Akobo Minerals AB (publ) (AKOBO) Earnings Call Transcript & Summary

Good morning, and welcome to the Third Quarter 2024 Akobo Minerals Presentation. Today, we will go through the latest development of the company. And with me, I have Helge Rushfeldt. We will together guide you through the presentation and also answer some questions at the end. I'll start with a general introduction to the company for those not too familiar with us. So Akobo Minerals is an exploration and mining company. We are based out of Oslo, Norway, and have our operations in Ethiopia in the Gambela region. So we're a gold exploration and mining company. We have been working with this project and the company for the last 14 years and has, through that period, developed a strong local foothold and also positioned us for the growth and the development of the mining sector that we see coming in Ethiopia in the years going forward. So we're located in the gold rich Gambela region in Ethiopia. As you can see from the map, it's close to the border of South Sudan. It's about 700 kilometers from Addis. It's a very nice place to work in. It's remote, but still not that remote anymore. We have access to the area, both through normal road and through our own airstrip that we've built. In the area, we have the exploration license of 182 square kilometers. We do have our mining license of 16 square kilometers. We already have plant, machine and equipment up and running, which we will look at a bit later. We have currently a mineral resource estimate of 68,000, 69,000 ounces with an average grade of 22.7 gram per ton. This is very, very gold rich compared to what you'll find in the industry in general. The indicated mineral part alone is 41,000 ounces. And you can see the average grade is 40.6 gram per ton. This part is what we find closest to the surface in the mine. So that's the area we are working in right now in the mining. And it's still open at depth, and we have near-term near mine targets. So we expect the mining to continue beyond the current resource estimates. So we foresee a high margin gold production from the Segele mine with significant cash flow going forward. We have already signed up a refinery agreement with MKS PAMP in Switzerland. We do expect to start exporting gold there in the near future. And just to put us on the map here, you can see a wider area where we have the Arabian-Nubian Shield, which is an area that you can see is filled up with a lot of existing mines all the way from Saudi Arabia through Egypt through Sudan and Eritrea into Ethiopia. And we are at the bottom part of this, call it, gold rich Arabian-Nubian Shield. And you have a lot of the big players already mining out of this geological area. And if we zoom in a bit more, as I said, we are located in the Gambela region. It's still an unexplored part of the Arabian-Nubian Shield. But still, we see that more players are coming along here. Allied Gold and KEFI been working for a long time on their projects, and we see them also now moving forward in building their infrastructure and hopefully, will start production within a couple of years. The Gambela region, you can see here, we have our existing license area at the bottom there, and we have also applied for a new and much larger exploration license called Gilo, a bit north of us. So we're well placed within a very exciting area. And then some of the latest key events. It's been a very exciting period for us lately. Of course, record high gold prices, which over time will improve the value of the Segele resource and the revenue potential. We have strengthened the management team with senior personnel from Sutton. We did secure a convertible loan of NOK 25.5 million to enhance our financial flexibility. And then for the even more exciting part, we have produced gold and we have sold gold also. First part has been delivered to the National Bank, valued at approximately $2,400 per ounce. We have been paid in local currency so far. That's good. We need local currency anyway. So this is just the proof that we have been able to produce and also monetize the gold. And the November production, more than 10 kilos of gold produced exceeded our expectations, and it covered all our operating expenses for the month. We also produced 3 kilos of gold in October. So all in all, 13 kilos produced so far. On the mining side, we have completed the first raise, and we have commenced stoping activities. Helge will say a bit more about that. And as I said earlier, we are preparing for the first export of gold. We'll see when that happens. It depends on how much we produce in December, but we're looking at maybe exporting the first gold by the end of the month or into January. We have also now actively promoted Ethiopia's mining industry by being part of their MINTEX conference. It's the third year they organize this. It's part of the general support to the mining industry, trying to develop the mining industry, attract players, service providers and investors. So it's a very good initiative. And also very important for us, we did our inauguration of the Segele mine, and it was a great ceremony with the Ethiopian Prime Minister and a lot of other guests and officials. So we'll see there -- here, you can see a bit more. This is a big event for the company. It