Quarterly Activities Report March 2019 · update on operational ramp up progress at Century during...

Office Level 4, 360 Collins Street, Melbourne VIC 3000 Phone +61 (3) 9070 3300 Email [email protected] Website www.newcenturyresources.com 1 / 12

ASX / MEDIA ANNOUNCEMENT ASX: NCZ

Quarterly Activities Report March 2019

Processing Plant

• >50% increase in quarterly zinc production, with 18,170t zinc metal produced (37,500t concentrate at 48.3% zinc & 152g/t silver)

• Significant increase in total zinc recovery, with operations averaging 50% recovery for March 2019 and up to 54% recovery achieved during the quarter (86% of design)

• Plant capacity scheduled to more than double in 2019 through further flotation cell refurbishments (Phase 2 expansion) in line with mining ramp up to five cannons

• New Century is targeting continued progression toward nameplate plant recoveries throughout Q2 2019

Shipping & Sales

• 55% increase in receipts from customers for concentrate shipments during Q1 2019

• A$48.6M in receipts from customers net of payability factors, silver credits, treatment charges and impurity penalties for Q1 2019

• Average impurity penalty on sales of just US$6.80/t of concentrate for the quarter, predominately associated with SiO2

• Average concentrate treatment charge for the quarter below the recently established 2019 annual benchmark price of US$245/t

• Total 61,000t of zinc concentrate shipments to date (China, Europe & Australia)

Hydraulic Mining

• 3rd mining cannon now online (post quarter end), targeting a step change in mining rate into Q2 2019 to a minimum 8Mtpa and up to 10Mtpa

• Continued strong reconciliation of mining grade to the ore reserve model, with the ore grade mined during Q1 2019 averaging 2.92% Zn

• New Century is targeting full mining rate ramp up to 15Mtpa by end of 2019

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Other

• The Expansion PFS, which is assessing potential for development of insitu zinc & lead resources, due for completion and release in Q2 2019

• Completion of A$100M debt facility with Varde Partners

• Nick Cernotta joined the New Century Board and Tom Eadie resigned

New Century Resources Limited (Company or New Century) (ASX:NCZ) is pleased to provide an

update on operational ramp up progress at Century during Q1 2019.

Figure 1: Century’s average daily metal production ramp up and monthly improvement in total zinc recovery

since the start of operations

20

25

30

35

40

45

50

55

60

-

50

100

150

200

250

Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19

Zin

c R

ecovery

(%

)

Zin

c M

eta

l Pro

duction (t/

d)

Av. Daily Zn Metal Production (t) Zinc Recovery (%)

3 / 12

Operational Developments

Processing Plant

• Plant ramp up continued throughout Q1 2019, with a progressive increase in all aspects of

production, including metal recovery, concentrate tonnage and overall product quality

• 50.4% increase in quarterly zinc production (Q4 2018 to Q1 2019) and 27% increase in monthly

zinc production throughout Q1 2019

• 18,170t of zinc metal produced in 37,500t concentrate at 48.3% Zn, 5.6% Pb, 6.9% SiO2 and

152g/t Ag

• Operations now regularly achieving 50%+ total zinc recoveries (average 50% for March 2019)

and up to 54% recovery achieved during the quarter (86% of design)

• Plant capacity scheduled to more than double in 2019 through further flotation cell

refurbishment activities during 2019

During the quarter the Company continued the ramp up of the Century Zinc Mine operations. Strong

improvements to overall processing plant zinc recovery has been made to date, with operations

now regularly achieving 50%+ recovery.

During Q1 2019, a total of 18,170t of zinc metal was produced in 37,500t of concentrate grading

48.3% zinc (vs 25,500t at 47.0% zinc in Q4 2018).

PROCESSING Quarterly Processing Performance

Concentrate Grade Zinc Metal

Q4 2018 25,500t 47.0% Zn 12,080t

Q1 2019 37,500t 48.3% Zn 18,170t

Difference +47.1% +2.8% +50.4%

The increase in overall production was directly attributed to improved plant performance, with

hydraulic mining operations delivering 8% less metal to the plant on a quarterly basis due to wet

season effects and mining of marginally lower grade zones of the tailings dam (1.39Mt at 2.92% Zn

Q1 2019 vs 1.5Mt at 2.95% Zn Q4 2018).

