Aeris Resources share price drops after 90% profit plummet

Aeris Resources finished in the red today after the company dropped its FY22 earnings report.

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Key points

  • The Aeris Resources share price finished in the red today after the company announced its earnings for FY22
  • Lower production volumes and metal grades, as well as higher production costs, contributed to pressure on its top and bottom lines
  • The outlook for FY23 is more positive from a production standpoint, but significantly higher operating and capital expenditures are also expected

The Aeris Resources Ltd (ASX: AIS) share price finished the session on Friday down 2.08% after the company announced its financials for FY22.

Shares in the precious minerals explorer closed at 47 cents each.

Let's go over the highlights of the report.

What did Aeris Resources report?

The 90.2% nosedive in profit after tax significantly impacted the EBITDA, caused by an increase in all-in sustaining costs (AISC) for producing the precious metals.

The company reported it produced 18,581 tonnes of copper, which fell within guidance. However, its AISC surged to $5.10/lb, above the top end of its $4.85/lb guidance range. Aeris Resources cited a weaker labour market and cost pressures as being the cause of the increase. Lower copper grades from its Tritton underground mines didn't help either, diluting their value per tonne.

The production of gold was less successful for the company, as it realised 53,920 ounces which fell below the lower limit of its previously posited guidance of 56,000 to 59,000. Making problems worse, AISC was also below guidance at $1,911/oz, overshooting its guidance of $1,825/oz. The main cause of the cost increase was lower yields on its gold production, which put pressure on its cost basis per ounce.

What else happened in FY22?

In April, the company acquired Round Oak Minerals. It completed a $117 million equity raise in the same period.

Aeris Resources paid down debt on its balance sheet of US$20.25 million to help improve its financial position moving forward.

It also delisted a number of its companies in FY21, including Girilambone Copper Company Pty Ltd and Templar Resources Pty Ltd.

What did management say?

Aeris Resources remuneration committee chair Michele Muscillo said:

Throughout the financial year, the company was impacted by industry-wide cost and labour market pressures, which we worked hard to contain across the operations. Australia experienced an increasingly competitive job market, with low unemployment rates fuelling labour shortages of skilled workers.

What's next?

Aeris Resources expects production for its precious metals to ramp up considerably in FY23, along with an increase in operating and capital costs. The company has raised its production targets because Round Oak Minerals will become part of its operations in FY23. It completed the purchase in July this year.

The company expects increased copper production of between 32 kilotonnes and 40 kilotonnes, up from 18.6 kilotonnes. It expects to deliver 24 kilotonnes to 29 kilotonnes of zinc, up from zero in FY22.

Aeris anticipates 60,000 to 78,000 ounces of gold, up from 58,200 ounces. Finally, it expects to mine between 1.1 million and 1.3 million ounces of silver, up from 0.1 million.

The company's largest projected operating expenses will come from mining and processing in the ranges of $229 million to $277 million and $98 million to $120 million, respectively.

The largest capital costs are expected to be seen in its sustaining line item at $91 million to $112 million, up from $47 million.

Aeris Resources share price snapshot

The Aeris Resources share price is down 58.4% year to date. Meanwhile, the S&P/ASX 300 Metals and Mining Index (ASX: XMM) is down 0.2% over the same period.

The company's market capitalisation is $331.65 million based on today's closing share price.

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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