Thank you for standing by, and welcome to the AIC Mines Aaron Colleran Expansion and Funding Update. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Aaron Colleran, CEO. Please go ahead.
Thanks, Mel. Last week was a busy and important week for AIC Mines. We entered into an AUD 77.6 million engineering, procurement, and construction (EPC) contract for the expansion of the Eloise processing facility with GR Engineering Services. We entered into a $40 million loan agreement with metals trader Trafigura. We also entered into an offtake agreement with Trafigura for 400,000 dry metric tons of Jericho concentrate. We launched an AUD 55 million placement, and we announced the intention to launch a share purchase plan. There's a lot of new information to digest, and the purpose of today's call is to provide you with an opportunity to ask any questions you might have regarding these developments. It was a big week, and as you would well expect, a huge effort went into sourcing, negotiating, reviewing, and completing those transactions.
At the outset, I would like to acknowledge the Herculean effort of our General Counsel and Company Secretary, Audrey Ferguson, who managed close to 1,000 pages of legal documents last week and had them all completed and signed on Thursday night into Friday morning. We've engaged GR Engineering Services to expand the Eloise processing facility from its current 725,000 tonne per annum capacity to 1.1 million tonne per annum. Importantly, key equipment has been upgraded to 1.5 million tonne per annum capacity to allow for a straightforward later expansion. Following last year's exploration success at Jericho, we are very confident that over time we can ramp up production from Jericho alone to 1.5 million tonne per annum. With ongoing exploration success at Jericho, Eloise, and regionally, I'm confident that we could maintain that rate for at least 10 years.
The additional upfront cost of the 1.5 million tonne per annum equipment increases the cost of the plant and also has a knock-on effect to infrastructure and tailings dam construction that have increased the upfront cost of the build. The payback will be more than worth it. Every financial model we ran told us that the quicker we ramped up to 1.5 million tonne per annum capacity, the better the net present value (NPV). At a 1.5 million tonne per annum throughput rate, production is 100% higher than where it is today, and operating costs are expected to be 20% lower. Production up, cost down has a big impact on cash flow. Huge impact. It was too good an opportunity to delay. The oversized equipment provides the flexibility to do the second stage expansion quickly and cheaply.
We estimate as cheaply as $10 million as soon as the mining ramp-up permits. Including the oversized equipment avoids higher costs and delays associated with retrofitting or replacing equipment. What it does is make an asset that is very leveraged to the copper price even more leveraged to the copper price. We expect AIC Mines will become the go-to stock for copper leverage, and there are many reasons to want your investment portfolio leveraged to copper over the next few years. Last week, we also entered into a U.S. $40 million loan facility with Trafigura to fund the expansion. Linked to the loan agreement is an offtake agreement that requires us to deliver 400,000 tonne of copper concentrate from the Jericho mine.
We will pay benchmark, treatment, and refining charges on that concentrate, and we will receive LME pricing for the copper content and LBMA pricing for the gold and silver content. We received very strong competition for the Jericho offtake via strong funding offers. We received strong bids from a number of traders and smelter companies. Their offers were significantly better overall than what we received from conventional project finance lenders. The agreement with Trafigura also makes good business sense as they have a life-of-mine offtake agreement over Eloise concentrate, making the ongoing relationship easier to manage. Last week, we also launched an equity capital raising placement and SPP. These raisings are ongoing, and we will provide an update once closed. The funds raised will be applied predominantly to non-plant infrastructure and exploration. There are significant non-plant infrastructure upgrades required.
We're effectively doubling the size of the Eloise processing facility, so there are many knock-on effects. We need upgraded power, water, and tailings infrastructure. We need new critical spares, workshops, offices, muster rooms, and warehouse capacity. We need a stronger working capital position for the changeover from 650,000 tonne per annum mining rate currently through to 1.1 million tonne per annum throughput. On exploration, you've seen the success that we're having at Jericho. A great example is the release we made two weeks ago with the results from JED-74. A 380-meter step-out hole drilled down plunge at the Billabong chute. It hit 5.5 meters, 4.1 meters estimated true width, grading 2.4% copper from 696 meters. That's a big step out 380 meters. There are not many ore bodies where you can do that.
