Another busy week in the local mining space

Company News

by Glenn Dyer

Even for the ever-dynamic local mining sector, the week just ended was a particularly busy one. Here’s the latest from Sandfire, St. Barbara, Regis, Perseus, Galena and Aeris.

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Sandfire Resources (ASX:SFR) saw its June quarter and 2021-22 production nicely boosted by its big Spanish copper and zinc purchase, MATSA which delivered a repayment on the more than $A2.7 billion acquisition price

But like so many other resource companies, rising costs (general inflation and especially energy), labour shortages (Covid) and weakening prices (especially for copper and gold) have clouded the outlook for 2022-23.

Thanks to the purchase of the Spanish based miner, MATSA and another solid result from the Degrussa operations in WA Sandfire said it exceeded its full-year guidance for its key minerals, such as copper and zinc

Sandfire produced 34,974 tonnes of copper in the June quarter, 21.5% above the previous quarter. This saw total copper output rise to 98,367 tonnes for the year to June and nicely above the 92,000 to 95,000 tonne forecast from management.

Zinc production jumped 42.8% in the June quarter compared to the March quarter to 22,880 tonnes. Full-year zinc output totalled 38,907 tonnes – nearly 1,000 tonnes above Sandfire’s full year guidance.

Quarterly output of lead and silver came in at 2,201 tonnes and 800,000 ounces, respectively. That saw full-year lead output of 4,102 tonnes and silver, 1.5 million ounces.

This compares well with management’s full-year guidance of 3,000 tonnes of lead and around 1.4 million ounces of silver.

Sandfire’s $US1.87 billion MATSA purchase also delivered in another way – a significant upgrade in its reserves.

Sandfire said the proved ore reserve estimate increased by 41% to 26.2 million tonnes at 1.7% copper and 2.7% zinc.

“Contained ore tonnes have increased by 3% with an 8% decrease in contained copper and a 5% increase in contained zinc since the previous Ore Reserve estimate stated as at 31 July 2020. This replaces mining depletion over the intervening two years,” Sandfire noted in its report this week.

But as pointed out earlier, rising costs are a big concern for the company (and the entire sector).

The group’s C1 cash costs surged more than 34% quarter-on-quarter to $US1.57 a pound. This pushed Sandfire’s full-year C1 costs to $US1.27 a pound. The company doesn’t see those pressures easing and it warned that 2022-23 C1 costs will reach US$1.57 a pound.

Investors noted the apparent downgrading of copper output in its 2023 guidance.

Sandfire issued a fairly wide production range for the new financial year of between 81,000 and 89,000 tonnes. That’s well below the 98,367 tonnes it delivered in 2021-22 and under the earlier guidance for last year as well.

But the takeover of MATSA will give its zinc output a big boost to 78,000-83,000 tonnes for the coming year, while lead should increase to between 6,000 and 10,000 tonnes for the year.

Sandfire’s CEO, Karl Simich, said in Thursday’s release: ‘We are delighted to report on an outstanding June Quarter, which caps a transformational year for Sandfire and positions our business for long-term growth.”

“This should provide investors with a clear insight into the strong cashflow generating capability of our expanded global business, with the MATSA operations generating an EBITDA margin of 51% for FY2022 – a very strong result by any measure.

“The strong margins and cashflows were achieved despite increasing costs. This is a global trend which reflects the impact of rising fuel and energy costs across all the jurisdictions where we operate, as well as significant labour shortages and the impact of COVID-19 in Western Australia. As a result, Group C1 unit costs came in slightly above guidance at US$1.27/lb of payable copper, which we think is still a very creditable result.

“Operationally, we were very pleased with MATSA’s performance during the Quarter, as well as the strong progress with our operational integration, optimisation and excellence programs.

“Elevated energy costs in Spain remain a challenge and were reflected in C1 unit costs for MATSA of US$1.81/lb for the quarter and US$1.45/lb for FY2022. We are progressing a number of responses to this situation, including the planned construction of new solar farms, engaging with electricity suppliers for new contracts and investigation of other pricing structures.

“At the DeGrussa Operations in Western Australia, our team delivered another quarter of safe production despite the challenges of COVID-19 and ongoing cost pressures, with the operation continuing to generate strong margins and make a strong contribution to our Group production.

“This will continue for another four months, with mining expected to be completed in September 2022 and processing to wind up in October. We have developed a detailed care and maintenance and mine closure plan and have implemented high-quality retention and engagement programs with our staff and contractors, to ensure a smooth and seamless transition.

“The strong cashflows generated during the quarter saw us finish the year with cash holdings of US$463.1 million and net debt of US$324.7 million. We remain well placed to make the first repayment due under the MATSA facility of US$118 million at the end of September, together with repayment of our ~US$138M (A$200 million) ANZ corporate facility in Australia.