Despite the decrease in total metal mined, the operations still achieved an increase in metal

production of over 50%, further demonstrating the significance in improvement of plant

metallurgical performance.

The quality of zinc concentrate produced continued to improve over the quarter, with a 25%

decrease in the lead impurity content (5.6% Pb for March 2019 vs 7.5% Pb Q4 2018). Silica content

remained within the target range of 5.0–7.5% SiO2 (6.9% SiO2 average for the quarter). Silver content

of 152g/t within the concentrate remained in line with previous quarter operations.

Focus for the plant during Q2 2019 remains on continuing the ramp up of recovery performance and

increasing throughput rate with the progressive commissioning of the third mining cannon.

4 / 12

Figure 2: Century’s processing plant ramp up performance against other ASX listed start-up operations through

to the end of Q1 2019 (Source: public company data & Credit Suisse estimates)

Figures 3 & 4: Launder sprays for the cleaner circuit (left) now operational (end of March 2019) and installation

of pipe racks as part of the refurbishment and upgrade of launder spray and reagent dosing systems (right)

5 / 12

Shipping & Sales

• 55% increase in receipts from customers to A$48.6M (net of payability factors, silver credits,

treatment charges and impurities penalties)

• Average impurity penalty on sales of just US$6.80/t of concentrate for the quarter,

predominately associated with SiO2

• Average concentrate treatment charge for the quarter below the 2019 annual benchmark rate

• Total 61,000t of zinc concentrate shipments to date (China, Europe & Australia)

During the quarter, the Company continued to ramp up of shipping and sales activity in line with

increasing production. A total of A$48.6M in receipts from customers was achieved during the

quarter, net of payability factors (zinc typically paid on 85% of metal in concentrate), silver credits,

treatment charges and impurity penalties. This represents a 55% increase on the preceding quarter

(A$48.6M Q1 2019 vs A$31.2M Q4 2018).

To date 61,000t of zinc concentrate produced from the operations has been shipped, with exports

destined for smelters in China, Europe and Australia.

The Company specifically notes that the average treatment charges (excluding impurity penalties)

for Q1 2019 was US$228/t, which is below the new 2019 benchmark price of US$245/t and current

spot pricing which ranges US$250/t to US$300/t.

Average impurity penalties shipments in Q1 2019 were US$6.80/t, primarily associated with SiO2.

Figure 5: Inside the MV Wunma, showing the bucket wheel reclaimer used to load concentrate from the

transhipment vessel onto export ships

6 / 12

Hydraulic Mining

• Hydraulic mining progressive ramp up continued throughout Q1 2019

• Mining grades reconciling strongly with the ore reserve model, averaging 2.92% Zn as expected

• Mining of 1.39Mt in Q1 2019 (vs 1.50Mt in Q4 2018) due to wet season effects

• Installation of a third cannon and an additional pump train now complete (post quarter end),

to boost the overall mining rate consistently above 8Mtpa and up to 10Mtpa

During the quarter the Company continued the hydraulic mining ramp up toward the Phase 1

nameplate mining rate of 8Mtpa. While hydraulic mining operations maintained two cannons in

operation for Q1 2019, wet season effects and mining of marginally lower grade zones of the tailings

dam caused an 8% reduction in overall zinc metal mined (1.39Mt at 2.92% Zn Q1 2019 vs 1.5Mt at

2.95% Zn Q4 2018).

Post quarter-end the installation of a third mining cannon and pumping system was completed,

resulting in ability for the operations to target ramp up to a mining rate consistently above 8.0Mtpa

and up to 10Mtpa during Q2 2019.

The Company is targeting ramp up to 15Mtpa mining rate by the end of CY 2019 (via the

implementation of five cannons) and continued progression toward the remainder of nameplate

recovery during the Q2 2019.

