Aurelia Metals : AMI - Quarterly Activities Report December 2016

QUARTERLY ASX: AMI |December 2016 Quarter REPORT

for the period ending 31 December 2016

QUARTER HIGHLIGHTS

• Record quarterly processing throughput and gold recovery

• Gold production of 13,427 oz at an AISC of A$821/oz (US$592/oz)

• Quarterly revenue of $31.1 million and Site EBITDA of $13.2 million

• Early debt reduction commenced with voluntary $10M repayment

• Net debt reduced by 12% to $93.6M

• Cash of $21.4M (after $10M voluntary debt repayment)

• Cancellation of 108M Glencore Options

• High grade gold and base metals returned from Hera North Pod drilling

  HERA OPERATIONS

• Quarterly gold production of 13,427 ounces at an AISC of A$821/oz.

• Ore processed was a record 97,778 tonnes and was a 15% improvement relative to the prior

  quarter.

  The December quarter annualised throughput was +390,000 t/y (11% above design)

• Continued improvement in gold recovery to 88.6%, with a monthly high in December of 90%.

• Low All-in Sustaining Cost (AISC) of $821/oz (US$592/oz) achieved through cost control, increased throughput and two concentrate shipments.

• A new mining lease was granted in the quarter over the northern portion of the Hera Deposit (North Pod).

• Drilling to test the size and quality of the North Pod continued during the quarter. Drill results indicate potential for the North Pod to be the highest grade zone of mineralisation at Hera. Best results released to ASX during the quarter included:

  • 7 metres at 88.1 g/t Au and 4.3% Pb+Zn (HRU

  • 6 metres at 31.4 g/t Au and 8.9% Pb+Zn (HRU

    370)

    386)

    CORPORATE

• Site EBITDA (revenue less site operating costs) was $13.2 million. Quarterly revenue of $31.1 million included $21.5 million from gold and silver sales and $9.6 million from base metal sales.

• Voluntary $10 million debt repayment during the quarter reduced outstanding debt by 8% to

  $115 million. The debt repayment enabled the cancellation of 108 million Glencore Options.

• Quarterly cash increased by $2.55 million to $21.40 million, after the $10 million debt repayment.

• Net Debt reduced by 12% to $93.6 million (prior quarter balance of $106.2 million)

• Gold hedge position at quarter end was 5,450 ounces at a price of A$1753/ounce.

• On the 28 November, Cobb Johnstone was appointed as Chairman of the Company. December, Tim Churcher (CFO) was appointed as Company Se retary.

On 22

HERA MINE NSW (100%)

HERA OPERATIONS SUMMARY l

Operations performed strongly in the quarter driven by increased gold recovery and higher ore

throughput.

Continued focus on the gravity section of the processing plant increased quarterly

gravity gold recovery to 62% and a total recovery to 88.6%.

Mining performed strongly with a record level of ore mined, matched to processing throughput. Process throughput was a record for the quarter at 97,778 tonnes. This reflects efforts made in

the continual debottlenecking of the plant. below:

Summary quarterly production figures are tabulated

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e

Units	FY16	FY16	FY17	FY17	FY17
Ore Mined	t	81,087	75,927	88,890	96,988	185,878
Mined Grade ‐ Gold	g/t	6.62	6.96	4.21	4.69	4.46
Mined Grade ‐ Silver	g/t	12.4	16.0	12.5	12.0	12.19
Mined Grade ‐ Lead	2.15%	3.06%	2.19%	2.00%	2.09%
Mined Grade ‐ Zinc	1.65%	3.31%	3.15%	2.36%	2.73%
Ore Processed	t	83,522	74,665	85,314	97,778	183,092
Processed Grade ‐ Gold	g/t	6.51	6.95	4.00	4.82	4.44
Processed Grade ‐ Silver	g/t	12.69	15.84	12.76	11.77	12.23
Processed Grade ‐ Lead	2.22%	3.04%	2.23%	1.96%	2.09%
Processed Grade ‐ Zinc	1.80%	3.17%	3.27%	2.38%	2.80%
Gold recov ry	81.2%	83.9%	84.3%	88.6%	86.6%
Silver recovery	85.2%	85.1%	84.3%	88.6%	86.6%
Lead recovery	87.6%	93.0%	93.2%	90.8%	91.9%
Zinc recovery	92.4%	92.5%	90.2%	91.2%	90.7%
Gold Production	oz	14,184	14,035	9,254	13,427	22,680
Silver Dore Production	oz	7,385	8,555	6,269	9,561	15,831
Concentrat produced	DMT	5,874	8,081	8,021	7,171	15,192
Gold sold	oz	14,652	13,280	9,683	13,079	22,762
Concentrate sold	dmt	4,886	10,379	5,171	10,380	15,551
Payable Lead sold	t	1,195	2,585	1,064	2,220	3,283
Payable Zinc sold	t	931	1,690	1,052	2,257	3,309
Payable Silver sold	oz	4,722	6,164	0	2,992	2,992

Aurelia Metals Dec‐16 Qtr Summary

Mar Qtr

Jun Qtr

Sep Qtr

Dec Qtr

YTD

MINING

A total of 96,988 tonnes of ore was mined during the quarter at an average grade of

.69 g/t gold,

1. % lead and 2.4% zinc. Lateral underground development ac

   ieved during the quarter was 684

   metres (726 metres in the prior quarter).

   Unit costs continue to reduce with increased ore mined.

   Unit costs of ore processed reduced from $70/t in the Septembe quarter.

