Mineração Vale Verde Ltda. (“MVV” or the “Company”) and Appian Capital Advisory LLP (“Appian”) are pleased to announce strong performance in the first quarter of 2023, as the Company continues to operate above design capacity at its Serrote copper-gold mine and processing plant (“Serrote” or the “Mine”) located in Alagoas, Brazil. Serrote has been fully operational since 2022, and recently finalized the US$140m Project Financing Completion Tests during the quarter.
Appian and MVV have unlocked significant value for investors during their ownership of Serrote, bringing the Mine into production in May 2021 under budget and ahead of schedule. An NI 43-101 Definitive Feasibility Study (“DFS”), completed in 2021, outlined an initial 14-year mine life producing approximately 20ktpa Cu Eq, while Serrote’s rare standalone, construction-ready, copper project with meaningful precious metal by-product credits has benefitted from Appian’s technical arbitrage strategy.
Serrote Q1 2023 performance highlights
- Outstanding ESG and safety performance, with 12 month Lost Time Injury Frequency Rates continuing to be zero (0) through to quarter end, an achievement met since December 2022, and 100% of safety KPIs met
- Building on the ramp-up which was completed in Q4 2022, the operational covenants of MVVs Project Financing facility have been finalized during the quarter
- Open pit operations in-line with expectations, with total material mined showing a 16% improvement over the same period last year at 3.5Mt
- Processing plant throughput at nameplate recording 1.0Mt of ore processed in the period and copper recovery increased stability at around 83.0%
- Quarterly production of 6.7kt of copper and 3.2koz of gold in concentrate, a 126% and 141% increase year-on-year
- Two 11kt shipments completed containing 5.2kt copper, while MVV ended the period with 10.9kt of concentrate containing 2.7kt of copper stockpiled at the port
- Plant cost 38% lower year-on-year, chiefly driven by higher volume processed and more controlled stability of the plant
- Lower mine cost as consequence of higher deferred stripping benefit, for the period following the Completion Test strategy to accomplish the waste mined tons target
- C1 costs of US$1.39/lb, 31% below C1 cost in the same period last year and representing a 11% quarter-on-quarter improvement
Paulo Castellari, CEO of Appian Capital Brazil commented:
“This quarter has demonstrated ongoing momentum in Mineração Vale Verde’s performance, following a highly successful 2022. Our expert team and continuous business improvement strategy underpins our strong operational and financial results, in addition to the industry-leading safety standards we maintain at the Mine. MVV remains strategically positioned to unlock substantial returns for investors at Serrote, at the same time as the Company pursues a number of value-generating initiatives over the coming months.”
Safety and ESG performance
MVV continues to deliver outstanding safety performance, with target safety KPIs at 100%. The Company reported a 12 month rolling average Lost Time Incident Frequency Rate (“LTIFR”) at zero (0) through the quarter, an achievement met since December 2022, resulting from 2.2 million man-hours worked without Lost Time Incidents (“LTI”). At the same time the Company delivered 423 Visible Felt Leadership (“VFL”) engagements in Q1, and intends to maintain a high level of VFL engagement alongside other measures to ensure its continuous improvement on safety. MVV also conducted a successful TSF emergency test drill in March, with all regulatory requirements met within Brazilian Mining Agency accordingly.
MVV continues proactively engage with its local communities by creating and investing in various social programs including (but not limited to) Science, Technology, Engineering, and Mathematics (“STEM”) schools and education programs which resulted in over 1,300 student beneficiaries. Other initiatives include Enterprise Women, which engages local women and fosters entrepreneurship through professional training courses, and a rural Poultry Farming Program which provides technical assistance and Knowledge Industry targeting to build a role model school in the Craibas municipality.
Environmental sustainability remains critical for Appian, and MVV operates in line with leading IFC Performance to protect, re-establish and sustain biodiversity. MVV runs the Environmental Education Center (“EEC”) which promotes environmental study and regeneration, such as biome studies and planting native species. In Q1 14,400 seedlings were cultivated and planting will begin in late Q2 after the dry season finishes. Furthermore MVV hosts a number of lectures on the Caatinga natural biome which is native to the area for local school teachers, students, universities and employees.
Operational update
In Q1 2023, MVV sustained strong performance post the successful plant ramp-up. Plant throughput has been stabilized at nameplate capacity where 1Mt of ore has been processed in the quarter, marking a 56% increase year-on-year. With Cu recovery ramped up and stabilized at 83%, copper in concentrate totaled 6.7kt in the quarter, representing a 126% increase over the same period last year. Au in concentrate totaled 3.2koz, representing a 141% increase year on year. Open pit mining operations outperformed the previous quarter by 17% with 3.5Mt materials mined.