Figure 6: Century’s hydraulic mining ramp up performance against other ASX listed start-up mining operations to

the end of Q1 2019 (Source: public company data & Credit Suisse estimates)

7 / 12

The mining grades during operations to date have reconciled strongly with the mine plan, averaging

2.92% Zn over the quarter.

MINING RATE Quarterly Mining Performance

Mining Rate Mined Grade Cannons in Use

Q4 2018 1.50Mt 2.95% Zn 2

Q1 2019 1.39Mt 2.92% Zn 2

Difference -7.3% -1.1% -

Figure 7: Overview of hydraulic mining progress at the Century

Figures 8 - 10: Commissioning activities for the 3rd mining cannon & pumping

8 / 12

Expansion Prefeasibility Study Nearing Completion

During the quarter the Company progressed toward finalisation of the Expansion PFS to investigate

the incorporation of Century’s in-situ Mineral Resources into the current tailings only mine plan.

As outlined in the Restart Feasibility Study (see ASX announcement 28 November 2017), once steady

operations at 8Mtpa have been achieved, the operations are scheduled to ramp-up to 15Mtpa on

tailings via refurbishment of the remainder of the plant.

While the Company remains fully committed to the tailings operational ramp up, it is assessing the

potential for an improved project value proposition via replacing the expansion to 15Mtpa on

tailings only, to instead complement the tailings operations with the introduction of in-situ Mineral

Resources on the mining lease (9.3Mt at 10.8% Zn + Pb & 66g/t Ag).

New Century considers that the PFS has the potential to increase the previously announced (tailings

only) 6.3-year mine life and 264,000tpa full scale zinc metal production. Different blending

strategies, as well as plant configurations, are being investigated to determine the optimum

pathway for zinc and lead production from the expanded operations.

Should New Century elect to expand operations via the insitu Mineral Resources, the Company will

refurbish the existing carbon and lead flotation circuits within the plant, enabling production of

separate zinc and lead concentrates as per historical operations.

Completion and release of the PFS is anticipated in Q2 2019 in line with continued progress of the

initial ramp up of operations to nameplate recovery and 8Mtpa tailings only throughput. Once this

initial ramp up is at or nearing completion, the Company will finalise the Expansion PFS, allowing

the selected mine plan to form the basis of detailed feasibility and design work. Pending the

successful outcome of this executable study work, the additional insitu Mineral Resources will be

incorporated into the overall Life of Mine.

Figure 9: Existing insitu Mineral Resources at the Century Zinc Mine

9 / 12

Corporate Developments

Completion A$100M Debt Facility with Varde Partners

During the quarter the Company executed working capital facilities for A$100 million with Värde

Partners (Debt Facilities), a leading global investment firm. The Debt Facilities comprise of a A$60

million senior secured facility (Senior Debt) and a A$40 million junior unsecured facility (Junior

Debt).

The Senior Debt has a term of 2.5 years, carries an interest rate of 8% per annum and first ranking

security over all Century assets. The Junior Debt has a term of 3 years, carries an interest rate of

10% per annum and is unsecured. The Debt Facilities also include a limited term capped silver

royalty as detailed in the table below. New Century paid customary fees associated with

establishment of the Debt Facilities and is subject to early repayment fees (if incurred).

The Senior Debt has been drawn down and used to extinguish and replace New Century’s current

facility with National Australia Bank (NAB) as well as provide sufficient working capital for

continued operations. No early repayment penalties are applicable to the NAB facility (A$20 million

of the NAB facility previously drawn).

The Company retains NAB’s support as its primary banking partner and continues to work closely

with NAB to develop potential alternative forms of surety to replace existing bank guarantees,

which were put in place by MMG Limited as part of the original transaction over the Century assets

(see ASX announcement 19 November 2018).

The Junior Debt remains subject to completion of technical and commercial tests (see table below)

by 30 August 2019 and MMG Limited’s consent prior to being available for draw down.

As part of the entry into the Debt Facilities with Värde, the Company elected to cancel the existing

A$20 million prepayment facility with MRI Trading (without cost), which was not utilised.

