Austral Resources Australia: March 2022 Quarterly Report

Austral Resources Australia Ltd

ASX AR1

ASX ANNOUNCEMENT

For personal use only

April 28, 2022

March 2022 quarterly activity report

Austral successfully transitions its Anthill mine to full-scale production and is focused on expanding its exploration campaign in at the heart of one of Australia’s most prolific copper provinces, Mt Isa Inlier

Strong points:

  • A major production milestone was reached with the first deliveries of copper ore from the Anthill mine in March

  • Austral is on track to produce 10,000 tpa of copper cathodes from mid-2022

  • Six drill-ready copper oxide exploration targets prioritized from geophysics and fieldwork

  • 348 tonnes of cathode sold for $4.83 million in the quarter as copper production increased significantly from May due to the start of ore processing at Anthill

  • Austral has finalized a $15 million cash advance facility with Glencore to aggressively ramp up exploration and provide the company with a strong balance sheet

  • The exploration team focused on delivering drill-ready targets with a clear objective of expand Austral’s current resource inventory (420,000 t of copper content). $10 million budgeted to drill 30,000 m over the next 12 months

Business

  • Cash balance of $23.6 million strongly positioning the Company for 2022

  • Exploration joint venture discussions are underway with several parties for a portion of The 2,100 km of the Australs2 very promising exploration mandates

  • Glencore Levy Offers Premium to Copper Spot Price for LME Grade A Cathode

Summary

Copper producer Austral Resources Australia Ltd (ASX:AR1) (Austral or the Company) is pleased to provide an overview of its business for the quarterly period ending March 31, 2022.

During the quarter, ta Anthill Mine commenced production, paving the way for achieving >9,000t of copper cathode production in 2022 and >12,000t in 2023 as Austral continues to execute its growth strategy. Importantly, copper cathode production will increase significantly from May 2022 to reach an expected monthly production of 1,400 t by October 2022, driving revenue growth throughout calendar year 2022.

Austral Resources Australia Ltd

ASX AR1

ASX ANNOUNCEMENT

For personal use only

Copper prices are at historic highs, approaching A$14,000/t. This, coupled with a sharply increasing cathode production rate from May 2022, will result in significant sales revenue growth, considerably higher than expected when Austral listed late last year. Glencore’s $15m prepayment facility provides a safe cash reserve during production ramp-up and enables increased exploration drilling expenditure in 2022, with the aim of increasing Austral’s copper inventory by Discovery.

With the completion of work to develop a strong cash flow from the production and sale of copper cathodes, exploration activities are now expanded in the heart of one of Australia’s most prolific copper deposits provinces leverage the Company’s significant resource endowment of 420,000 tonnes of contained copper.

Figure 1. East pit of Anthill mine, April 27. 5.7 Mt of overburden was moved between January and April 2022. Oxidized copper ore appears in the right half of the main pit as dark colored material. 100,000 t of ore were extracted in April 2022.

Austral Resources Australia Ltd

ASX AR1

ASX ANNOUNCEMENT

For personal use only

Introduction

It was a very productive quarter for Austral, with the company setting a clearly defined path to begin full-scale copper production in May 2022. All mine development and plant preparation activities remained on schedule despite a wet month of January and staff absenteeism linked to Covid-19.

Production of copper cathodes will increase significantly from May 2022 and will continue to increase to a projected 1,400 t/month from October 2022, with sales revenue expected to exceed A$15 million per month from October 2022. August 2022, helped by current copper prices of around AU$14,000/t.

Austral expects to average 10,000 tons per year in cathode sales over the next four years, generating more than $500 million in revenue at current copper prices.

Exploration activities intensified in March with six copper prospects prioritized for drilling starting in May 2022. An exploration budget of $10 million has been approved for a 30,000 m drilling project over the next 12 months, weather permitting. The Company is starting a diamond drilling program at the Flying Horse pit to infill the sulphide resource and collect fresh core for metallurgical testing potentially using new processing technology.

In summary, Austral has achieved its objectives of bringing its new Anthill mine into production, thanks to the exemplary efforts of its team and the contractors on site. Overburden transport has exceeded plan, reaching 5.7 Mt at the end of April 2022. This has exposed the top of the Anthill oxide ore body and we are now seeing ore production exceeding plan. Mining production is de-risked.

Figure 2. Road train loaded with ore from Anthill before traveling 43 km to the Mt Kelly processing plant.

