ACG Metals Limited ($ACG)

Ladies and gentlemen, we warmly welcome you to the Montega Markets Critical Resources Summit. This roundtable is dedicated to ACG Metals Limited. I'm pleased to welcome CFO, Patrick Henze, who will guide us through the presentation and the insights shortly, after which we will move over to our Q&A session. Please note that this session is being recorded, and a replay will be available on airtime later on. And having said this, I'm handing over to you, Patrick.

Thank you so much, Judith. Hello, everyone, and thank you very much for taking the time to listen to our story today. Given it's a critical minerals summit, I thought we'll spend a bit of time on the copper market itself and a bit of real-life practice examples of why copper is important. And then we'll basically dive a little bit into ACG and our story. So if we look at the, obviously, very recent news on the Iran war and why that's important, I just wanted to start with this, explaining a bit that, obviously, this is a very, very key example leading to commodities being more and more present in the whole media environment, but it has severe impacts on a lot of different goods. And thankfully, the base metals and precious metals markets are not as impacted and ACG is also not really impacted from that blockade. But as you can see, a lot of the metals and also food and agriculture products that we use in our daily lives are obviously heavily impacted from that. If we look a bit broader, and that's something that has been coming up and about in the last couple of years actually, you see that more politicians in the West, in Europe, in Africa, in the North and South American markets have realized that actually minerals and metal supply is super critical, and we are heavily reliant on China. And it's not only 1 or 2 commodities, it's basically the majority of the commodities that's either been sourced out of the East or that is actually being processed in the East because even if you have a rare earth project in Brazil, you still have to ship it to China to actually refine it and then get it back into the U.S. for use or back into Europe. So hence, this critical minerals and metals have become more and more prominent. And with Mr. Trump arriving in the White House, I think that has been really pushed out for more supply chain security. If we then look a little bit into the universe of investments that you are more familiar with most likely, if you look at the German indexes like the DACs and so on, there's a lot of really, really good companies, great companies in different sectors. What is really, really key is that none of these sectors would exist or even be able to grow without the underlying commodities. And copper is actually one of the top 3 essential metals used in most of these industries, right? You see obviously steel and aluminum in a lot of these, you see silver, for example, in renewables, but still copper is one of the key items in all of those. If we then go a little bit into the new technologies that we are also excited about and you see the markets are really excited about them. You see that actually a data center, a server doesn't really function without the security and the server boards having copper in them. It doesn't really work without the heat sinks having copper to cool down the system. So 2 out of 4 essential parts are mainly driven by copper in a data center. We look into the next big thing that we all are talking about already now. I think it was 2 days ago that the robot run a marathon in China finishing with a new world record. So it becomes more and more real. But also robots, the new thing that a lot of ETFs and a lot of investment themes are building on to now is not working without copper. If we then just look a bit deeper, right, 1 ton of copper, and I want to make this example for 1 ton of copper because we need millions and millions of tonnes of copper in the market. The global market is about 30 million to 40 million tonnes of copper. We see that it can actually feed a lot. And one large data center needs about 5,000 tonnes of copper. We look at 2040, and I really like this because that's 14 years away. It's not too far away, but you see that actually we need about 8,000 to 12,000 data centers. To just feed the system, we need about 550 gigawatt of energy demand, which means that the copper demand will be 3 million to 4 million tonnes a year, 3x of what we currently have. And if you look at this, for me, this is one of the key things that we have to really speak about because the humanity in all of our history, whatever we mine in copper is the same equivalent of the copper that we need in the next 14 to 16 years. It's pretty amazing, right, if you think about it. But this is what the AI, the data center, the robotics, the renewables, but also the electric vehicles in the car industry, whatever is needed, it is basically the same that we mined in our whole human history. And how do we feed this? It's almost impossible in blunt terms. Even if you look at the best research