“Commodity prices experienced significant headwinds towards the end of the quarter, with both copper and zinc prices moving significantly lower. While delivering production into lower commodity markets in the near term will have an impact on our business, we remain extremely positive on the longer-term demand outlook for the metals we produce,” Mr Sumich said.

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St Barbara (ASX:SBM) might have seen a small improvement in 4th quarter gold production but the full year performance fell short of 2020-21’s level while costs nudged higher.

The company is in the sights of a consolidation going on in the WA gold industry that has seen Genesis Minerals stalking and winning struggling Dacian Gold.

Once that deal is bedded down, the new company is expected to chat to St Barbara about a merger of their operations in the Leonora region on WA’s northern goldfields.

St Barbara’s quarterly report confirms that like so many of its peers in the resource sector, it has had to battle cost inflation on key inputs as well as Covid impacts on labour availability as well as associated travel restrictions.

On top of that the company is cutting costs, staff, and looking at perhaps getting rid of the expansion planned for its Simberi mine in PNG.

At the same time its operations in Eastern Canada (in Nova Scotia) are facing pressures from local regulators, though the company had good news on that topic in this week’s statement.

St Barbara said group gold production for the June quarter was 86,403 ounces up 40% quarter on quarter and 5% above the 82,098 ounces mined in the final quarter of 2020-21.

Full year production was 280,746 ounces which was sharply lower than the 327,662 ounces reported for 2020-21. But that shortfall was mostly due to wet weather in Canada and the restrictions and labour shortages caused by Covid.

“Group gold production for the June quarter was up 40%, with all operations delivering significant quarter on quarter production improvement. Leonora’s production increased due to improved grade after regaining access to higher grade stopes.”

“Production at Simberi improved as it recovered from the COVID-19 outbreak in the third quarter. Atlantic recovered from the difficult weather conditions of the March quarter and accessed higher grade mining zones after the completion of in-pit waste relocation work.”

Group All In Sustaining Cost (AISC) for the June quarter was $A2,007 an ounce and full year $A1,848 an ounce which was just under guidance of $A1,710 – $A1,860 an ounce.

Cash in bank increased 25% quarter on quarter to $99 million at June 30, but that was down from $133 million at the end of June, 2021.

On the problems in eastern Canada, St Barbara said that senior executive relationships were established with the Nova Scotian Government “which has improved permitting pathways for (the) Atlantic Operations.”

The tussle is over the handling of mine tailings, their disposal and storage in a dam that needs expanding otherwise the mine will be forced to close and with it the mine and expansion plans.

That had seen two permits issued during quarter and multiple permits will be able to be processed concurrently. That should help clear the way for the Atlantic mining operations to continue.

The company also released an inaugural ore resource for its Old South Gwalia prospect in WA of 1.9 million tonnes at 3.7 grams to the tonne of gold for a total resource of 200,000 ounces.

And the corporate cost cutting has identified savings of $5 million identified with hopes of doubling that in first year by consolidating offices into Perth in 2023. A further $10 million in cost savings will be sought in 2024.

Barbara CEO Craig Jetson said the company “has finished the year strongly, achieving both our production and cost guidance at a site and group level for FY22. Against the headwinds of cost inflation and COVID-19 impacts on our workforce availability as well as associated travel restrictions this is a rewarding result.”

“Today we announce a further increase to our extensive mineral resource base in the Leonora province with the release of our inaugural Mineral Resource for Old South Gwalia. This initial Mineral Resource is the first instalment from Old South Gwalia from between 600 metres below surface down to 1000 metres below surface. Further resource extension drilling is planned for the coming year to grow a productive new mining front at Gwalia.

“Management’s focus on Gwalia and the Leonora province plan is generating early rewards with expansion of Mineral Resources and Ore Reserves and our expanded footprint across the region. We continue to execute our Leonora Province Plan.

“St Barbara is central to any regional consolidation with the largest Mineral Resource and Ore Reserve base in the Leonora region, a host of near-term growth options, growing production from the new Zoroastrian underground mine and a cash generating processing facility which is expected to increase its processing capacity by 50% to 2.1mtpa. Following our acquisition of Bardoc, the assets have been promptly assimilated with Zoroastrian on track for first ore at the start of FY24”

That sounds like the company is waving a flag at Genesis/Dacian and reminding them that they are there to talk to about a possible deal.

On the company’s Atlantic Province projects in Nova Scotia, the company said that with travel restrictions lifted, “we have strengthened our relationships with the Government and First Nations people in Nova Scotia.”

“In collaboration with the Government, a new permitting approach has commenced and has already yielded promising results with two permits already granted.

“These results provide encouragement that outstanding permitting issues can be addressed and the potential of Atlantic can be realised. Furthermore, our decision to place Simberi Operations under strategic review is aligned with our clear focus on leveraging the highest value options for the St Barbara Group.”

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Like St Barbara, the June quarter produced some solid results for Regis Resources (ASX:RRL) and in turn meant record year of gold production.

