Quarterly Activities Report June 2017

Transcription

1 For ASX Market Release: 31 July 2017 Quarterly Activities Report June 2017 HIGHLIGHTS Wetar Copper Project Corporate Record copper cathode production of 6,804 tonnes with record sales of 7,419 tonnes at an average realised price of US$2.60/lb Cu C1 cash cost of US$1.02/lb and AISC cost of US$1.33/lb EBITDA of US$22.5 million Unsold finished product inventory of 1,729 tonnes copper cathode with a value of US$10.3 million at quarter end Consistent mining and processing rates maintained throughout the quarter 12 month rolling LTIFR and Injury Severity rates remain at zero Contacts: Mr Gary Comb Non-Executive Chairman Mr Barry Cahill Managing Director Mr James Wentworth Chief Financial Officer Phil Retter Investor Relations NWR Communications phil@nwrcommunications.com.au T: Total project debt reduced to US$73.6 million as at 7 July 2017 from the initial US$162 million facility Project Completion under the Bank Facility achieved in July Indonesian tax incentive received, reducing taxes payable over the life of the mine by more than US$10 million Cash on hand at quarter end of US$3.3 million Perth Office: 25 Colin Street West Perth WA 6005 T: F: E: info@findersresources.com ASX Code: FND Managing Director Barry Cahill commented: The June result consolidates what has been a transformational half for Finders as it moves from an exploration and development company to a significant copper producer with robust financial and production metrics. Finders in now a standout value proposition amongst its ASX-listed copper peers. Our focus now turns to extending the mine life beyond the current 7 years with drilling underway testing for extensions to the Lerokis Ore Reserve.

2 WETAR COPPER PROJECT (FINDERS 74.1%) 3,000 t.p.a. and 25,000 t.p.a. SX-EW Plant Production Report Both the 3,000 t.p.a. and the 25,000 t.p.a. plants continued to operate as expected, as summarised in the following table: Table 1: Wetar Quarterly Copper Production Full Year 2016 December 16 Quarter March 17 Quarter June 17 Quarter Ore stacked 1 t 2,152, , , ,638 Grade % Cu Metal stacked t Cu 47,247 19,057 6,299 10,450 Copper stripped t Cu 11,760 6,166 6,125 6,804 Copper sold t Cu 8,825 4,888 7,153 7,419 2 Copper sale price US$/lb Cu Note 1: includes ore stacked to heap and stockpile leach pads. Note 2: due to a change in accounting standards during 2017, figure includes 990 tonnes of copper sold that was recognised upon the issuance of an invoice to customers rather than when the sales proceeds were collected. Ore and waste mining continued at Kali Kuning, with ore mined as required to meet crusher feed requirements. Image 1 Kali Kuning pit 2

3 Tonnes and grades mined from the open pit continued to be in line with those estimated by the Ore Reserve, with reconciliations remaining positive for the project to date (an additional 4% more copper metal extracted). The mining schedule has now progressed through the higher, northern part of the pit and grades will continue to improve as mining proceeds into the massive sulphide zone of the orebody. Ore stacking on the DP07 leach pad, GPLP leach pad and the Kali Kuning Valley (KKV) heap leach pads was ongoing. The crushed and stacked quantities were as per forecast for the quarter. Leach pad extension work was completed on the KKV leach pads and to the front and rear of pads 1 and 2, with stacking of crushed tonnes underway in these areas by quarter end. Image 2 Stacked tonnes on the Gold Pit Heap Leach Pad with ore mining in Kali Kuning pit in the foreground The 25,000 t.p.a. SX-EW plant and the neutralisation plant continued to perform well. The SX-EW plant is now operating consistently above nameplate. Ongoing enhancement programmes to the design and operation of the plant to improve consistency will continue throughout the remainder of the year. Performance of the 3,000 t.p.a. SX-EW plant improved during the quarter and this is trend expected to continue commensurate with the completion of the refurbishment projects during the second half. 3

