Q2 AND COMPANY UPDATE

Transcription

1 Q2 AND COMPANY UPDATE GREG HALL IIIII CEO & MANAGING DIRECTOR RUSSELL MIDDLETON IIIII CHIEF FINANCIAL OFFICER STEVE MCCLARE IIIII GENERAL MANAGER KANMANTOO 25 AUGUST 2014

2 CORPORATE SNAPSHOT AS AT 31 JULY 2014 ASX listed: HGO Shares on issue: 1,181.7 million Share price: $0.077 (20/08/14) Market capitalisation: $91.0 million (20/08/14) Cash and cash equivalents $12.1 million Debt $25.2 million Net Debt $13.1 million Tax losses carried forward circa $69 million Franking Account Credit $21.3 million Planned one for eight share consolidation 2 Note: HGO has recently moved from a 31 January to 31 December year end, so current references are Q1 Feb-Apr, Q2 May-Jul, Q3 Aug-Sep and Q4 Oct-Dec (CY14). In 2015 Q1 and Q2 will be Jan-Mar and Apr-Jun.

3 TOP SHAREHOLDERS 31 JULY 2014 Top Shareholders % of isc SHAREHOLDER DISTRIBUTION Perennial Value Management 12.5% Platinum Partners 8.4% Renaissance Smaller Companies 7.4% Colonial First State - Growth Aust. Equities 5.5% Freepoint Metals & Concentrates 4.7% Aedos Advisers 4.3% Ariadne Australia 3.9% Dimensional Fund Advisors 3.8% JPMorgan Securities Australia 1.1% Republic Investment Management 0.7% Overseas 18.8% Institutions Australia 35.6% Retail 45.6% Total 52.3% Source: Orient Capital 3

4 Q2 HIGHLIGHTS - SAFETY AND COMMUNITY Total Recordable Injury FR lowest since operations commenced at Kanmantoo Community meetings continued discussing Kanmantoo region dust impacts, mine life extension approval and local vehicle traffic issues Now greater than 80% of Hillgrove employees are from the local area or Adelaide Hills region 4

5 Q2 HIGHLIGHTS COPPER PRODUCTION A record 5,884 tonnes of copper in concentrate produced for the quarter, tracking above the guidance range for the year 20,500mt to 22,500mt Copper 5

6 PRODUCTION OUTPUT Period FY13 to JAN 13 FY14 to JAN 14 APR-14 QTR JUL-14 QTR Ore to ROM from Pit kt 2,221 2, ,492 Ore to long term stockpiles kt Mined Waste kt 11,777 10,027 4,164 3,643 7,806 Total Tonnes Mined kt 14,847 12,922 5,259 4,744 10,003 To ROM from LT Stockpiles kt Mining Grade to ROM % Ore Milled kt 2,303 2, ,595 Milled Grade - Cu % Au g/t Ag g/t Recovery - Cu % Au % Ag % Cu Concentrate Produced Dry mt 56,431 75,423 24,335 25,621 49,956 Concentrate Grade - Cu % Au g/t Ag g/t Contained Metal in Concentrate - Cu t 13,744 17,184 5,554 5,884 11,438 -Au oz 6,570 5,962 1,327 1,639 2,966 -Ag oz 121, ,854 38,864 36,647 75,511 Total Concentrate Sold Dry mt 56,526 74,051 24,425 26,284 50,709 CY14 YTD Total tonnes mined down due to heavy rain interruption Record quarter for mined grade Continued consistent copper recovery of 91.9% Higher mill throughput and performance achieved despite planned shuts for maintenance 6

7 IMPROVED MINING PRODUCTIVITY MAINTAINED Note: Chart includes total Bank Cubic Metres (BCM) and total ore tonnes (kt) mined. Total BCM mined of 1,535k is equivalent to 4,744kt. Heavy rain impacts despite scheduling for rain days truck productivity maintained three mining pits operating with two in primary ore 7

8 MINING OPERATIONS AND PRODUCTION Note: Rodda will include Emily Star; and Giant will include Giles, Lean and Valentine Nugent now in primary ore and Emily Star (below) in trans/oxide ore 8

9 ORE MILLED RECOVERY AND RUN TIME Mill throughput and reliability maintained, with planned maintenance shuts completed Mill throughput above nameplate capacity with 838kt of ore milled for the quarter Mined ore blended with additions of low grade ore to maintain high milling rate 9

10 Q2 HIGHLIGHTS REVENUE AND COSTS Period US cents per lb FY13 to JAN 13 FY14 to JAN 14 APR-14 QTR JUL-14 QTR Total Mining Cost Deferred Mining Prestrip Ore Inventory Adjustment Mining Costs C1 basis Processing Costs Other Direct Cash Costs Total Onsite Costs Transport & Shipping Treatment, Refining & Smelter Charges Total Offsite Costs Precious Metals Credits Total Direct Operating Costs (C1 Cash Costs) Royalties D&A TOTAL COSTS CY14 YTD Revenue of AUD46.9M at average realised copper price of AUD3.74/lb (USD3.47/lb) Reduced C1 unit costs for the quarter of USD1.94/lb (AUD2.07/lb) 10