It's testament to the smarts of our exploration team and also the strength of the Jericho mineralizing event. We don't want to fall into the normal junior company trap of ceasing all exploration during periods of high capital expenditure and then come out the other end with no momentum. We have 2,000 sq km of prospective exploration tenements surrounding Eloise, and there could be another ore body like Eloise hiding undercover in that area. Remember, for those of you who can, remember when Eloise first commenced mining and was mined selectively in the upper levels, it was delivering 4.5% copper ore. Eloise is a high-grade ore body. Imagine finding another one of those today and blending that into a 1.5 million tonne per annum processing plant. That is an opportunity too good to put on hold.
We want to maintain our exploration momentum at Eloise, hence the funding agreements we have entered into. That concludes my overview, so I'll ask the operator to open the lines for questions. Thank you, Mel.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Peter Kormendi with Shore Partners. Please go ahead.
Oh, good afternoon, Aaron. Thank you for the presentation today, and thanks for taking my question. You've run through a lot of the items in the proposed use of funds on page eight of the presentation, but if I could just refer back to that page itself. Can you just run through those items, particularly around timing? Some of them are 12 months, others are 18 months. Is it possible to just get a bit more information there, please?
Yeah, Peter, it's a good question, a fair question. That page, or any page in a presentation that has as many footnotes as it does bullet points, is always going to be a relatively complicated page. That's the key to it, Peter, is those five bullet points, five footnotes at the bottom of the table. What they try to do, apparently not successfully, is set out the slight variances in there on the 18-month outlook versus a 24-month outlook. What we've got in terms of the uses, let's say, Eloise processing plant expansion + the NPI + the Jericho mine development and exploration funding, they're all 24 months. That's over FY2026 and FY2027. However, the free cash flow from existing Eloise copper mine and the Jericho mine development plus link drive piece, that's the next 18 months.
That's easier visibility for us. That's the peak of the funding. There is a sort of a little bit of a mismatch there. The hardest delta or the hardest line to predict in all of this is the source of funds, is how much cash flow will we be producing. Obviously, we're in budgeting stage at the moment. We're firming up 12 months. We'll come out with our June quarterly report. As per normal, we'll have our FY2026 guidance in that. Ahead of that, you can see what we're expecting over 18 months. You can also see in the footnote, importantly, what pricing we've put around that, roughly where copper and gold are trading today, slightly below. We've used AUD 14,500 a tonne for copper. It's around AUD 15,000 at the moment. Gold of AUD 5,000 an ounce.
Goodness knows where that is at the moment, but on the weekend, it was around $5,200 an ounce. So reasonably close. I hope that helps, Peter.
Yeah, that's good. Thank you. I mean, you probably don't want to provide the individual items that comprise the NPV, but what's the major item there? Is it the tailings expansion?
I probably covered that, tried to cover that a bit in my opening remarks. If I go back to that, it's that NPI is basically everything other than the plant itself. Sorry, that's self-explanatory. With that, it's a pretty significant upgrade as well as a big update to the size out there. Beyond just the plant itself, you've got to upgrade the power and power reticulation. Water requirements increase, so our ability to store water and draw water increases. Tailings infrastructure, we'll have a faster rate of rise. That brings forward some of the tailings dam lifts we need. It doesn't bring forward the next tailings dam. That's still a couple of years out, but we need to start all the planning and permitting for that now, which is an expense unto itself.
New critical spares, a whole new crusher, a whole new filtration needs or doesn't need just the first round of equipment, but those critical spares. The knock-on effects, larger workshops. We've got twice the mining fleet to maintain. Larger offices, more people, muster rooms, a lot more people to get to work each shift, and warehouse capacity. That adds up. Peter, it's not probably I read that out in something of in order of cost, but each of those items all add up. You get to that AUD 37.6 million pretty quickly and pretty easily when you're doing that much work on site.
