersections returned from the north lode.
FY22 Outlook – FY22 guidance between 18,500 tonnes and 19,500 tonnes of copper produced at an AISC between A$4.60/lb and $4.85/lb is on track. The focus on improving grade at Tritton by targeting higher grade areas and lower tonnes was starting to come through in March and expected to continue during the June quarter.

ACE RECOMMENDATION:

During the second quarter of FY22 the Company recognised that the operating strategy of “fill the mill” was impacting production targets due to low-grade ore feed from the Tritton mine. As a result, the Tritton team has implemented changes to the mine plan. Over the last 6 months it has seen this updated operating strategy take effect, resulting in FY22 copper production being within guidance. This new strategy of focusing on ore “quality over quantity” will accelerate in FY23 with new, highgrade ore sources at Budgerygar and Avoca Tank coming on-line.

In FY22, the Company continued to focus on life extension opportunities at Cracow and pleasingly, it has more priority targets now than when the operation was acquired two years ago. Drilling at the historic Golden Plateau deposit returned encouraging high-grade drill intersections and a maiden Mineral Resource is planned for Q1 FY23. Golden Plateau offers the potential for a new, high-grade production source for Cracow in the near term to offset declining grades in the Western Vein Field. We recommend the stock as SPECULATIVE BUY at a closing price of $0.064.

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