The last three months of 2021-22 saw production reach a new high of 123,900 ounces at an AISC of $1,591/oz.

Duketon, the company’s WA mine, produced 92,800 ounces of gold at an AISC of $1,706/oz, and Tropicana, 31,100 ounces of gold at an AISC of $1,157/oz

The 2021-22 gold production hit 437,300 ounces, within guidance of 420,000-475,000 ounces, while annual AISC of $1,556/oz was slightly above guidance of $1,425-$1,500/oz.

Regis CEO Jim Beyer said the company had overcome a number of challenges throughout FY22, and to deliver gold production within guidance was a testament to the Regis team’s commitment and capability.

“With the plant modifications at Duketon complete, resource models performing to expectation and Garden Well South underground coming online, Regis is well positioned to deliver a strong FY23,” he said.

“The company is in a solid financial position with two operating sites that generate strong operating cash flows and building a portfolio of potential growth options capable of delivering our target to be a 500,000oz-per-year producer. We are looking forward to continue delivering on our growth plans over the next three years.”

Regis says it is looking for a small increase in production for 2022-23 at a slightly higher cost estimate.

It said in the report that 2023 guidance is the range of 450,000 ounces to 500,000 ounces at an AISC of $1,525-$1,625/oz

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Perseus Mining (ASX:PRU) was another mid-level gold miner to make guidance in the year to June.

The company said in its quarterly report that it achieved the upper half of its market guidance with the production of 494,014 ounces of gold for the June 30 year.

June half Year production of 252,850 ounces included 122,327 ounces of gold produced during the June quarter.

2021-22 financial year gold sales reached 481,075 ounces at an average price of $US1,683 per ounce.

Perseus said the weighted average AISC of $US952 an ounce for the June 30 financial was “in the bottom quartile of the market guidance range.”

“AISC for the June 2022 half and quarter of $US955 and $US1,004 an ounce respectively, both within market expectations.”

Perseus said its financial position continues to strengthen with available cash and bullion of $US328 million, debt of $US50 million, and net cash of $US278 million at June 30, $US50 million more than at the end of the March quarter.

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Meanwhile Aeris Resources (ASX:AIS) says it has struck high-grade copper-zinc – silver mineralisation at its wholly-owned Jaguar operations’ Turbo Lens and Java Deeps target in Western Australia.

Resource definition drilling also extended high-grade copper-zinc mineralization at the Bentley deposit, it added.

Diamond drilling had found five separate intersections of note in two diamond drill holes at the Turbo Lens prospect.

The best was 36.8 metres of 2.24% copper, 8.22% zinc, 49 grams a tonne of silver, and 0.73 grams of gold from 36.8 metres in one hole at the Turbo Lens. Another had found 21 metres of 2.19% gold, 4.69% zinc, 87 ounces of silver and 0.70 grams of gold to the tonne.

The while Java Deeps prospect saw drilling which returned high-grade intersections including 2.15% copper, 16.7% zinc, 228 grams a tonne of silver, and 1.98 grams of gold to the tonne over 7.05 metres.

Aeris said “multiple sulphide lenses remain open down plunge and along strike and have the potential to extend the Bentley mineral resource”

Executive Chair Andre Labuschagne, said in the ASX statement “The recently discovered, high grade Turbo lens has doubled in strike length and is still open down plunge. Turbo offers excellent potential to extend the life of the Bentley underground mine and will be a priority for further drilling in this financial year. An update of the Turbo Mineral Resource is expected this quarter.”

“Also, a number of other lenses have been identified at depth but have had limited drilling. The latest drill results from Java Deeps show exciting, high-grade intersections that will be followed up with further exploration drilling”.

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And finally, Galena Mining (ASX:G1A) has raised another $17 million to help give it a financial buffer while it closes the development of its rich Abra lead-silver mine in Western Australia.

Galena placed 136 million new shares at an issue price of 12.5 cents a share to raise the money

Galena CEO Tony James said with first concentrate production coming in early 2023, the company felt it critical to ensure the Abra project had an adequate funding buffer to deal with any unforeseen circumstances during the ramp-up phase of the mine.

“It’s very pleasing to see the ongoing strong support from our key stakeholders who continue to support us in the development of our world-class lead-silver mine,” he said.

Galena said the the placement “was significantly oversubscribed and well supported mainly by existing stakeholders. The company’s largest shareholder and strategic investor Timothy Andrew Roberts subscribed for 35,318,665 placement shares for about $4.41m.”

Taurus Mining Finance Fund, the provider of the Taurus debt facilities to the Abra mine and a key stakeholder in the ongoing success of the Project, subscribed for 30,007,862 placement shares for about $3.75m.

Proceeds will be used to provide Abra a temporary unsecured reserve facility, which will be made available during the critical commissioning of Abra, up until the project completion tests are satisfied under the Taurus facility.

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