Varde Debt Facility Terms Summary

Facility Senior Debt Junior Debt

Facility Type Senior Secured (all assets) Unsecured

Facility Amount A$60,000,000 (US$42,900,000) A$40,000,000 (US$28,600,000)

Term 2.5 years 3 years

Interest Rate 8% per annum 10% per annum

Silver Royalty 20% of payable silver production limited

to 4 years (capped at US$5M total)

Increase to 35% of payable silver production

limited to 4 years (capped at US$4.5Mpa)

Material Conditions

Precedent None

35 days averaging above 45% zinc recovery,

7.3Mtpa & an EBITDA >A$8M

10 / 12

Board Changes

During the quarter the Company announced the appointment of Mr Nick Cernotta, an experienced

mining executive and former Director of Operations for Fortescue Metals Group Limited (ASX:FMG),

to the Board of the Company as Non-Executive Director.

Mr Cernotta brings valuable operations and asset optimisation experience to New Century. During

his time at FMG, he played a key role in overseeing the operational performance of the company’s

iron ore mines, and is credited with driving the complex beneficiation strategy that slashed FMG’s

cash operating costs from US$35/t in 2014 to closer to US$12/t.

In addition to the appointment of Mr Cernotta, the New Century Board is in the process of being

restructured to reflect the Company’s recent successful evolution from mine developer to

producer.

Mr Bryn Hardcastle will move into an Executive Director role (previously Non-Executive Director),

where he will be responsible for corporate, governance and legal activities and provide focus on

the Company’s continued progress in the development of its Environmental, Social and Governance

(ESG) processes. Mr Hardcastle will transition to the Executive Director role during Q2 2019.

Mr Tolga Kumova and Mr Evan Cranston have transitioned into non-executive positions within the

Company, as Non-Executive Director and Non-Executive Chairman respectively.

In addition to the changes above, Mr Tom Eadie has resigned from the New Century Board.

The Company plans to continue the process of board evolution over 2019, in line with its planned

growth towards establishing the business as a significant base metal producer on the ASX.

Other Projects: Kodiak Coal Project (NCZ 70%)

The Kodiak Coal Project is currently on care and maintenance.

The Company continues to consider options with regard to the future of the Kodiak Coking Coal

Project in Alabama, USA, including the disposal of the asset.

To learn more, please visit: www.newcenturyresources.com

For further information, please contact:

New Century Resources Media enquiries

Patrick Walta Shane Goodwin

Managing Director Head of Corporate Affairs

P: +61 3 9070 3300 P: +61 434 039 106

E: [email protected] E: [email protected]

11 / 12

Statement of JORC 2012 Compliant Resources & Reserves

Mineral Resources

Tonnes (Mt)

Zn (%)

Pb (%)

Ag (g/t)

Zn (t) Pb (t) Ag (Oz)

South Block (Indicated)

6.1 5.3 1.5 43 322,000 90,000 8,550,000

Silver King (Inferred)

2.7 6.9 12.5 120 186,000 337,500 10,500,000

East Fault Block (Inferred) 0.5 11.6 1.1 48 60,000 5,500 800,000

TOTAL 9.3 6.1 4.7 66 568,000 433,000 19,850,000

Ore Reserves Tonnes (Mt)

ZnEq (%)

Zn (%)

Ag (g/t) Zn (t) Pb (t) Ag (Oz)

Century Tails (Proved) 77.3 3.1 3.0 12 2,287,662 - 29,734,819

Zinc Equivalent Calculation

ZnEq was calculated for each block of the Century Tailings Deposit from the estimated block grades.

The ZnEq calculation takes into account, recoveries, payability (including transport and refining

charges) and metal prices in generating a zinc equivalent value for each block grade for Ag and Zn.

ZnEq = Zn%+ + Ag troy oz/t*0.002573. Metal prices used in the calculation are: Zn US$3,000/t, and

Ag US$17.50/troy oz.