11 IMPROVED MINING COSTS MAINTAINED Mining Expense per BCM Moved ($) Jan 2013 Q4 FY13 Apr 2013 Q1 FY14 Jul 2013 Q2 FY14 Oct 2013 Q3 FY14 Jan 2014 Q4 FY14 Apr 2014 Q1 CY14 Jul 2014 Q2 CY14 Consistent reductions in mining unit costs over the last four quarters Drilled and blasted stocks reduced - will need some re-build coming quarter 11

12 LOWER PROCESSING COSTS MAINTAINED Continued low processing unit costs achieved due to optimisation work and a focus on saving initiatives New suspended screening unit installed and other maintenance improvements ongoing Re-grind capacity utilisation increased giving improvement in concentrate grade 12

13 STRONG HEDGE BOOK FOR NEAR TERM REVENUE CERTAINTY A$/mt A$/lb A$4.54 A$4.08 A$3.63 A$3.18 A$2.72 Strong hedge book provides certainty for cash flows and revenue during debt repayment periods An additional 1,487t of copper hedged at AUD7,642/t (AUD3.47/lb) from Aug to Nov during firmer Cu pricing again for revenue protection with upcoming debt repayments Overall average hedge price of A$7,900/t or A$3.58/lb to March

14 GUIDANCE TO DECEMBER 2014 MAINTAINED Adjusted below for the new 11 month year; Hillgrove maintains its guidance levels, based on current performance and planned operational improvements Guidance For CY14 Ore mined 2,850kt to 3,000kt Ore processed 2,900kt to 3,000kt Ore grade processed 0.76% to 0.81% Copper Copper recovery 91.5% to 92.5% Copper produced 20,500t to 22,500t copper contained in concentrates Gold produced 6,000oz to 7,800oz gold contained in concentrates C1 Costs USD2.00 to USD2.20 per lb at 0.90 exchange rate Forecast Capex For CY14 Tailings Storage Facility Controlled Potential Sulphidisation Dust mitigation Other sustaining capital AUD4.8M AUD2.8M increased with additional studies AUD1.0M AUD2.3M 14

15 DEBT REDUCTION Hillgrove made further significant reductions to its debt balance during the quarter Total debt reduced from AUD33.4M to AUD25.2M at 31 July 2014 A Gold Loan repayment of AUD2.2M (1,328oz) was made in addition to the repayment of AUD6.0M Senior Debt principal repayment The Gold Loan will be fully repaid by end of Q3 reducing debt to approx. AUD23.5M 15

16 CONTINUOUS IMPROVEMENT INITIATIVES New screen installation providing crushing efficiency and maintenance improvements Controlled Potential Sulphidisation (CPS) for oxide treatment benchmarking trip, independent review of design and plan underway, project execution plan completed being prepared for Board approval Successful geotech shear pin trial for bench integrity and rock fall safety TSF northern section finished which completes all underfloor drainage Potential flash floatation unit trial for further recovery improvements 16

17 STRATEGIC FOCUS The strategic focus is on further improvements in performance of the Kanmantoo Mine, expansion of the Kanmantoo region Resource through exploration, realisation of value from the Indonesian assets and creation of value for shareholders Achieve CY14 budget targets and implementation of operational improvements Achieve current two year life extension PEPR approval - completed Continued payment of debt facilities from operational cashflow Evaluate future capital management alternatives to enable return of value to shareholders Evaluate resource extension potential at Kanmantoo beyond current target life Options for extraction of value from Indonesian exploration assets through joint venture or external investment 17

18 SUMMARY Revenue for the quarter was AUD46.9M at an average realised price for copper of AUD3.74/lb (USD3.47/lb) Record quarterly production with YTD production exceeding the upper end of guidance Production guidance revised for CY14 to 20,500t 22,500t Cu in concentrate Low costs maintained and strong positive operating cash generation in CY14, with copper price certainty as a result of strong copper hedge book Consistent mining production and ore processing reliability with ongoing optimisation, productivity and process control improvements Achieved 2 year life extension approval allowing 75% greater ore to be processed Change of financial year end to 31 December and one for eight share consolidation planned 18

19 KEY CONTACTS For further information please contact: Greg Hall, CEO and Managing Director Russell Middleton, Chief Financial Officer Suite 1709 Australia Square Level 17, 264 George Street Sydney NSW 2000 E: T:

