Metals Exploration PLC – Quarterly Update To 30 September 2019

Metals Exploration PLC – Quarterly Update To 30 September 2019

Metals Exploration plc (AIM: MTL) (“Metals Exploration”, the “Company” or the “Group”), the natural resources exploration and development company with assets in the Pacific Rim region, today provides a quarterly update on matters relating to the operations of its Runruno gold project (“Runruno” or the “Project”) in the Philippines.

 

Mining Operations

·      Total ore mined of 464Kt. With total ore and waste mined of 2.77Mt, slightly exceeding budgeted ore mined.

·      Key mobile fleet equipment rebuilds commenced in Q3 2019, and will continue into Q1 2020.

·      Average mined gold grade of 1.39 grams/tonne, which is consistent with the historical dilution rate.

·      On-ground activities in relation to access development to mine plan Stages 3 & 4, and resettlement of illegal miners away from mine plan Stages 3 & 4, commenced in Q3 2019.

 

Processing Operations

·      18,848 ounces of gold poured during Q3 2019.

·      Throughput for Q3 2019 exceeded budget by 74kt.

·      Gold recovery of 77.6% in Q3 2019.

·      Gravity circuit gold recovery of 30.8% achieved in Q3 2019.

·      BIOX® oxidation rates are still below design however feed rates have improved to average 57.5tpd of sulphur average for the quarter and average oxidation rate for Q3 2019 of 61%. 

·      CIL recovery was maintained at 85%.

 

Finance and corporate

·      18,239 ounces of gold were sold during Q3 2019 at an average realised gold price of US$1,479 per ounce.

·      Discussions with the Group’s lenders to restructure the Group’s overall debt position continue.

·      A standstill from making principal and interest payments remains in place until further notice.

·      Cash at bank as at 30 September 2019 was US$5.2 million. 

 

 

Production and Finance Summary

 

Runruno Project Report

Quarter

YTD

Sep YTD ($USD)

Actual

Actual

PHYSICALS

Units

Q3 2019

9 Months

Mining

Ore Mined

tonnes

463,885

1,486,033

Waste Mined

tonnes

2,304,111

6,971,697

Total Mined

tonnes

2,767,996

8,457,730

Au Grade Mined

g/tonne

1.39

1.47

Strip Ratio

4.97

4.69

Processing

Ore Milled

tonnes

524,158

1,446,636

Au Grade

g/tonne

1.44

1.52

S2 Grade

%

1.01

0.93

Au Milled (contained)

ounces

24,282

70,857

Recovery

%

               77.6

               70.0

Au Poured

ounces

18,848

49,622

Sales

Au Sold

ounces

18,239

49,109

Au Price

$US/oz

1,479

1,370

FINANCIALS

Revenue

Gold Sales

(US$000’s)

26,967

67,259

Operating Costs – Summary

Mining

(US$000’s)

6,358

18,154

Processing

(US$000’s)

8,123

20,980

G&A

(US$000’s)

2,292

6,457

Total Operating Costs

16,773

45,591

Excise Duty

(US$000’s)

1,086

2,703

UK/Philippine G&A

(US$000’s)

2,118

6,145

Total Direct Production Costs

(US$000’s)

19,977

54,439

Net Cash Income

(US$000’s)

6,991

12,821

Total Capital Costs

(US$000’s)

4,006

5,896

Total non-cash costs

(US$000’s)

3,020

6,941

Free Cashflow

(US$000’s)

2,985

6,925

Cash Cost / oz Sold – C1

US$/oz

989

950

Cash Cost / oz Sold – AISC

US$/oz

1,385

1,251

 

 

Review of Operations (Unaudited)

 

Q3 2019 resulted in gold sales of US$27.0 million bringing total gold sales for the year to US$67.3 million. Total net free cash flow for the year stands at US$6.9 million, after having re-invested US$5.9 million in capital expenditure.

 

The positive cash flows achieved over 2019 have allowed the Company to finally commence its long delayed fleet maintenance programmes. 

 

A new mine plan has been submitted to the Company for adoption. This is being reviewed and upon adoption will become the basis for the 2020 mine plan and associated budgets. 

 

Mining Operations

 

Notwithstanding ongoing fleet equipment availability issues, a constant level of mining production of 2.77Mt was achieved for the quarter. Total ore mined of 464kt was slightly in excess of budget.

 

Ore to model recoveries continue to reflect historical mining results with the average mined gold grade lower than budget at 1.39 grams/tonne (budget of 1.60 grams/tonne).  The lower average mined gold grade compared to previous forecasts is expected to continue and will be adopted in future mine studies/forecasts.

 

Positive free cash flow produced from operations allowed the critical fleet maintenance, long over-due because of working capital constraints, to commence in Q3 2019.  These critical engine/transmission rebuilds will continue throughout Q4 2019 and into Q1 2020, reducing equipment availability over this period.  Additional trucking capacity has been hired to maintain capacity and, as a result, additional mining costs will continue to be incurred in the short term.