MVV delivered successful operational covenants for Completion Tests, which are all above target as of 31 March 2023 and are forecast to achieve targets ahead of schedule. As of Q1 2023, head grade of 0.83% copper, plant throughput of 1.0Mt and recovery of 83.0% Cu also all successfully achieved above target.
In Q1 all operational areas, excluding G&A, have recorded cost improvements as a result of the strong cash management culture embedded in operations. MVV’s continuous improvement program has developed over 34 cost saving initiatives across the mine, plant, maintenance, TSF and G&A areas which are in the various stages of validation and deployment. With these initiatives MVV is targeting further cashflow improvements by year end.
C1 costs at US$1.39/lb for Q1 2023, 31% below C1 cost in the same period last year and represents an 11% quarter-on-quarter improvement. A key factor contributing towards the cost improvement is the 38% reduction in plant operating costs, mainly driven by the higher volume processed and more controlled processing stability. Mine operating costs also decreased in the period due to lower waste striping in-line with the plan.
Financial update
During Q1 2023, MVV made two shipments of concentrate with an average grade of 23.7% Cu and 3.3g/t Au completed year-to-date. This generated US$50.5m in revenue.
5.2kt of copper was sold at US$8,241/t Cu and 2.3koz of gold sold achieved US$1,725/oz Au benefitting from the favorable price environment. Q1 EBITDA at US$28.2m (including hedges), with one shipment stockpiled at port at quarter end and deferred into early April. The quarter performance recorded a 55.8% EBITDA margin versus a 39.6% margin recorded in the same period last year.
MVV has US$22.5m cash on hand as of 31 March 2023, and continues to repay its senior debt financing facility following a robust financial quarter.
Growth and exploration
The pit expansion and reserve growth program at Serrote is on track for the end of 2023. A resource expansion drilling campaign was concluded in the quarter with 10,500 meters drilled and over 41 holes completed as of 17 May 2023 outside of the current reserve pit shell, and the updated resource estimation workstreams are now underway. Updated geo-technical and hydrogeological studies for the lager pit have also begun. The metallurgical testwork is underway for the stockpiled oxide project which is looking to reach PEA stage by year end.
2023 guidance
Outlook for 2023 is expected to be strong now commercial operations have been completed. Production guidance continues to be 23.5-25.0 kt Cu and 9koz Au, at a C1 cash cost of US$1.50-1.60/lb C1 net of by-products. Delivery of the technical reports for the expanded mineral reserve is also targeted at the end of 2023.
Upcoming events
MVV continues to pursue a number of initiatives over the course of 2023 to unlock additional value as laid out in its Strategic Plan, including:
- Delivering continuous business improvement program to keep cost below inflationary environment
- Expanding the mineral reserve and life of mine from known existing resources at the Serrote pit
- Completion of economic studies on processing of oxide ore currently stockpiled at site
- Completion of the 36,000 meters resource compilation at Caboclo (14km away) and inclusion into the Serrote life of mine plan
- Initial debottlenecking study to unlock latent plant capacity by ~20%
For further information:
FGS Global +44 (0)20 7251 3801 / [email protected]
Charles O’Brien, Richard Crowley, Theo Davies-Lewis
Appian Capital Advisory +44 (0)20 7004 0951 / [email protected]
Michael W. Scherb
About Mineração Vale Verde Ltda.
MVV is the owner and operator of Serrote, an advanced stage, de-risked greenfield open-pit copper-gold asset, located in Alagoas, Brazil. The Company is headquartered in Belo Horizonte, with a high-quality management team with extensive local and international experience operating at site.
Following Appian’s acquisition of the asset in mid-2018, an updated DFS was completed in 2021 outlining a 14-year initial mine life with production of approximately 20 thousand tonnes of copper equivalent per annum in a premium, high grade concentrate. Serrote is expected to be well positioned in the lower second quartile of the copper cost curve on a total cash cost basis.
MVV is pursuing several expansion opportunities beyond the initial mine life, with significant defined mineralization outside of the current mine plan as well as numerous satellite resources and targets within trucking distance of the planned plant infrastructure. Less than 50% of the 112Mt global MI&I resource is currently contained within the mine plan, with active drilling and growth plans underway to increase mineable inventory.
About Appian Capital Advisory LLP
Appian Capital Advisory LLP is the investment advisor to long-term value focused private capital funds that invest solely in mining and mining related companies.
Appian is a leading investment advisor in the metals and mining industry, with global experience across South America, North America, Australia and Africa and a successful track record of supporting companies to achieve their development targets, with a global operating portfolio overseeing 6,300 employees.
Appian has a global team of 65 experienced professionals with offices in London, Toronto, New York, Lima, Belo Horizonte, Montreal, Perth, Mexico City and Dubai.
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