Competent Persons Statement

Mineral Resources

The information in this announcement that relates to Inferred Mineral Resources on the Silver King

Deposit and the East Fault Block Deposit was first reported by the Company in its prospectus

released to ASX on 20 June 2017, and the South Block Deposit was first reported by the Company

to the ASX on 15 January 2018. The Company confirms that it is not aware of any new information

or data that materially affects the information included in the original market announcements, and

in the case of estimates of Mineral Resources or Ore Reserves, that all material assumptions and

technical parameters underpinning the estimates in the relevant market announcement continue

to apply and have not materially changed. The Company confirms that the form and context in

which the Competent Person's findings are presented have not been materially modified from the

original market announcement.

12 / 12

Ore Reserves

The information in this announcement that relates to the Ore Reserve at the Century Tailings

Deposit was first reported by the Company in its ASX announcement titled "New Century Reports

Outstanding Feasibility Results that Confirm a Highly Profitable, Large Scale Production and Low

Cost Operation for the Century Mine Restart" dated 28 November 2017. The Company confirms that

it is not aware of any new information or data that materially affects the information included in

the original market announcement, and in the case of estimates of Mineral Resources or Ore

Reserves, that all material assumptions and technical parameters underpinning the estimates in

the relevant market announcement continue to apply and have not materially changed. The

Company confirms that the form and context in which the Competent Person's findings are

presented have not been materially modified from the original market announcement.

Appendix 1:

The following information is provided pursuant to Listing Rule 5.3.3 for the quarter ended 31 March

2019:

Project Location Status Interest

Century Zinc Mine Queensland, Australia

ML 90058 Mt Isa Granted 100%

ML 90045 Mt Isa Granted 100%

EPM 10544 Mt Isa Granted 100%







EPM 26778 Mt Isa Application 100%

EPM 26976 Mt Isa Application 100%

Kodiak Coking Coal Project Alabama, USA

Coke Seam, Gurnee Property Shelby & Bibb Counties Lease 70%

Atkins Seam, Gurnee Property Shelby & Bibb Counties Lease 70%

Gholson Seam, Gurnee Property Shelby & Bibb Counties Lease 70%

Clark Seam, Gurnee Property Shelby & Bibb Counties Lease 70%

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

+ See chapter 19 for defined terms 1 September 2016 Page 1

+Rule 5.5

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/13, 01/09/16

Name of entity

NEW CENTURY RESOURCES LIMITED

ABN Quarter ended (“current quarter”)

53 142 165 080 31 MARCH 2019

Consolidated statement of cash flows Current quarter $A’000

Year to date (9 months) $A’000

1. Cash flows from operating activities

48,624 107,269 1.1 Receipts from customers

1.2 Payments for

(733) (4,089) (a) exploration & evaluation

(b) development (47,669) (127,161)

(c) production - -

(d) staff costs (3,948) (11,002)

(e) administration and corporate costs (2,280) (6,902)

1.3 Dividends received (see note 3) - -

1.4 Interest received 60 285

1.5 Interest and other costs of finance paid (234) (237)

1.6 Income taxes paid - -

1.7 Research and development refunds - -

1.8 Other (MMG support fees) (638) (1,934)

1.9 Net cash from / (used in) operating activities

(6,818) (43,771)

2. Cash flows from investing activities

- (407)

2.1 Payments to acquire:

(a) property, plant and equipment

(b) tenements (see item 10) - -

(c) investments - -

(d) other non-current assets (12,035)* (12,035)





2.2 Proceeds from the disposal of:

35 584 (a) property, plant and equipment

(b) tenements (see item 10) - -

(c) investments - -

(d) other non-current assets - 2,200

2.3 Cash flows from loans to other entities - -

2.4 Dividends received (see note 3) - -

2.5 Other - -

2.6 Net cash from / (used in) investing activities

(12,000) (9,658)

*Represents the replacement of cash-backed bonds from NAB to Varde with additional inclusion of a bond associated with a long-term power generation contract.