 

In order to reduce these extra mining fleet rental costs, the Company will set funds aside in a capital reserve to fund the purchase of additional mine trucks. This proposed capital expenditure is expected to be made during the first half of 2020.

 

In Q3 2019, a programme of infill resource and mine plan drilling was commenced, aimed at improving the short-term model confidence in mine plan Stages 1, 1.5 and 2. Unfortunately the Company’s Schramm drill rig has not performed adequately and the Company will consider engaging a contract driller to complete this programme during Q4 2019. 

 

Process Plant

 

Since early in the year, with the introduction of new processing personnel, the Company has invested in a significant level of studies and on-site testing of various possible solutions to the Company’s historic gold recovery issues.

 

As a result of these investigations, the Company now believes it has a better understanding of the operational processes required to stabilise and improve the operational results of the process plant. In Q3 2019, the Company’s changes to various processing variables, including a change in reagents usage and adjusting pH levels, produced positive results in reducing CIL/BIOX® frothing and floatation recovery.

 

The overall result of these changes allowed the Company to achieve gold production of 18,848 ounces. The overall gold recovery for the quarter was 77.6%, up from 66.1% for the six months ended 30 June 2019.

 

In addition, engineering and offsite testing of additional potential process plant modifications is continuing with the aim of improving and increasing flotation capacity, to gain a better understanding gold deportment and mineralogy, and therefore to improve overall gold recovery.  The Company expects these studies to complete in Q4 2019.

 

Plant reliability and availability continued to improve during Q3 2019, moving from 87% to 90%. This improvement allowed for an increase in throughput to offset the continued lower head grade. As a result the Company processed 524kt of material which was 74kt in excess of budget.

 

However, October 2019 has seen maintenance reliability fall owing to lost time for planned downtime (SAG mill coupling realignment and replacement) and unplanned downtime (mainly power transformer failure and ongoing tails pipe/pump issues), which has interrupted production and had a negative impact on the level of gold production.

 

Q3 2019 saw a higher average sulphur throughput in BIOX®. It was noted that at the higher average sulphur throughput BIOX® performance suffered due to a lack of available air. The standby blower has been brought into production to try to offset this effect.  Unfortunately, due to a lack of maintenance, design air levels cannot be achieved which will impact BIOX® oxidation performance in the short term.  A 4th blower has been budgeted for purchase and is expected to be brought on-line in Q1 2020.

 

Residual Storage Impoundment (“RSI”)

 

Construction of the next raise of the RSI continues and the installation of a bituminous liner to the upper embankment was completed in Q3 2019.

 

Occupational Health & Safety

 

Runruno has accumulated a total of 1,031 days without a reportable injury by the end of Q3 2019.

 

Environment and Compliance

 

Compliance matters are fully embraced by the Runruno workforce and the mine remains compliant, with no outstanding issues. For the second year running the Runruno project was the mining industry overall winner of the Philippine government Best Forestry Management Programme award.

 

Community & Government Relations

 

Productive relations with both the community and the government continue. The Company continues with its government agencies consultations in relation to the impending need to remove illegal miners, their infrastructure and dwellings from those areas scheduled to be mined as part of mine plan Stages 3 and 4. The process of identifying and acquiring land suitable for the re-location of the illegal miners commenced in Q3 2019. Initial access development to mine plan stages 3 & 4 also commenced in Q3 2019. Further actions in relation to the resettlement activities will be made in the forthcoming quarters.

 

Finance (Unaudited)

 

Gold produced during Q3 2019 was 18,848 ounces.

 

Gold sold during Q3 2019 was 18,239 ounces, at an average realised gold price of US$1,479 per ounce but AISC costs rose to US$1,386/oz for the quarter. 

 

A standstill agreement, first put in place in March 2019, remains in place with both the Group’s lenders, HSBC and BNP Paribas (the “Senior Lenders”) and its major shareholders, MTL Luxembourg SARL and Runruno Holdings Ltd, as holders of its mezzanine debt (the “Mezzanine Lenders”). Under this standstill agreement, the Group is not required to make interest or principal payments to either the Senior Lenders or the Mezzanine Lenders until further notice. The aim of this standstill has been to provide time for all parties to consider debt restructuring options.

 

Extensive discussions and negotiations have been held with all lenders during this standstill period. Although this process has taken longer to conclude than expected, discussions are continuing, and a final outcome is expected during Q4 2019. Until a re-structure of the Group’s debt is achieved all relevant interest and fees continue to be accrued. On this basis, the total interest-bearing liabilities as at 30 September 2019 were US$121.9 million.

 

Group cash at bank as at 30 September 2019 was US$5.2 million.

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