Austral Resources Australia Ltd

ASX AR1

ASX ANNOUNCEMENT

For personal use only

Anthill Mine Development

During the quarter, the Anthill site began bulk overburden mining on January 5, 2022, reaching 4.2 Mt of overburden moved by the end of the reporting period. The top of the Anthill East Pit ore body was exposed on January 26 and ore mining began in February 2022. Ore haulage began on March 24 and will reach a planned volume of 5,000 tpd from here in early May 2022.

Total overburden mined at the end of April was 5.7 Mt, exposing significant portions of the eastern pit ore body for bulk ore mining. This will allow pre-stripping activities to resume at the west pit.

The flat, low-dip geometry and consistent nature of the exposed ore means simple grade control and mining. Blasting is done on 10m benches and mining on 2.5m flitches (blasted ore), with boreholes in and adjacent to the ore assayed for grade control. To date, the ore blocks are closely correlated to the block model for tonnes – with copper grades significantly higher than expected for the first 109,000 tonnes of ore mined.

Ore production for April of 100,000 t was well above the budgeted 53,000 t, averaging 1.45% copper. Ore stockpiles at the end of April of 109 kt contain 1,370 t of recoverable copper. Stockpiling of ore to heap leach begins in early May.

Glencore Direct Debit and Prepayment

In February 2022, the Company entered into a direct debit and prepayment agreement with Glencore, one of the largest mining companies in the world.

Under the off-take agreement, Glencore holds the off-take rights for up to 40,000 t of copper cathode Austral’s Anthill mine productioncollection to begin in May 2022.

Glencore has also provided Austral with a US$15 million prepayment facility, providing Austral with a safe cash reserve as operations reach design capacity. The advance payment also allows Austral to accelerate exploration and development activities throughout 2022, after which exploration will be funded internally from Anthill’s cash flow.

Austral will sell its Anthill cathode at the prevailing spot copper price plus a premium for LME Grade A quality.

Austral Resources Australia Ltd

ASX AR1

ASX ANNOUNCEMENT

For personal use only

2022

Jan

Feb

Mar

Apr

May

June

Jul

August

Sep

Oct

Nov

Dec

Mount Kelly Plant Renovation

Anthill Creek Diversion

Pre-stripping anthill (kt)

665

1,400

1,750

1,502

1,294

1,393

1,407

1,394

1,389

1,421

1,382

1,323

Anthill Ore Mining

3,000

5,000

100,000

177,500

172,500

169,500

187,000

164,500

158,000

179,000

237,000

Ore delivery to Mt Kelly

5,000

51,000

155,000

150,000

155,000

155,000

150,000

155,000

150,000

155,000

Mt Kelly ore stockpile

137,000

180,000

186,000

174,000

150,000

150,000

150,000

150,000

Tons of cathode production

175

125

125

115

193

688

1,021

1,265

1,337

1,453

1,434

1,450

source of copper

Residual mining 2021

Anthill copper production

Gross turnover M$A*

$2.5

$1.8

$1.8

$1.6

$

2.7

$

9.6

$

14.3

$

17.7

$

18.7

$

20.3

$

20.1

$

20.3

Mount Kelly Processing Plant

The Mt Kelly processing plant consists of a heap leach pad and solvent extraction/electrowinning (SXEW) plant with a capacity to produce up to 30,000 tpa of copper cathode . Mt Kelly is fully operational and produced 5 tpd of LME Grade-A grade copper cathode during the quarter.

The crushing, conveying and stacking circuit was refurbished to resume production. Ore stockpiling begins in early May 2022.

The operation is simple: 5,000 tpd of oxide ore is crushed, sintered and stockpiled on the heap leach pad for processing. This stockpiled ore is irrigated with dilute sulfuric acid, which leaches copper into the ore, with the leaching solution being concentrated in the solvent extraction circuit before passing to the electrowinning circuit to produce cathode sheets of copper. About 2 kW of power is needed to produce 1 kg of copper cathode.

Anthill’s ore leach performance is excellent with rapid initial leach kinetics: metallurgical testing has demonstrated that it takes 60 days to leach 60% of the contained copper from the ore and 270 days to achieve an expected overall recovery 85.2% copper. The relatively fast leaching characteristics mean that copper production increases rapidly soon after ore stockpiling.

Table 1. Production and sales revenue projection for 2022

Table 1 provides Austral’s production schedule for the remainder of 2022. Cathode production is expected to build in May as ore from Anthill is processed. Production by July should exceed 1,000 t/month of cathode.

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