3. Cash flows from financing activities

- - 3.1 Proceeds from issues of shares

3.2 Proceeds from issue of convertible notes - -

3.3 Proceeds from exercise of share options 312 312

3.4 Transaction costs related to issues of shares, convertible notes or options

- (15)

3.5 Proceeds from borrowings 60,000 71,438

3.6 Repayment of borrowings (11,438)# (11,438)

3.7 Transaction costs related to loans and borrowings

(2,069) (2,902)

3.8 Dividends paid - -

3.9 Other - -

3.10 Net cash from / (used in) financing activities

46,805 57,395

#Represents extinguishment of NAB facility (non-cash backed bond proportion) and replacement by Varde.

4. Net increase / (decrease) in cash and cash equivalents for the period

22,418 46,249 4.1 Cash and cash equivalents at beginning of

period

4.2 Net cash from / (used in) operating activities (item 1.9 above)

(6,818)

(43,771)

4.3 Net cash from / (used in) investing activities (item 2.6 above)

(12,000)

(9,658)





4.4 Net cash from / (used in) financing activities (item 3.10 above)

46,805

57,395

4.5 Effect of movement in exchange rates on cash held

688

878

4.6 Cash and cash equivalents at end of period

51,093

51,093

5. Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts

Current quarter $A’000

Previous quarter $A’000

5.1 Bank balances 50,979 22,304

5.2 Call deposits 114 114

5.3 Bank overdrafts - -

5.4 Other (provide details) - -

5.5 Cash and cash equivalents at end of quarter (should equal item 4.6 above)

51,093^

22,418

^ Cash and cash equivalents excludes the debtor of the final MMG support payment for $5,575,000.

6. Payments to directors of the entity and their associates Current quarter $A'000

6.1 Aggregate amount of payments to these parties included in item 1.2 264

6.2 Aggregate amount of cash flow from loans to these parties included in item 2.3

-

6.3 Include below any explanation necessary to understand the transactions included in items 6.1 and 6.2

Payments to directors/director associates for director fees, legal fees and other fees

7. Payments to related entities of the entity and their associates

Current quarter $A'000

7.1 Aggregate amount of payments to these parties included in item 1.2 99

7.2 Aggregate amount of cash flow from loans to these parties included in item 2.3

-

7.3 Include below any explanation necessary to understand the transactions included in items 7.1 and 7.2

Payments to key management personnel



8. Financing facilities available Add notes as necessary for an understanding of the position

Total facility amount at quarter end

$A’000

Amount drawn at quarter end

$A’000

8.1 Loan facilities - -

8.2 Credit standby arrangements - -

8.3 Other (please specify) AUD$100,000** AUD$60,000

8.4 Include below a description of each facility above, including the lender, interest rate and whether it is secured or unsecured. If any additional facilities have been entered into or are proposed to be entered into after quarter end, include details of those facilities as well.

** Working capital facilities with Varde Partners comprising a secured facility of $60 million which is approved and available for use and an unsecured facility of $40 million which is subject to conditions precedent prior to drawdown. For further details see the Company's ASX announcement dated 18 February 2019.

9. Estimated cash outflows for next quarter $A’000

9.1 Exploration and evaluation 891

9.2 Development 10,917

9.3 Production 43,095

9.4 Staff costs 3,996

9.5 Administration and corporate costs 2,156

9.6 Other (provide details if material) * (62,136)##

9.7 Total estimated cash outflows / (inflows) (1,082)

## Expected receipts from customers, which are net of payability factors, silver credits, treatment charges and impurity penalties.

10. Changes in tenements (items 2.1(b) and 2.2(b) above)

Tenement reference and location

Nature of interest Interest at beginning of quarter

Interest at end of quarter

10.1 Interests in mining tenements and petroleum tenements lapsed, relinquished or reduced

NA

-

-

-

10.2 Interests in mining tenements and petroleum tenements acquired or increased

NA

-

-

-



Compliance statement

1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

2 This statement gives a true and fair view of the matters disclosed.

Sign here: Date: 29 April 2019 (Managing Director)

Print name: Patrick Walta

Notes

1. The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.

2. If this quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

Quarterly Activities Report March 2019 · update on operational ramp up progress at Century during...

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