also says a lot about the support we have through all the -- both the local government, local community, local administration through the Gambela region and their President that you can see here on the picture all the way up to Prime Minister Abiy, who is also holding a speech here at our inauguration. So very strong support, not only for the mining industry, but also Akobo as a company. I was there at inauguration and also witnessed the pour of a very nice gold bar of 6.5 kilos. So great, I would say, enthusiasm when that happened. And we had a -- even though heavy rain, we had a very good day at site and everyone was pleased with what they saw. We are focusing still on ESG, health and safety, working on wastewater management, important also noise and air quality monitoring from the processing plant. We have worked on enhancing our local health services by getting a very good local doctor to run our clinic and staffing up and supporting that initiative. And of course, as we continue the underground mine, emergency preparedness is important. So developing on-site trauma and emergency care centers and also working with local and regional hospitals for more advanced care. So health and safety and ESG, definitely something we're taking very seriously and working hard on. On the exploration side, not much happening in the field. We have been focusing on the Segele mine, getting that up and running. Now it's time to look forward and start focusing and refocusing on the exploration side. The Gilo license, it's applied for, it's still in process. Difficult to say exactly when we will have an answer back, but hopefully, in the very near future. We are re-logging drill holes. We have done a lot of work on the data management side and also done some training for our employees. So preparing us for the restart of the exploration side. We are working also now on getting a more international recognized expert to support our local team to really look at more the overall strategy on the exploration side, also taking into consideration the Gilo license area. So hopefully, that will be something we can announce in the near future also. And as I said, we'll start drilling again. The Segele drilling, I think it's restarting today or tomorrow. It will be interesting to see what results will come from that activity now going forward. And then for gold sales and financial update. So we did, as I said, a convertible bond, NOK 25.5 million with both existing and new shareholders. It has a term of 24 months and an interest of 20%. We still have ongoing discussions with different partners to look at what the future can bring, especially also looking at how we can restructure some of the debt that we have with Monetary Metals. That's a key focus area going forward. We think there are opportunities there given that we're now in production and the company is in a much more mature phase with a reduced operational risk. Gold production and sales, of course, some of the most interesting things these days, I would definitely say November better than expected, very happy to see the production there. As I said, we did cover all our operating costs in November, and we're preparing for the export going forward. You can see here from the table, the bars that we have produced gives you the gram of gold, how much ton we process to get that gold out, gives you an average gram per ton. You can see we're the beginning, 8.2 gram per ton, we have been up to 33 gram per ton in average. All in all, around 18 gram per ton so far, which we are very pleased with given the fact that we're still in the early phases here. If you look at the recovery estimate since we're only doing the gravity part, we're estimating that we're getting 60% out of the gold. So the remaining is then kept in the tailings. You can see there is now also a considerable amount of gold just in the tailings that we will reprocess at a later stage. But I'm not saying this is bankable as it is, but at least we know there is gold going in there when we produce. On the purity side, still working on that. We'll get more answers once we ship this abroad to a proper refinery, but these are the numbers we get out of the gravity way of checking purity. We have sold all of this to the National Bank now in Ethiopia. And you can see the estimated revenues here in dollars. It's based on the currency exchange rate between the local currency and the dollars handed out by the National Bank. And you can see it's -- yes, it's a considerable amount already $1 million as per the end of November. On the right-hand side, you can see a bit what we're working against. We call it the 4 5s goals. It's yes, just an easy illustration. We're aiming for 25 days of blasting each month with 25 tons of ore moved daily, an average grade of 35 grams per ton and also a recovery rate from the gravity part up to 65%. This is what I will call a short- to medium-term goal that we expect at least to get out of the winzes moving forward. And reaching these goals will give us a solid revenue from the operation and will give us, yes, solid revenue and also a good base for moving forward on the production side. And with that, I'll leave -- I'll hand over the presentation to Helge, who will talk more about the mining side and the processing side. So, Helge?