4 Image 3 Crusher stacking on the KKV Leach Pad During the quarter, over 50% of the copper shipped was sold as LME Grade A Cathode at a premium to the LME copper price. The balance was sold as Standard Grade Copper at or around the LME copper price. The C1 cash cost for the quarter was US$1.02 per pound of copper produced and the AISC cost was US$1.33 per pound of copper produced, which has benefited from modest levels of capital and exploration expenditure during the first half of this year. Costs for the Wetar Copper Project are summarised in Table 2 below: Table 2: Wetar Quarterly Unit Costs Full Year December 16 1 Quarter March 17 Quarter June 17 Quarter Copper Stripped t Cu 11,760 6,166 6,125 6,804 Copper Sold t Cu 8,825 4,888 7,153 7,419 2 Copper sale price US$/lb Cu C1 cash cost US$/lb Cu Royalties US$/lb Cu Marketing / sales costs US$/lb Cu Sustaining capital US$/lb Cu Hedging losses US$/lb Cu Reclamation & other US$/lb Cu AISC cost US$/lb Cu Note 1: 2016 Year still under construction and commissioning Note 2: due to a change in accounting standards during 2017, figure includes 990 tonnes of copper sold that was recognised upon the issuance of an invoice to customers rather than when the sales proceeds were collected. 4

5 Project EBITDA for the quarter was US$22.5 million. Copper cathode as finished product (produced but not sold) at quarter end was 1,729 tonnes. This copper cathode is either at site awaiting shipment, in transit to Surabaya (the major export port) or at Surabaya. This copper is worth US$10.3 million based on the LME copper price as at 30 June Exploration and Project Development Image 4 Aerial view of the 25,000 t.p.a. SX-EW plant at night As foreshadowed in the March 2017 quarterly report, the multi-purpose drill rig for the Lerokis project development programme arrived on site in late April. Prior to commencing drilling at Lerokis, the drill rig completed piezometer holes around the Kali Kuning mine area for monitoring purposes. The rig then moved to Lerokis where drilling activities involved vertical infill holes and angled holes to resolve areas of complex geology and grade distribution prior to finalising the mining design of the Lerokis open pits. During the quarter, five holes (243m) of reverse circulation drilling (RC) were completed in Zone 1S at Lerokis (refer to Table 3 & Figure 1). Table 3 Completed Drill holes Lerokis Drill Hole Easting (me) Northing (mn) RL (m) Azimuth/ Incline (⁰) Hole Depth (m) LKR / LKR / LKR / LKR / LKR / Assay results were encouraging based on the current interpretation, however their overall significance will be dependent on the results from the remainder of the programme. The balance of the Lerokis programme comprises a further 45 holes (approximately 2,400m) which will be completed during the September quarter. 5

6 Figure 1 - Lerokis Delineation & Sterilisation Plan (June 2017) 6

7 Significant drill hole intersections returned to date as presented in Figures 2 5 include: 17m at 4.24% Cu, 0.47g/t Au, 48.8g/t Ag, 0.62% Zn from 5m in LKR524 Zone 1S (sulphide) and includes 14m at 5.06% Cu, 0.53g/t Au, 56.9g/t Ag, 0.66% Zn from 5m 5m at 2.14g/t Au, 133.8g/t Ag, 0.62% Pb from surface in LKR524 Zone 1S (barite) 28m at 1.68% Cu, 0.62g/t Au, 27.3g/t Ag, 0.76% Zn, 0.19% Pb from 7m in LKR525 Zone 1S (sulphide) 5m at 4.21g/t Au, 220.4g/t Ag, 0.27%Pb from 1m in LKR525 Zone 1S (barite) 17m at 1.08% Cu, 0.16g/t Au, 9g/t Ag from 7m in LKR526 Zone 1S (sulphide) 7m at 4.00g/t Au, 157.6g/t Ag, 0.33% Pb from surface in LKR526 Zone 1S (barite) 4m at 0.66% Cu, 10.1g/t Ag from 12m in LKR523 Zone 1S (sulphide) 8m at 2.07g/t Au, 213.5g/t Ag, 2.93% Pb from 1m in LKR523 Zone 1S (barite) Figure 2 - Lerokis interpretative section 4675gN showing LKR523 & projected LKR524 7

8 Figure 3 - Lerokis interpretative section 4625gN showing LKR526 and projected LKR525 Figure 4 - Lerokis interpretative long section 5050gE showing LKR523, LKR525 and LKR526 8