20 COMPETENT PERSON STATEMENTS ABOUT HILLGROVE Hillgrove Resources is an Australian mining company listed on the Australian Securities Exchange (ASX: HGO) focused on the operation of the Kanmantoo Copper Mine in South Australia, and with exploration projects on its Indonesian tenements. The Kanmantoo Copper Mine is located less than 55km from Adelaide in South Australia. With construction completed in late 2011, Kanmantoo is an open-cut mine which has now ramped up to a throughput of 3.0Mtpa, to produce approximately 90,000 dry metric tonnes of copper concentrate, containing approximately 20,000t copper and associated gold and silver per annum over the current life of mine. Kanmantoo Global Mineral Resource Estimate at End February 2013 In Situ Resource Long Term Stockpiles Note: In Situ Resource >0.20% Cu, Long Term Stockpiles >0.15% Cu. JORC 2012 Tonnage Cu Au Ag Classification (Mt) (%) (g/t) (g/t) Kanmantoo Global Ore Reserve Estimate at End February 2013 In Situ Reserve Measured Indicated Inferred Measured N/A N/A Indicated N/A N/A Total JORC 2012 Tonnage Cu Au Ag Classification (Mt) (%) (g/t) (g/t) Proven Probable Long Term Stockpiles Proven N/A N/A Total Note: In Situ Reserve >0.20% Cu. Long Term Stockpiles >0.15% Cu. Competent Person's Statement The information in this release that relates to Mineral Resources is based upon information compiled by Mrs Michaela Wright, who is a Member of The Australasian Institute of Mining and Metallurgy. Mrs Wright is a full time employee of Hillgrove Resources Limited and has sufficient experience relevant to the styles of mineralisation and type of deposit under consideration 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 (JORC Code). Mrs Wright has consented to the inclusion in the release of the matters based on their information in the form and context in which it appears. The information in this release that relates to Ore Reserves is based upon information compiled by Mr Steven McClare, who is a Member of The Australasian Institute of Mining and Metallurgy. Mr McClare is a full time employee of Hillgrove Resources Limited and has sufficient experience relevant to the styles of mineralisation and type of deposit under consideration 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 (JORC Code). Mr McClare has consented to the inclusion in the release of the matters based on their information in the form and context in which it appears. 20

21 DISCLAIMER IMPORTANT NOTICE No representation or warranty is or will be made by any person (including Hillgrove Resources Limited ACN ( Hillgrove, HGO, or the Company ) and its officers, directors, employees, advisers and agents) in relation to the accuracy or completeness of all or part of this document (the Document ), or the accuracy, likelihood of achievement or reasonableness of any forecasts, prospects or returns contained in, or implied by, this Document or any part of it. This Document includes information derived from third party sources that has not been independently verified. This Document contains certain forward looking statements with respect to the financial condition, results of operations and business of Hillgrove and certain plans and objectives of the management of Hillgrove. Forward looking statements can generally be identified by the use of words such as project, foresee, plan, expect, aim, intend, anticipate, believe, estimate, may, should, will or similar expressions. Indications of, and guidance on, production targets, targeted output, mine development or timelines, exploration or expansion timelines, infrastructure alternatives and financial position and performance are also forward looking statements. Any forecast or other forward looking statement contained in this Document involves known and unknown risks and uncertainties and may involve significant elements of subjective judgment and assumptions as to future events which may or may not be correct. Such forward looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of the Hillgrove, and may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements. Various factors may cause actual results or performance to differ materially. These include without limitation the following: risks specific to Hillgrove s operations; credit risk; levels of supply and demand and market prices; legislation or regulations throughout the world that affect Hillgrove's business; insurance expenses; the risk of an adverse decision or other outcome relating to governmental investigations; class actions or other claims; growth in costs and expenses; and risk of adverse or unanticipated market, financial or political developments (including without limitation in relation to commodity markets). You are cautioned not to place undue reliance on forward looking statements. These forward looking statements are based on information available to us as of the date of this Document. Except as required by law or regulation (including the ASX Listing Rules) we undertake no obligation to update these forward looking statements. This Document is provided for informational purposes only and is subject to change without notice. Subject to any obligations under applicable laws, regulations or securities exchange listing rules, Hillgrove disclaims any obligation or undertaking to release any updates or revisions to this Document to reflect any change in expectations or assumptions. Nothing in this Document should be interpreted to mean that future earnings per share of Hillgrove will necessarily match or exceed its historical published earnings per share, or that there has been no change in the affairs of Hillgrove since the date of this Document. Nothing contained in this Document constitutes investment, legal, tax or other advice. The information in this Document does not take into account the investment objectives, financial situation or particular needs of any recipient. Before making an investment decision, each recipient of this Document should make its own assessment and take independent professional advice in relation to this Document and any action taken on the basis of this Document. All currency referred to is Australian Dollars (AUD) unless otherwise indicated. Hillgrove has recently moved from a 31 January to 31 December year end, so current references are Q1 Feb-Apr, Q2 May-Jul, Q3 Aug-Sep and Q4 Oct-Dec (CY14). In 2015 Q1 and Q2 will be Jan-Mar and Apr-Jun