Yes. Thank you, Jorgen. Hello, everyone. It is really nice to be able now to talk to you and also say a little bit about this very exciting period that we have been in. This is a -- picture that you see in front of you now is from the winzes. And you see in the bottom center that's there an area that has a fence around it, and that is where we keep the run-of-mine ore before it's being shipped to the plant. Yes, next, please. So we have a mine where the infrastructure looks like this. We have an Eastern winze and a Western winze, they are green areas that has been driven down. The Eastern winze is a bit further than it looks like here, but we have done the crosscut between these 2 winzes and started the stoping in between there. So this is basically how the infrastructure looks like. This incline shaft that is planned is the one that you see on the bottom coming down from the left going to the right. Yes. Okay. So lately, we have encountered very rich ore in the crosscut, and this was also predicted by the mine model. We have started the stoping. That is just very recently, we have started the stoping now in this crosscut by making raises and then you start blasting from these raises, the ore into the crosscut and taking it out via the winzes. And we are now then producing ore from this very rich area. The Eastern winze is now at 71.8 meters. It will be extended still some meters before we make the next crosscut. So this extension of the Eastern winze is to make the next crosscut. So this is kind of development to be able to open up new mine areas in the near future. The Western winze is already at 63.5 meters. So it's very close to being where we want it as of today. We have not done very much on the incline shaft because we have prioritized the mining and development in the winzes so that we can get the ore to the plant. We have a few challenges still. Moving ore and waste rock during stoping is challenging. So we are currently investigating a possible alternative infrastructure for the mine, and we have brought together an expert team that is now doing research and is, as we speak, on the way to site to do some hands-on evaluation of the area and how it looks like. Possibly we will have a different way of approaching the mine logistics in the future. So that is what we are investigating. That could add a great value to our project. Another challenge that we have had is the hiring of skilled miners and completing paper works for these expert miners going to Ethiopia. It is a bit tedious work, and it's a lot of things to get right, but we have added new team members recently, and they are helping with getting all these structured and fixed. And as always, water is one of our challenges in Ethiopia, but now only the very, very heavy rains is still causing issues. We have been able to deflect most of the water and stuff like that. And we have also a more robust pumping plan underground. So -- and we will -- we also have plans in place to cut out the last issues we have with these rains. Next. I just wanted to show you how the ore actually looks like now in this rich area. And as you can see in this picture, it is extremely rich. This is something you don't see, for example, in South Africa, where you have very like fine grained gold and stuff like that. So this is a very rich, nuggety gold ore, which is quite unique. And also a picture on the right where you can see a picture from the crosscut. So there's a lot of materials there that we -- that they are installing now to make it ready for the stoping. So this is taken some weeks back. Okay. Based on a lot of discussions we have had through the last quarter, we have realized that a lot of people have many questions regarding mining and mining in general and don't really understand. So we have prepared a little Q&A with some typical questions that we have gotten. And I'll just run quickly through that so to just increase the understanding of what we are doing. So first part, how do we organize daily operations in the mine? What methods do we use to map the gold? How is the sequence of development tunnels and stopes? And what is the difference between development and production in the mine? So we start every shift with a quick meeting, which you can see in the picture there. And typically, the first thing we talk about is safety and then the tasks of the day, what we are going to do. This is how it starts every day with all the people talking to the mine captain or the person in charge. We have 2 mine geologists that are constantly mapping and sampling the progress and the mineral that is exposed every time we blast underground. And they are updating our models using 3D software, so that the block models are continuously getting better with regards to what we had from exploration and then what we now see underground. We also use surveyors with typically these total stations to map the exact progress of the mine in XYZ coordinates and feed this into our mine model. Yes. So the mining in general, we are first developing down the winzes, then we make crosscuts between the winzes. And from the crosscuts, we make raises and from the raises again, there are stopes going out. And then we mine the stopes and put -- and it goes through the raises into the crosscuts and out through the winzes. So that is how we are developing and making the mine as of today. A lot of people have asked about the development, can't you just like mine directly? No, we can't. We need to have a proper infrastructure underground to be able to extract the ore efficiently. So that's why we have development first before we can start the stoping. Yes. So about safety and risk. How do we ensure blasting and excavation are carried out safely? What measures do we take to protect workers from dust, rock falls and chemicals? How is water and ventilation managed in the mine? So we use only certified mine blasters in our operation. And we have currently 2 certified blasters that go like on rotation on site. We have very strict procedures before, during and after blast to ensure everyone is at safe distance during blast and that all the toxic gases that are vented out before someone enters the mine. Being safe also means knowing what to do. And our mining team is highly competent and includes a lot of people with experience from both South Africa and other countries in Africa. All personnel underground wear proper personal protective equipment, the PPE, and you can see there the PPE in the picture. It's just put up there for -- as a means for people to see with everything that goes into that. So everybody wears this PPE as the last kind of protection. For water, we have pumps that pump the water out of the mine, and we have fans that blow air into the mine. And both these operation needs to go 24/7. It's always pumping out water and pumping air into the mine. You can see in the lower picture there also these metal rock bolts that are drilled into the rock so to make the face secure so that you don't have any rock falls. So these are done a lot in the mine to keep -- to protect