9 Figure 5 - Lerokis interpretative long section 5050gE showing LKR524 OH&S The Lost Time Injury Frequency Rate (LTIFR) at the end of the June quarter was zero (March quarter: 0), while the Total Recordable Injury Frequency Rate (TRIFR) at 4.7 (March quarter: 4.5). Safety systems development continued to focus on prevention of incidents and improving the safety culture of employees and contractors, with risks associated with hazards and their identification and management a key focus. Wetar Community Development Community development programmes as outlined in previous quarterly reports, which assist with local health and economic development, continued during the quarter. As part of the Company s annual commitment, many of these community projects are constantly reviewed to ensure they remain effective and appropriate. A community sustainability and social assessment has commenced with the aim of ensuring that the programmes defined produce long lasting results after the mining operations have ceased. An external, independent consultant has been engaged for this purpose. Wetar Environmental Management Environmental monitoring activities and reporting to the relevant Indonesian authorities in accordance with the Project s environmental permit was ongoing. No non-compliance events were reported. 9

10 September 2017 Quarter Planned activities for the September 2017 quarter include: Continued stacking of ore to the KKV, GP and DP07 leach pads; Ongoing refurbishment of the 3,000 t.p.a. SX-EW plant; Continued optimisation of the 25,000 t.p.a. SX-EW plant; Maintaining the production profile of the project at the nameplate capacity of 28,000 t.p.a. copper cathode at or below a C1 cash cost of US$1.05 /lb Cu; and Completion of pre-development drilling at Lerokis. CORPORATE Cash and Project Finance Facility Finders Resources Limited through its Indonesian subsidiary PT Batutua Tembaga Raya ( BTR ) previously entered into a Senior Facilities Agreement with BNP Paribas, Commonwealth Bank of Australia, Hong Kong and Shanghai Banking Corporation (HSBC) and Société Générale ( the Senior Lenders ). The Agreement provided for a US$162 million commitment from the Senior Lenders consisting of a: US$127 million Term Loan Facility; US$20 million Cost Overrun Facility; and US$15 million VAT Working Capital Facility. In July 2017, BTR achieved Project Completion under the Senior Facilities Agreement. Project Completion occurs when the Senior Lenders and their independent engineer accept that the Project is operating in line with all key physical and financial parameters. BTR was required to demonstrate Project Completion over a three-month period to 31 May This is an important milestone under the Senior Facilities Agreement and demonstrates independent corroboration of the assumptions set out in the Project s Bankable Feasibility Study. During the quarter, BTR was advised that it had been granted a Tax Incentive Facility by the Indonesian Government. The Facility provides for a number of benefits including: 1. Accelerated depreciation for selected project assets; 2. An increase in the value of selected project assets by 30% for tax depreciation purposes; and 3. A reduction in the withholding tax rate on dividends from BTR to Australia from 15% to 10%. BTR estimates that the income tax benefit of items 1 and 2 alone is more than US$10 million over the life of the Project. During the quarter, BTR made further repayments of US$3.5 million on the Term Loan Facility and US$3.3 million on the VAT Facility. The total amount drawn under the Senior Facilities Agreement as at the end of the quarter was US$74.6 million. In early July, BTR made a further repayment of US$1.0 million on the VAT Facility, reducing total debt to US$73.6 million. 10

11 Hedging During the quarter, BTR commenced a discretionary hedging programme. The discretionary hedging programme aims to, where appropriate, increase the level of short term hedging (3-6 months) from the current 26% of production under the mandatory hedging programme to reduce short term pricing volatility and lock in favourable copper pricing. As at 30 June 2017, BTR had hedged 1,050 tonnes of copper under its discretionary hedging programme. This is in addition to 12,665 tonnes hedged at an average price of $4,800 under the mandatory hedging programme between July 2017 and March The book value of the hedges entered into by BTR as at 30 June 2017 is summarised in the following table (US$ million): Copper hedging (14.6) Fuel hedging (0.9) Total (15.5) As at 30 June 2017, Finders and BTR held cash of US$3.3 million. Project Ownership During the quarter, Finders increased its economic ownership in the Wetar Copper Project from 73.5% to 74.1%. The interest of Posco Daewoo Corporation was diluted to 20.9%. The interest of Finders local Indonesian partner remained unchanged at 5%. Corporate During the quarter, a total of 22.9 million options with an exercise price of A$0.35 expired unexercised and 300,000 shares issued under the Employee Share Scheme were cancelled. At the Annual General Meeting held in May, Finders shareholders approved a new Employee Share Ownership Plan and Performance Rights Plan and renewed Finders ability to issue additional shares under Listing Rule 7.1(a). Finders head office was relocated to 25 Colin Street, West Perth during the quarter. 11