institutes like Wood Mackenzie, S&P, Standard & Poor's, they basically forecast a supply gap in copper in the next 5 to 10 years that is about 4 million, 5 million tonnes a year. If you have then AI, the growth scenario that we are talking about now that could add another shortage. But this also implies that the supply takes all the probable projects in the copper market, all the potential projects in the copper market actually coming on stream as expected. In history, that has happened maybe to 1% or 2% of projects because there is always something in the political environment. There is something in the asset or in the studies, et cetera. It takes about 10 to 15 years to get a copper deposit from exploration to production. So this is actually an optimistic scenario. And this is actually shown also in the market. So you see that people realize this commodity traders, traders on the exchanges realized this, so you could see the commodity prices all increasing. And that's obviously geopolitical tension plus the supply-demand metrics that we talked about, plus obviously, the -- yes, market environment in terms of stockpiling, et cetera. I wanted to show this graph just to give you an understanding of how can you actually participate as an investor in this copper theme. And you can obviously invest throughout the value chain. But most importantly, and this is why we are really excited about being a miner and I chose to be in that industry is that in the mining, you have basically geological, metallurgical, you have other complexities, but it's also the highest margin aspect of the whole value chain. And there's a lot of really, really good companies down the whole value chain up to obviously, EV cars and data centers, end user demand. But really, the whole margin or the main margin is made in the mining industry. With this, I would like to come to ACG Metals to our company and spend about 5, 10 minutes on our company before we then head to the Q&A session. So ACG today is actually coming from only 1.5 years history on the markets. We're still a fairly new company. We're trading in London on the main market, the London Stock Exchange. And we basically started our life in September 2024 with about $100 million market cap. We have now reached today roughly USD 500 million market cap, so 5x from the original start. We also were able to raise as a very young company with the good asset and the strong cash flows we have from our asset to raise a $200 million bond in the Nordic market. That was basically used to construct our mine extension, which will give us another 10 to 15 to 20 years of mine life, so a very sustainable business, which is due to complete in the middle of 2026. We also still have $145 million of cash on the balance sheet. Right now, we are producing gold. As you can see, last year in '24, we produced about 57,000 ounces of gold; 2025 was 39,000 ounces of gold; and in '26, we are now transitioning to copper for the next 10, 20 years in the initial asset. We're producing an ounce of gold around $1,400 and the market price right now is close to $5,000. That's why we have a strong cash position. If we look at our key shareholders, we have a strategic partner, Lidya Madencilik. It's the company that we bought our first mine in Turkey from. They are a very key supporter for us in the region and also help us, obviously, in country. We have Argentem Creek, a U.S. emerging markets fund that has been the financial partner for the business so far, and they've been a very good partner in that respect, the Herd Investments, a Hong Kong investment fund. And then we have Glencore and Trucys, 2 major trader in the commodity space that actually gave us funding for the acquisition and therefore, received our offtake. We, as directors, Artem, the CEO and me and a few others hold about 4% of the company. So we are aligned with our other shareholders. We have good coverage. On the equity research side, we have coverage from Stifel, Canaccord, Cantor Fitzgerald and Berenberg. Share price target is about $21. Right now, we have $15. And we also have good coverage on the debt side actually by Clarksons and by ABG because we have the bond listed in Oslo. So if you invest in a company, you invest in the team. I just want to say a few words on our team. I think the overarching message is that we have all done it before and especially the execution of the strategy that we have done before. So Artem was the CEO of Rusal, the largest aluminum company outside of China a couple of years back. Then was the Head of EM Plus Group, which was a $20 billion company, leading mostly in aluminum, hydropower and others and then basically started with me and the previous company to look at the gold consolidation, and now we're looking at consolidating the copper market, similar to what Artem did at Rusal in the aluminum industry already. I personally spent most my time in -- basically all my time in mining, started in banking, went to private equity, founded my own company in Switzerland, doing advisory on royalties