people from falling rocks. So how do we use block models to plan the mining operations? And how do we monitor production? In the picture there, you can see actually how a block model looks like. These are very, very tiny like blocks that have been estimated by the use of specialized software that interprets the drilling made in the exploration. So block models are approximations of the reality to try to give a 3D image of how the distribution of gold looks like in the orebody. These models form the basis of where we want to plan our stopes, where high grade areas will be the main target for extraction and barren areas will be preferably used for pillars and support in the mine. All such models are inherently wrong to some degree. So when the development reaches the ore, the ore will be sampled and analyzed and the results reconciled with the block model increasing the accuracy and our understanding of the geology. Yes. And production is monitored by estimating the size of each blasts. Then we can say something about the tonnage that we have blasted. And ultimately, all the ore that has been blasted will be taken to the run-of-mine storage and then processed through the mill. And going into the mill, we have this belt conveyor scale system so that it is weighed with high accuracy. So that's how we know exactly how many tons we get. Yes. So what is the strategy to minimize gold loss in process such as blasting, transporting, and crushing? Why are stopes critical for efficient mining? How do we ensure that development work does not delay production? And what challenges do we face in transporting rock and ore? So all material is taken well care of through all logistics stages and kept in storages and stocks that are safe and secure. Like there is nothing that we lose anywhere. There is no place out of the mine except where we take it out. So all the material that is blasted will be going out of the mine through the winzes and stored on the storage pad. Even the pumps go through a sediment area, so there is nothing coming out of the water that will not be taken back to us. So we don't lose any material in the transport stage. Stopes, those are where the gold ore is being extracted. These are voids that are specifically designed to include as much valuable ore as possible. And development work always needs to be ahead of the stoping, so that we always have enough ore production points to feed the processing plant. So the stopes are specifically made to include as much ore as possible, whereas the development is specifically made to make the extraction of gold and the infrastructure as efficient as possible. The greatest challenge we have now is the transport of the ore out of the mine. The winzes are very steep, and they have limits to the amount of ore that can be transported out. So we are currently, as I have said also earlier, working on an alternative plan that could be faster using a team of mining experts that will conclude on this soon. We expect a new plant to be ready in a couple of weeks before Christmas. Yes. Okay. So going over to the processing plant, and I like this picture because it shows it's a new dawn for the processing plant. As before, we have been in construction and commissioning phase. But now it is a fully operational plant, and we are -- instead of talking about which machine is working and where -- what needs to be connected, we are now talking about improvements and tonnage per hours and chemicals and all of these things that is part of. So it's a huge change in how we think about the plant now. So obviously, we have now smelted the first gold bars. In October, we had 2 gold bars at about 1.4 kilos each. So that was like kind of first start of what we are doing. And in November, we were able to smelt 10 kilos of gold, which was much more than we had anticipated, which was a very pleasant surprise to us. And the whole organization is now geared towards operations, and there's no more talks about construction and commissioning and everything is focused on operations and making things more efficient and better. Yes. As I said, the plant is fully operational. We are producing several batches through the gravity and ILR circuit each month. Typically, we -- since we have this plant that is now geared towards batch production, we can run batches every day. So typically, we have the mine coming up with ore one day and then we process that whole batch through the plant one day, and then we continue the next day. So we can start and stop the plant. So it's very flexible now in the start with doing it this way. The downside has been shown also in Jorgen's presentation is that we have 60%, 70% recovery, but the rest is not lost. It is in a temporary Tailings Storage Facility that we can reprocess later through this CIL systems. So that will be up and running later and then we can reprocess all that and get a higher overall recovery. Yes, we are processing all the ore received from the mine on a continuous basis now, and we have produced several gold bars from 1.4 kilos and up to 6.5 kilos in a single bar. And going forward, the main focus now is to get the complete laboratory building up and running. That will increase our understanding of the process and also of the mine and will keep also us being able to get results much faster than we have today with our current system. So these are just some pictures. This is specifically the pouring that was made when the Prime Minister Abiy was on site. So this was what he saw with the pouring. And also on the second picture there, there how you release the gold bar from the slag underneath. So you see the gold bar red hot and the slag a little bit darker underneath. And then you put the gold then in the washing and cooling it down. And he was able to hold it. And I think that was an experience that he would remember the rest of his life because not often can you see this kind of process up close and see how things are actually produced. So that is actually something that is a very nice experience for anyone. Yes. Yes. So the recent understandings are that the recent developments are better understanding and more expertise on running the plant. We are getting better at this every time we do batches through the gravity, every time we are running the ILR and the electrowinning, every time we are smelting, we understand more, we are getting better at this. So this is a very, very competent team we have now, and we are only getting better. And as Jorgen said, we have then produced these Dore gold bars that are produced and sold to the Ethiopian National Bank. So cash is coming in, and that is a very, very good and big milestone for any company. Going forward, we are going to reprocess the tailings for higher recovery. And we are going to process continuously larger batches as the mine production gets up to speed. Yes. So you see me there with the first gold bar that we ever produced and also Mr. Abiy watching the gold smelting during the inauguration in the bottom corner. Thank you. And I think that was [ mine ], so over to Jorgen again.