12 Capital Structure Type of Security Number on Issue Fully Paid Ordinary Shares ( Shares ) - Quoted on ASX Shares on issue at 30 June 2017 Quoted on ASX 761,267,245 Unlisted Employee Shares No. of Shares Employee shares issued under the Finders Employee Share Ownership Plan at issue prices of cents to cents funded by loans from the company Vested and unvested Director s incentive Shares issued at issue prices from cents to cents funded by loans from the company and subject to performance and time based vesting conditions 600,000 10,500,000 Unlisted Employee Shares on issue at 30 June ,100,000 Unlisted Options Exercise Price Expiry Date No. A$ Oct ,298,904 Unlisted Options on issue at 30 June ,298,904 Unlisted Converting Notes Conversion Price Maturity Date No. of Shares US$5,500,000 A$ Mar ,248,538 Barry Cahill Managing Director 12

13 Background Information on Finders Finders is the operator of the Wetar Copper Project (74.1% interest) located on Wetar Island in eastern Indonesia. The Wetar Copper Project comprises the development, open pit mining and processing of the high-grade sulphide deposits at Kali Kuning and Lerokis located within 3 kilometres of the coast on Wetar Island. The project benefits from having existing infrastructure in place, particularly a wharf, camp and roads and partially exposed copper ore bodies from a prior gold mining era. Finders currently operates a 25,000 tonne per annum ( t.p.a ) copper cathode solvent extraction -electrowinning ( SX-EW ) plant, commissioned in May 2016, and a 3,000 t.p.a SX-EW plant giving annual production capacity of 28,000 tonnes copper cathode. To date, the plants have produced over 27,000 tonnes of copper cathode. The average sale price for all copper sold to date has been a premium to the LME price. The project currently has a total debt of US$73.6 million (including a VAT facility) repayable over the period to March 2019 and has a projected cash operating cost of US$1.05/lb Cu over the life of mine. Opportunities for extending the mine life past the current 7 years are strongly founded on exploration upside, focussing initially on the nearby Meron satellite deposit and other identified VMS copper and gold targets on Wetar Island. Tenement/Mineral Permit Schedule IUP Decision No. Type Mineral Expiry Date Area (ha) Term Holder 1 Wetar Copper Project Tahun 2011 IUP Exploitation Copper 09 Jun , years BKP a Tahun 2012 IUP Exploitation Sand, gravel & stone 01 Nov years BKP b Tahun 2012 IUP Exploitation Limestone 01 Nov ,425 5 years BKP b Tahun 2010 IUP Exploitation Barite 01 Nov years BBW 1. Finders interest in the Wetar Copper Project (74.1%) is held through Indonesian subsidiaries PT Batutua Tembaga Raya ( BTR ) and PT Batutua Kharisma Permai ( BKP ). BBW has merged with BKP and tenements previously held by BBW are in the process of being transferred to BKP. 13

14 Wetar Copper Project Resources & Reserves Wetar Copper Project Ore Reserve Estimate as at 30 th June 2016 Proved Probable Total Mt Cu% Mt Cu% Mt Cu% Cu (Kt) Kali Kuning Open Pit (COG 0.4% Cu) Primary Transition Leached Total Lerokis Open Pit (COG 0.5% Cu) Waste 3.9 Stripping Ratio 0.7 Primary Total Total Kali Kuning and Lerokis Open Pits Waste 1.9 Stripping Ratio 0.8 COG as above Heap Leach Pads (ex-mine minus cathode production and decommissioned leach pads) Kali Kuning Total Total Ore Reserve (including Heap Leach Pads) COGs as above Notes The Ore Reserve Estimate for the open pit mines is derived from the Mineral Resource block models for the Kali Kuning and Lerokis deposits. The tonnes and grades are stated to a number of significant digits reflecting the confidence of the estimate. Since each number and total is rounded individually, the columns and rows in the above table may not show exact sums or weighted averages of the reported tonnes and grades. Stripping Ratio refers to the ratio of the waste to the ore tonnage. 14