Excellent. Thank you. Thanks very much for answering those queries.
Yep.
Thank you. Your next question comes from David Coates with Bell Potter Securities. Please go ahead. Pardon me, David, your line is now live. Please ask your question.
Sorry, can you hear me now?
Yeah, I've got you there.
Thank you. Thanks, Aaron, for the presentation, the opportunity to ask questions today. Following on a little bit from Pete's line of questioning, you've given a good rundown of some of those costs. Just considering, I guess, the timing of that expenditure, some of those items sound like they could be sort of quite back-ended towards the end of that 18-month timeframe. Is that kind of a fair interpretation?
No. Yeah. It's difficult. We've done a lot of playing with that, and that's a little bit of the reason for actually being late with these announcements. We did promise EPC and debt funding packages were going to be wrapped up by the end of May. Here we are, or there we were on the 20th of June. You know me, I don't like missing a promise. I don't like being 20 days late. I don't like being two minutes late. The timing of these items is, unfortunately, a lot of it is pretty front-ended. The commencement. It is a better assumption, Dave, to spread those costs, the EPC cost, the non-plant infrastructure over 18 months, not even over 24 months.
Hence, we really needed to put a pin in it or just move quickly and to raise that full amount so we can fund this AUD 215.8 million over the next circa two years.
Sure. Okay. That might speak a little bit to the next question, which is, and look, I appreciate you probably can't really sort of quantify this per se, but in deciding to build to cater for a potential 1.5 million tonne expansion now as opposed to perhaps later and perhaps potentially when there's a bit more recognition in the share price for where the copper market's heading and so on, just sort of talk us through, I guess, some of the trade-offs and considerations that as a company sort of made between doing it now versus doing it later.
Yeah. It's really, in the simplest sense, it's NPV. That's roughly AUD 11.4 million spent now allows for AUD 10 million to be spent at any point. It's probably NPV + flexibility, but NPV. To build that slightly cheaper plant, there's some sort of, I guess, knock-on effects in terms of the non-plant infrastructure as well. Let's say to spend AUD 15 million less on the plant now, it's not AUD 25 million later. That becomes a big job later because you're either stuffing around with contract crushing or somehow trying to expand a 1.1 million tonne per annum crusher, pipe in, surge bins. There's so much that needs to be replaced. It's not just the cost of that. It's the time as well as the downtime involved in that. To move there directly, to move there now, we have a 1.5 million tonne per annum crusher from the get-go.
We can now start to find out really where the bottlenecks will be in this plant. AUD 10 million worth of additional expenditure, upgrade pumps, upgrade the conveyor belt. We can do that ourselves as and when required. It is the cost saving versus our, I would not say commitment, but versus our strong expectation that we will get to 1.5 million tonne per annum. It meant that it was not a straightforward decision, but it was the best decision for the operation.
Sure. Final one for me. Jericho, you know I can pretty clearly see the exploration and resource upside potential on that. Great drilling results. Regionally, what are your top targets at the moment that you think will sort of feed into, I guess, formalizing that expansion commitment?
Yeah. Yeah. Like I say to my children, I don't have favorites, but they all know my daughter's the favorite. So shoot, I shouldn't have said that.
They do now.
I shoot. I'm sure my son hasn't dialed in because he's a shareholder. Expect those shares to hit the market tomorrow morning. Look, Baghdad's interesting. Clementine to Arlington is looking really interesting. Kevondown's south. We've got some government funding to drill a deep hole there later this year. The geophysical response out there, as is always the case with geophysical targets, looks like a ripper. I've drilled plenty of geophysical targets to come up with a different rock type rather than an ore body. Dave, it's really the strength of the mineralizing event that we're now seeing. Jericho, we knew the strength at Eloise. We know that the grades get better at depth.