and then moved to the corporate world being Head of M&A and now CFO at ACG. We have Peter Carter, 40 years in mining operations experience as our COO. And we have Damian Coles, who was a leading partner at Kirkland and Ellis in Asia, very, very strong legal expertise and obviously supporting us in the growth phase that we're looking at. Graham Rapley has built 14 projects in mining in his life. So he's building this one for us. All of them were on time and on budget. And we are now about 70-plus percent complete on hours on time and on budget. We have Yaahamadu, who's been working at Glencore and Barrick and other big industry names, basically phasing our ramp-up and then being our implementation man, key man for the sulfide project. And obviously, another young team behind it, that is really driving the company forward. The strategy that ACG has is really to consolidate the copper sector, right? We really strongly believe in the fundamentals, and we also have a network established over the last, for me, 15 years; for Artem, 25, 30 years that we can actually tap on. So the key area where we want to actually consolidate other mining assets is in the Tethyan copper belt, which reaches from Portugal to Mongolia, and that's where we spend a lot of our time in our careers. But we also see really interesting targets in Africa, in North or South America. The key thing for us also as shareholders is that we want to buy producing or near producing assets, build a larger company with about 100,000, 200,000 tonnes of copper in the next couple of years. Become really, really sizable with market capitalization of about $3 billion to $5 billion. And that's obviously how you build the growth. But every project that we will buy will be able to also get some leverage on it because it has production cash flow, and therefore, we minimize dilution for the shareholders. Our first asset that we successfully acquired in that journey is basically the Gediktepe mine in Turkey. The Gediktepe mine is basically in the middle between Izmir and Istanbul. So on the western side of Turkey. We have strong access to port, very good infrastructure, highways up to 1 hour to the asset, then a mountain road pave to the asset. So it is easy for us to access the mine site, but also export the concentrates that we're going to produce. Right now, as I mentioned, we are producing gold and silver. That's been basically shipped to Istanbul to sell. But from the middle of this year, we're going to start producing copper concentrate and zinc concentrate with significant gold and silver byproducts, and that will basically go to the ports and feed the European all the Western supply chains. As you can see on the map, there's a lot of smelting capacity in Europe that we can feed. What's very interesting about this asset is it starts with an oxide cap. That's why we have gold now. It goes into a sulfide. That's where the copper and the zinc comes. But the asset is really, really low-cost producing. Our last year Isaac all-in sustaining capital cost, which means all costs included down to the tax line is basically $1,244 per ounce of gold. As I said, the current gold price is about $5,000. That's how we generated a lot of cash. But also for the next 10 to 20 years, we're going to produce at about $2.40 to $2.60 per pound of copper. The copper price right now in pounds is about GBP 6.20. So also there, the margin will be very, very strong. The grade of the asset is very, very good with 2.3%. That's been in the news also that all the existing copper deposits get declining grades, which means it's more costly to extract a tonne of copper. For us, it's actually very, very healthy grades, and that's why it's such a strong profile. And coming back to the copper production, this asset alone will basically get ACG into a position where we produce about 50,000 tonnes of copper by the end of 2030. 50,000 tonnes of copper in perspective is actually to some of our peers that are trading at $1.5 billion to $2 billion market cap. As I said, we are trading right now at about $500. So this is what we see. Even if we don't do any other acquisition, we already get to a 50,000 tonne threshold, which should really elevate the valuation of the company. Just a few pictures on what we are currently doing. As I said, we are transitioning from gold to copper. And you can see here that the construction of that project is going really well. We are on time and on budget. And by the middle of '26, we will basically start production of copper. Initial production, 20,000 to 25,000 tonnes already this year on an equivalent basis and for next year then sustaining. And as I said, going then to 50,000 tonnes later. An aspect that's always very important for us in mining safety is first. So we are very, very pleased and happy that we have a very safe mining site. Our lost time injuries, which is a common metric in the industry has basically close to 0. And that in an asset that has about 500 people working and a construction project is pretty outstanding. We will also be able