15 Wetar Copper Project - Mineral Resource Estimate as at 30 th June 2016 Measured Indicated Inferred Total Mt Cu% Mt Cu% Mt Cu% Mt Cu% Cu (Kt) Kali Kuning Resource (COG 0.4% Cu) Primary Transition Leached Total Lerokis Resource (COG 0.5% Cu) Primary Total Total Kali Kuning and Lerokis Open Pits COG as above Heap Leach Pads (ex-mine minus cathode production and decommissioned leach pads) Kali Kuning Valley Total Total Mineral Resource (including Heap Leach Pads) TOTAL Note Rounding errors may occur. Mineral Resources which are not included in the Ore Reserve compilation do not have demonstrated economic viability. The information in this report that relates to the in-situ ore reserve estimation at the Kali Kuning and Lerokis deposits is based on ongoing and prior work completed by external consultants and PT Batutua Tembaga Raya employees that has been reviewed by Mr Nick Holthouse, who is a full-time employee of PT Batutua Tembaga Raya (a subsidiary of Finders Resources Limited) and who is a Member of the Australasian Institute of Mining and Metallurgy (#305303). The information in this report that relates to the ore reserve estimation for the heap leach pads is based on ongoing and prior work completed by external consultants and PT Batutua Tembaga Raya employees that has been reviewed by Mr Augy Wilangkara, who is a full-time employee of PT Batutua Tembaga Raya (a subsidiary of Finders Resources Limited) and who is a Member of the Australasian Institute of Mining and Metallurgy (#206768) Both Mr Holthouse and Mr Wilangkara have sufficient experience which is relevant to the style of mineralisation, the type of deposit and the beneficiation method under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Both Mr Holthouse and Mr Wilangkara consent to the inclusion in the report of the matters based on their reviewed information in the form and context in which it appears. 15

16 The information in this report that relates to mineral resource estimation for the Kali Kuning and Lerokis deposits is based on prior work completed by external consultants that has been reviewed by Mr Terry Burns who is a Fellow and Chartered Professional of the Australasian Institute of Mining and Metallurgy (#107527). Mr Burns has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Burns is contracted by Banda Minerals Pty Ltd, a 100% owned subsidiary of Finders Resources Limited, and consents to the inclusion in the reports of the matters based on his information in the form and context in which it appears. Disclaimer This announcement may or may not contain certain forward-looking statements. All statements, other than statements of historical fact, which address activities, events or developments that Finders believes, expects or anticipates will or may occur in the future, are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as seek, anticipate, believe, plan, estimate, targeting, expect, and intend and statements that an event or result may, will, can, should, could, or might occur or be achieved and other similar expressions. These forward-looking statements, including those with respect to permitting and development timetables, mineral grades, metallurgical recoveries, potential production reflect the current internal projections, expectations or beliefs of Finders based on information currently available to Finders. Statements in this document that are forward-looking and involve numerous risks and uncertainties that could cause actual results to differ materially from expected results are based on the Company s current beliefs and assumptions regarding a large number of factors affecting its business. Actual results may differ materially from expected results. There can be no assurance that (i) the Company has correctly measured or identified all of the factors affe cting its business or the extent of their likely impact, (ii) the publicly available information with respect to thes e factors on which the Company s analysis is based is complete or accurate, (iii) the Company s analysis is correct or (iv) the Company s strategy, which is based in part on this analysis, will be successful. Finders expressly disclaims any obligation to update or revise any such forward-looking statements. No Representation, Warranty or Liability Whilst it is provided in good faith, no representation or warranty is made by Finders or any of its advisers, agents or employees as to the accuracy, completeness, currency or reasonableness of the information in this announcement or provided in connection with it, including the accuracy or attainability of any Forward Looking Statements set out in this announcement. Finders does not accept any responsibility to inform you of any matter arising or coming to Finders notice after the date of this announcement which may affect any matter referred to in this announcement. Any liability of Finders, its advisers, agents and employees to you or to any other person or entity arising out of this announcement including pursuant to common law, the Corporations Act 2001 and the Trade Practices Act 1974 or any other applicable law is, to the maximum extent permitted by law, expressly disclaimed and excluded. Distribution Restrictions The distribution of this announcement may be restricted by law in certain jurisdictions. Recipients and any other persons who come into possession of this announcement must inform themselves about, and observe any such restrictions. 16