Thank you, Helge. Very nice to see those pictures, gold being produced, gold being sold and, as Helge said, cash being received by the company. This is what we've been working hard on for a very long time. Still looking at financial performance, we did not have any revenues in Q3. Q4 will be the first quarter where we will see revenues from the sale of gold. So you only see here the cost side, which is fairly stable, so around SEK 16 million, around USD 480,000 per month. So, yes, that's the burn rate currently that you see here. You can see the equity and the debt development. The debt now is related to the Monetary Metals gold loan that we have. We will start paying interest on that from January. We are also, as I said earlier, looking at different alternatives on how to restructure that loan going forward. The equity is negative, as you can see, but it has no impact on the company or the accounts as such. So, that's it on the financial side for now. The corporate structure, just to remind you, we are listed on the Euronext Growth in Oslo and also on the Frankfurt Stock Exchange. We are still trading on the OTC Market in the U.S. and the company is backed by a strong group of active Norwegian shareholders. And in addition, some 3,000 retail shareholders still based out of Sweden and Norway. And as I mentioned, the Monetary Metals gold loan, it sits now at around 7,500 ounces at the end of the third quarter. Top shareholders, here, you can see the top 20, not much -- yes, not much changes there. It's stable, and it's a strong base for us, and they've been with us for a very long time. So, yes, really no changes in the top 20 shareholders. The remaining part here, I will leave to you to have a look at. You can contact me if you have any questions regarding the financials. And then we will have a small Q&A session. We'll keep it short since we've spent a lot of time already. It will start in a minute or 2. We just have to get the systems up and running so that we can see the questions. So tune back in a minute or so.