to publish our first sustainability report in the coming weeks. We've done a lot of data gathering and actually put the asset really to international standard. That's another value add that our team can bring to other assets. A little bit more towards my kind of expertise. We published our financial results just last week. I think the numbers speak for themselves, but we generated $136 million in revenues, had an EBITDA margin of 56%. But I think most important is that our operating cash flow, so really cash that we generated from the business was $65 million versus our financial net debt of $55 million. So the business is in a very, very healthy state, high cash flow generating and really good prepared for the transition and further growth that the business is going to experience. The balance sheet, we optimized very, very heavily over the last year, which means that we only have a $200 million Nordic bond outstanding. We have $145 million in cash at the time, which means that we have a very low net debt at the moment. Something that we really are pleased with is actually being in Turkey. Turkey is very stable. I have financed mining assets in Turkey 15 years ago. I looked at acquisitions of Turkish assets 7, 8 years ago. And now we operate an asset in Turkey, and we have 0 issues with operating there. We have free capital movements. And more importantly, the Turkish lira devaluation is really, really good if you earn in U.S. dollars and you have your cost in Turkish lira. It even offsets the Turkish inflation. But what we actually also were able to do because we're generating a lot of cash and we have a construction project in country, which means that I don't have an FX risk because I'm spending locally. I could actually put the money into a Turkish bank account earning 40%, 40% of interest, which means I could really put our effective cost on the Nordic bond down to 3% in the last year because I could earn a lot of money in the country, offsetting the coupon payments that I had. And a company our size in a construction phase, having a 3% effective interest rate is pretty outstanding. If we then look a little bit at the market, again, the investment universe for investors such as yourselves, you have a couple of people active in the London market, not many. You have a couple of people active in the Canadian and in the Australian market, but also to have a pure-play copper story is difficult to get. And there's the obvious like an Antofagasta, Freeport or First Quantum, they all have experienced significant growth. They are established companies. But if you want to have a real growth story, I think there is a couple of metrics why ACG could be appealing. And again, for me, as a CFO, cash matters. I don't really care about EBITDA or revenue. I care about cash. And if you look at the cash versus the market cap the ratio that we have is significantly better than a lot of significantly larger companies in the market. You look at Taseko, good name, good assets, trading at $2.6 billion, having 11% cash conversion to their market cap in relation. Atalaya, $1.6 billion, 16%. And on Ero Copper in Brazil, a very successful company with $3 billion market cap, roughly at the same cash to market cap ratio than ACG. Again, on this one, I always look at the last one, we are trading at 3.6x cash flow, whereas the average on the peer group is basically trading at 8x free cash flow. And last but not least, just to round up the presentation, what are the key catalysts for us. We just put our operations results for Q1 out today this morning. We beat expectations again. The operational delivery on the Sulfide project will be key. And then in 2027 in January, I have the first call date on the bond, which means that we can refinance the bond, get further reduction in the cost of capital and basically optimize the balance sheet a bit further. But then also, we are starting to trade in the New York market on the OTC. We're getting included in indexes, the MSCI Small Cap was the first one. The FTSE all shares, FTSE 250 are the logical next ones. And that always excludes any acquisition that we're going to do. So there's further upside in the story here. And with this, I would like to thank you for the attention and hand over back to Judith.

Thank you very much for your presentation, Patrick. Ladies and gentlemen, we are now moving on to the Q&A session. [Operator Instructions]

Silence is good and the presentation was clear.

Yes. It is like that. I give you a few more moments, ladies and gentlemen. And otherwise, you can always place your questions to Investor Relations afterwards as well.

Yes. We'll have to contact here.

Exactly. Very good.

Well, yes, then thank you very much for your interest. I hope you have a great sessions also with my colleagues from Deutsche Rohstoff, HMS and Savanna and all the others that are having great companies. Thank you so much for listening in. And yes, please be in touch if you have any questions from my side. Thank you also, Judith.

Thank you very much. Goodbye.

Bye-bye.