To have seen that elsewhere at Jericho, it's now really opened up the whole line of strike to serious ore bodies in an area that's under roughly 50 meters of cover, anywhere from 10-20 at the southern end up to over 100 at the northern end. That can bury something pretty exciting that could have been missed by us minerals. We're learning a lot about this system. We're learning more about geophysics. We're using slightly different, better geophysics. Hence my confidence. I hope that goes some way to answering your question, Dave.
No, that's great. Thanks very much, Aaron. Cheers.
Thank you. Your next question comes from Daniel Roden with Jefferies. Please go ahead.
Hey, Dave. How are you going? Thanks for the call and thanks for taking my question. Just wanted to maybe just follow up on David's question and line of questioning there. I think the big change is the, I guess, upsizing of the plants to 1.5 million tonne per annum. I was just wondering if we could, I guess, backfill some of the meat on the bone, I guess, on that and some of the rationale. A very similar kind of line. I guess from what I can see, Eloise kind of comes into an end-of-mine life around the early 2030s, at which point it's just Jericho. I guess the 1.1 million tonne per annum case did need both sources to feed it.
Expanding to a 1.5 million tonne per annum, you do need another hub other than just Jericho would be my, I guess, my insight there. I just wondered if you could kind of backfill some of the meat on the bone around where you're talking about seeing that NPV upscaling and its NPV accredited to upscale or to front-load some of those 1.5 million tonne expansion options on now. What are you backfilling that with in your NPV calculations? Where are you seeing that all come from?
Yeah. Yeah. Look, sorry, Dan. That's probably some announcements or some information from us that hasn't been helpful enough. Look, what we found is that we can produce 1.5 million tonne per annum from Jericho alone. We can ramp up Jericho over time. I guess the really difficult part here, and the really difficult part here, to be candid, is the JORC disclosure requirements. ASX has a fit every time we state 1.5 million tonne per annum. They see that as a production outlook. You'll see this footnote now everywhere that that's aspirational. We're literally hamstrung from providing analysts with useful information because of the JORC requirements around production outlook and us doing something as simple as providing you with a percentage breakdown of reserves and resources for that.
Somehow trying to explain that to you within the confines of the JORC police, we are very confident we can ramp up to 1.5 million tonne per annum from Jericho alone. You are right. Under the current mine plan for Eloise, that ramps down by 2030 without further exploration success. I think that is a conservative view. No, we do not model regional success or bringing in Sandy Creek, Roberts Creek, or anything like that. Probably you pick up on my answer to David Coates' question on why we want to continue and why I have faith in the exploration prospectivity of the region. I do expect we will come across something else, even something relatively small, that will further support 1.5 million tonne per annum. Remember, currently, 29.8 million tonne of 2% copper, 0.4 grams gold in resource.
Thirty years—sorry, I'm getting ahead of myself—twenty years of resource life. Now, be it resource life, albeit resource life, and again, the JORC police having palpitations as we speak. But we've got that backfill to do. We've got that faith in the strength of the mineralizing event out there. I hope that better answers your question regarding 1.5 million tonne per annum. And then why do it now, I think you're asking. Look, it's as simple as, and you'll see it. You've got the model there in front of you. From what we've got today at Eloise, double the production and reduce the cost by 20%, that's a hell of a prize. It's worth going for.
Yep. No, mate. That was very helpful. I guess I just wanted to see the, in the announcement, you kind of, I guess, earmarked the AUD 11.4 million in the upsize plant items to AUD 1.5 million. I guess if you were to FID the 1.5 expansion, where are the other costs in the plant? What other components do you need to consider, and where's that expansion?
For the to move to 1.5?
Yep. Yep.