   XPLORATION DRILLING

   quarter to $60/t in the current

   Drilling during the quarter focused on lower section of the North Pod and the northern end of the Hera lode sequence. All current exploration results have been released to ASX on 28 November, 1 December and 13 December 2016. For detailed drill information refer to these releases. Best high grade gold and base metal results included:

   • 7 metres at 88.1 g/t Au and 4.3% Pb+Zn (HRUD370)

   • 6 metres at 31.4 g/t Au and 8.9% Pb+Zn (HRUD386)

   • 7 metres at 4.7g/t Au and 52.7% Pb+Zn (HRUD374)

The drill results indicate that the North Pod has potential to become the highest grade zone at Hera to date.

Further exploration drilling will be conducted drilling out the North Pod and exploring the depth extensions and northern extensions of the Hera sequence.

l

A Resource and Reserve update will be provided mid-year from the current drilling program.

Figure 1. Long section showing the location of the most recent drilling results in reference to the

current Inferred Resource at North od

PERMITTING

During the quarter, Aurelia was

ranted Mining Lease ML 1746 ( urface activity excluded) which

ill enable underground development to access the North Pod and provide development for further

drill platforms for exploration to the North.

A modification and approval of the existing Mine

Operating Plan is required from planning authorities prior to mining.

PROCESSING

A total of 97,778 tonnes of ore was processed during the quarter grading 4.82 g/t gold, 2.0% lead and 2.4% zinc.

Process throughput increased to record levels during the quarter with the combination of low base

metal grades and continued deb

ttlenecking of the plant. Throughput reached an annualised rate

of 390,000 t/y for the quarter, some 11% above the 350,000 t/y design rate.

Improvements to the gravity gold circuit continued in the quarter and delivered an increase in total

gravity recovery rate to 62%, with December producing 65.7%. has now achieved the Definitive Feasibility Study target level.

The gravity recovery performance

Total gold recovery improved in

he quarter to 88.6% with December producing 90.0%, with

potential of further improvement.

The lead and zinc circuit continu

s to perform strongly, with 7,171 tonnes of concentrate produced.

Unit costs per tonne of ore processed reduced to $68/t ($73/t last quarter) due to increased l

throughput and cost initiatives.

Further improvements are being developed to increase gold recovery and mill throughput.

Two shipments of base metal co

centrate were achieved in the quarter, with 5,132 tonnes of

concentrate sold in October and 5,248 tonnes sold in December.

CORPORATE

FINANCIAL PERFORMANCE

Financial performance of the Hera operation is summarised in the table below. The q

arterly AISC

R

n

9

4

Y

e

of $821/oz (US$592/oz) was delivered by strong levels of gold production, two concentrate shipments (by-product credits completed on a sales basis) comb ned with a maintenance of the total cost base.

Aurelia Metals Dec‐16 Qtr		U its	Mar Qtr	Jun Qtr	S p Qtr	Dec Qtr	YTD
Summary	FY16		F 16	Y17	FY17	FY17
Mining Processing Site Administration Concentrate Transport & efining Net Inventory adjustments Royalties Third party smelting, refining Total By‐Pro uct Credits			$/oz $/oz $/oz $/oz $/oz $/oz $/oz $/oz	449 414 59 65 51 85 132 (341)	424 449 89 100 27 66 257 (790)	617 645 96 137 (258) 76 228 (671)	449	521 565 85 127 (51) 99 283 (909)
							505 77 119 102 117 323
							(1,085)
Adjusted Operating Costs*			$/oz	914	622	870	607	719
Corporate admin and other Sustaining exploration			$/oz $/oz	67 171	78 344	120 249	72	92 187
							142
AISC (All‐in Sustaining Cost)*			$/oz	1,153	1, 43	1,238	821	999

d

d

m

* Operating Costs and AISC are calculated on gol

2

1

4

1

o m

sold with by‐products credited

0

n a sales basis. Base metal sales are approximately 30% of

total sales and are accounted for as a by‐product credit. The timing of Pb‐Zn ship

ents (approx. every 6 weeks) will create volatility in the

Company's reported ASIC due to timing of base

t

etal by‐product credits and concentrate inventory movements.

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e

w

All financials are preliminary and subject to chan e. Final revenue will be adjusted due to quotational period pricing, product inventory and

smelter payable adjustments, w ere applicable. Cost data is preliminary and subj ct to final revie

and adjustment.

In consideration of strong financial performance, the Company undertook a voluntary $10.08 million debt repayment during the quarter, reducing outstanding debt by 8% to $115 million. The repayment of Facility A also had the consequential benefit of cancelling 108 million Glencore Options.

Cash at bank increased during the quarter by $2.55 million to $21.40 million as at 31 December 2016. The increase in cash is after the repayment of $10 million in debt. For reporting purposes the Company now states its cash balance excluding $3.5 million utilised as cash backing for

environmental bonds.

$18.85 million.

Accordingly, the September Quarter closi

g cash balance is restated at

Hera quarterly EBITDA (provisional only and subject to final revi

w) was $13.2 million, compared

ith $8.0 million in the prior quarter. Financial performance was enhanced by high g

ld and base

metals sales together with stron

base metal and gold prices.

Aurelia net cash flow in the period was positive $2.55 million. T

is was generated by Hera EBITDA

of $13.2 million, less $1.9 million of mine and process capital, less $0.7 million in exploration capital, less $0.9 million in corporate administration costs, less $10 million debt repayment, plus a net $2.9 million inflow from a decrease in working capital & other (primarily a decrease in concentrate stocks).