Hartleys site visit observations.AMI (Aurelia Metals Ltd, -3.0%...

Hartleys site visit observations.

AMI (Aurelia Metals Ltd, -3.0% to 49.0cps, m.cap A$445m, Gold: Producer): Mike MillikanWe visited AMI’s Peak and Hera Operations in the Cobar Basin of NSW.Peak delivered improved performance in recent SepQ and ended the quarter with a high-level of concentrate stocks, which are expected to be unwound in the DecQ.The upgrade of the Peak plant with the Pb-Zn circuit addition remains on track for MarQ completion, with dry commissioning starting mid-Nov, and full circuit tie-in late Jan early Feb. The plant upgrade is expected to provide 800ktpa capacity and the ability to process and realise additional value for the base metals within the field (Pb, Zn and Cu).Lower production at Peak is guided for the DecQ, largely due to lower grade ore sources and anticipated lower plant availability, though we note that a planned shutdown for the plant upgrade was completed in Oct and another planned shutdown in Dec, may provide a higher throughput than we previously had forecast.Development across to the base of the high-grade Kairos lode (beneath Peak) is going well with the decline from the Perseverance underground now advanced some 200m (20% complete). Kairos (high margin ores) is on track to provide first development ore from early FY21, lifting gold grades in the process.The mineralised rhyolite intersect at depth at Kairos (12m @ 4% Cu) is now being targeted with surface drilling, with a 1,800m hole planned with a number of wedges. Rhyolite hosted mineralisation within the field has in the past provided some of the longer life and higher value orebodies (Peak and Perseverance) and we look forward to the report of results from this drilling.AMI continues to mitigate water allocation risks at Peak, moving to be self-sufficient early in the New Year, pre-empting any future allocation cuts – approvals are still pending for the dewatering of the Great Cobar workings but are expected soon (before year end).Hera production was impacted by high base metal feed grades, which restricted plant throughputs due to bottlenecks with the concentrate filter press, optimisation is ongoing to filter press to better manage the ongoing higher base metal feed from ore sources such as the North Pod – we see potential improved production in the DecQ, and opportunities to ship more base metal (bulk Pb-Zn) concentrates in the New Year.Exploration continues to be big value driver, with activities around Hera targeting new ore sources for mine life extensions – drilling activities are ramping up at Federation (immediate focus in and around a shallow high-grade base metal zone (18m @ ~25% Pb+Zn) outside the main IP target and Athena (pre-collars completed for deeper diamond drilling).Hera has be largely self-sufficient for water, and to ensure this into the future, the site is installing pumping capacity from historic Nymagee mine and assessing a range of alternative ground water sources – approvals are also pending to dewater Nymagee but once again expected soon.Company Guidance for FY20 is unchanged for Group production of 85-95koz gold at an AISC range of A$1,050-1,250/oz (net of credits, lead 20-24kt, zinc 25-30kt, and copper 4-6kt). Currently tracking very well to guidance but a softer DecQ is forecast.We maintain our Speculative Buy recommendation.