Yeah. All right. Let me see if I can answer that question for you quickly. Yes. Okay. Okay. Bear with me. I think I can. Items required for 1.5 million tonne but not included in the current build. They're shown in the table below. That's quite handy. I do have it in front of me. Let me see if I can quickly think through that one for you. Yep. Yeah. Simple stuff. Cyclones, conditioning tank, one additional flotation cell, pumps, pipes, concentrate thickener, pressure filter, processed water, conveyors. All current conveyors at 1.1 million tonne will be suitable for 1.5 million tonne per annum. That's a matter of, I guess, changing the rubbers out, the belts themselves. Yeah. We've got power supply is sized for 1.5 million tonne per annum. The pressure filter is sized.
The frame is sized for 1.5 million tonne per annum. It just needs the additional plates put in. If I go through that more slowly for you, the cyclones pack suitable for 12 cyclones installed. We only need 10 cyclones for 1.1, drop in another 2. Conditioning tank, we require a second tank for the 1.5. Additional float cell most likely required, and we leave the space for one. Pumps, some upgrades required. Pipes, some pipes will need upsizing. Look, that's why you'll see it's straightforward and cheap to move to that second stage. What we're really building is a 1.5 million tonne per annum plant. Footnote one, aspirational target. Thanks.
Yep. Thanks, Aaron. Makes a lot of sense. I was wondering if you would be in a position today to give us an update on the Eloise, Jericho electorate and how that's progressing?
Look, in the release or the presentation for the capital raise, we say it's on schedule. Dan, there's not much more I can do. Or is that the halfway mark? That's true. It's at the halfway mark. Non-price sensitive disclosure on that. Beyond that is to say JS2, the second vent rise. We're ready to start that in July. The piling holes have been drilled and backfilled with cement. We're putting a base, cementing the base in there to set up the raised bore. The raised bore Raising Australia will be on site in July. We have July, August, September to put that one in. More conservative manner of doing it this way this time, of course. Slightly higher cost, but that cost is spent. So it's been spent in the current quarter rather than next quarter when we expected it to be.
We'll provide you with a bit more of an update in a month's time when we release our quarterly, of course, and maybe some photos to explain it. That all kicks off in July.
No worries. Perfect, mate. Thank you very much.
Thank you. Your next question comes from Shane Le plastrier, who is a private investor. Please go ahead.
Hello, Aaron. Thanks for the presentation. Operating costs coming down 20% on 1.5. You mentioned that near the beginning. I'm curious how that flows on through to all-in costs and all-in sustaining costs at that point.
Yeah. Fair question. These things are really hard to guide. I'm always cautious about it. What we have been saying, and I'm referencing all-in sustaining cost. Yeah, that's what I'm referring to. It's effectively you take 10 cents out of all-in sustaining cost. You've taken the same amount out from all-in costs. Let me go back a step. Expansion of 1.1 million tonnes, we said drops operating costs by roughly 10%. The second stage, 1.5, another 10%. How does that come about? It's almost all from economies of scale. Eloise is currently small, subscale operations, very fixed cost. It's very hard at Eloise to get our costs down any lower than they currently are. The only thing that we can do is hold those costs where they are. A lot of them we can as we expand throughput, as we expand production.
On an AISC, so on a relative basis, C1, C2, C3, whichever you want to choose, AISC are reduced. I'm not referencing a processing cost or a mining cost there. I'm referencing the whole bundle because as a bundle, we're very fixed cost at the moment at Eloise. It's almost held steady as we expand. Does that go, Shane? Does that go somewhere to answering the question?
Yes. Yeah. No, that's great. Thank you.
Cheers.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Colleran for closing remarks.
Whoops. I quickly need to find it as well. I do not need to because I do not have any closing remarks. Yeah. Great lot of questions. We have had a lot of people dial in because we can see that from this end as well. Clearly, well worth doing this call. Apologies for not having done it sooner. You could only imagine how busy we were last Thursday and Friday and how overtired, how exhausted we were. We have all bounced back after a weekend or half a day off. Thank you. Thanks, everyone, for dialing in. That concludes the call.
That does conclude our conference for today. Thank you for participating. You may now disconnect.