Okay. Welcome back. We have now a few questions that we can answer. We'll try to keep it short now. Helge, I have a few questions for you here, especially then on the incline shaft on the development there, we touched upon it. Maybe you will say a few words on what thoughts we have on the development on the incline versus potential new alternatives.

Yes, I can do that. Yes. As I said previously, the incline shaft has been postponed a bit while we are working on the -- we have been working on the development on the winzes and the crosscuts to get the ore production started. And during this period, we have had some inputs from different mining engineers that there might be an alternative way of extracting the ore that could be faster. It's not necessarily a replacement for the incline shaft, but it could be something that comes in addition to the incline. So it talks about some kind of vertical shaft system that will be faster to do and get into the ore body and could help us -- help relieve our winzes regarding extracting the ore. So if we go for that, it would most probably save us time and money and get us into a higher operation speed than previously thought. So that is what we are currently checking and investigating with this expert team. And we hope to have a plan ready now, as I said, before Christmas.

Good. And I guess, Helge, the incline might still be a part of the mine infrastructure going forward. We expect the mine to continue to be developed for many years. And especially given that it's open at depth, we might, as Helge said, also do both alternatives over time.

Yes.

Good. Question around the cyanide leaching the CIL tanks, extracting the remaining gold. As you can see, we think there is a lot of gold left in the tailings. When do we expect to be able to process that?

Yes. So what we are currently doing is that we are processing the ore in a gravity section and then not these CIL tanks that typically take whatever the gravity does not take. So that means that all of these materials goes to the tailing. And then our tailing is probably much richer than most gold ores in the world as of today, and we expect it to be like somewhere between 5 to 8 grams per ton of gold only in the tailings. So these tailings are not final tailings. It's a temporary storage, and we will process it back through the CIL tanks when it's enough. The reason why we are waiting with this is that the CIL tanks is kind of a massive beasts of an operation. So when you start it, you cannot just stop and start as you wish, you would preferably want to keep it running for weeks. So that means we need to have enough material to make that happen. So we are currently just waiting for the amount of tailings to be high enough. And we believe that this would be a first time we run it through there, but then we will also commission that part of the plant, the CIL tanks. So we believe that is a first quarter 2025 operation.

Good. Something then here on exploration drilling, when it's expected to resume and which targets? We expect it to resume, as I said, these days today or tomorrow. We are still targeting some of the area around Segele, the West Segele. But of course, we will start looking at other areas. And once we get a -- I would say, a better overall plan in place, we will also look at new targets and going back to existing targets that we've already drilled earlier. We have still one drill rig in operation. We have, as you all know, spare parts and other drill rigs ready to be put into operation. We have a team currently also at site evaluating how we can get those up and running in the fastest possible time so that we can really, as I said, refocusing -- refocus on the exploration side and the drilling side. The Gilo license that we have applied for, it's difficult to say when we will get that final feedback. It's a work in progress with the Minister of Mines. I believe that with the support we have from all officials these days, I hope this will not take too long. But it is a process. It's a normal process that everyone has to go through, and we are doing that also. Current production for September, now December, it's too early to say. We have not done any smelting so far in December, and we are all eager, of course, to see what will come out of the December production. Maybe, Helge, you can say a few words about what we see from the orebody right now. It's -- yes, from what I understand, it's areas of very, very, very high grade. And then you have some areas with less grade. So depending on what you hit and when you hit it, it will impact the production.

Yes, definitely. We see that the areas that we now produce in these raises going towards stoping is very high grade ore. We have had some more development during this period in December so far so that the tonnages are not so high, but we hope that, that will be countered by higher grades. So -- but it's -- as you say, it's too early to say anything about the production in December with regards to final gold.

Good. So, few more questions before we leave it. How would you describe the relationship with the regional government? Such things are often important for continuous operation. I would say, we have a very good relationship, and that was clearly shown at the inauguration. We had very, very good support, not only from the Prime Minister and the President of the Gambela region. But as part of the inauguration, we had visits and people staying with us for several days from the local communities and the wider area. And we're also working in addition to that, of course, on a day-to-day relationship with the community and see how we can help each other and be mutual beneficial going forward also as we have been already. Yes. So do we expect gold price to remain high? Very difficult to say. Of course, the current gold price is very good for our current cash flow. And we still -- as you can see from our operating costs, it's at a very low level compared to general industry averages. So remains to be seen. The gold price is volatile. It depends on a lot of the geopolitics happening around the world. We see China these days maybe going back into buying gold. So it's an interesting time for the gold industry. I think that's more or less it. When will the plant be taken from 10 tons to 20 tons? That is for future upgrade of the plant, depending on how much exploration and what we find in the wider area, but that's not something that we're looking into these days. That's a future expansion of the plant. So I think that's it. Helge, thank you for all your input and the presentation. I hope everyone who watched and listened in that you got a better understanding of what we're doing and where we are. Closing off to say that we are very excited these days, thanking all the team and all our employees, of course, working hard every day. It's a 24/7 continuous operation that we're doing. It takes a lot of efforts. So we're very pleased and happy to see finally the production coming and the gold being produced. So we'll continue with that, and we'll keep you updated with some information here and there of what's happening, and we'll also be seeing you at the next quarterly presentation. Thank you.