Altona Rare Earths Plc (REE) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. Welcome to the Altona Rare Earths Plc Investor Presentation. [Operator Instructions] The company may not be in a position of course to answer every question they received. However, the company can review questions today, and we'll provide those responses on the Investor Meet Company platform. Before we begin, we'd like to submit the following poll. And I'm sure the company will be most grateful for your participation. I'd now like to hand over to the management team from Altona Rare Earths, Cedric. Good afternoon, good evening to you.

Good evening. Thank you. So my name is Cedric Simonet for those who don't know me and for me with the company, I am the CEO of Altona Rare Earths. I am geologist by profession. I have done most of my career in Africa and based in Africa even as we speak currently in Maputo, in Mozambique. And Altona Rare Earths is a company listed on the London Stock Exchange with the ticker REE. Since 2021, the company has been implementing array of strategy. And early this year, we decided to expand our portfolio to diversify our portfolio into other critical minerals and it shows copper. So currently, we have one [indiscernible] asset that is Monte Muambe rare earths project in Mozambique, which is at a prefeasibility study level. We have a copper project in Zambia called Kabompo, which is a grassroot project, and we have another copper silver project in Botswana called Sesana, which is also at grassroot level. And this presentation is going to focus a lot on Sesana, in Botswana, because we have just notified the owner of the license that we are exercising the option. So let's get started -- all right. So the Sesana project is located in Botswana. If you look at the map of Africa on the left-hand side, you can see highlighted in brown, the 3 countries where we have a presence currently, Mozambique, Zambia and Botswana. So Botswana is a long-locked country, which is located between Namibia to the West South Africa to the south and Zimbabwe way to the East. And Botswana is one of the best countries in Africa, the best ranked countries in Africa in terms of ease of investments. So we are very happy to be there. The latest couple of developments in Botswana have taken place in geological formation called the Kalahari Copper Belt. This Kalahari Copper Belt stretches from Namibia into Botswana. And the Kalahari Copper Belt is geologically quite similar to the Central Africa Copper Belt. It's the demand hosted copper, although both don't have the same age. And also the Kalahari Copper Belt has nowhere been explored as much as the Central African Copper Belt has. And the reason for this is that in Botswana in this central part of Southern Africa, there is a surface geological formation called the Kalahari Sands, which covers the placement, which locates the basement. You can see on the [indiscernible] photo, how it looks like. This is a sound quarry, not very far from our projects, and you can see tens of meters of sun. So historically, this sands quarry has made exploration in the Kalahari Copper Belt quite difficult, and that's why it has been very much untouched until recently. But nowadays, with modern geophysical and geochemical exploration method, it is possible to see through this sand [indiscernible] and to do exploration. And actually, exploration over the past 15 years in the Kalahari Copper Belt been quite successful since 2 mines have been opened, the [indiscernible] copper silver mine has been opened in 2023. And the Khoemacau copper silver mine has been opened in 2021 and is currently producing about 60,000 tonnes per year of copper in concentrate and 1.6 million ounces of silver per year. And the company owning the Khoemacau copper-silver mine, which is called MMG, is considering to expand the mine to double basically the production and has recently published a competent person's report about this expansion. And this is very interesting for us, because that mine is just located 25 kilometers from the Sesana project. So looking a little bit closer at the geology, as I said, the copper and silver mineralization is hosted in sediments. And basically, the situation is the same as in the Central Africa copper base. You have different types of sediments, which have different characteristics. And you find the copper mineralization at a very well-defined contact between oxidized sandstones. That's a formation which is called Ngwako Pan and reduced siltstones, that's a formation, which is called D'Kar Formation. So the general contours of copper mineralization in the Kalahari Copper Belt are very well understood. And this is very important because when you do exploration at Kalahari Copper Belt, you know right from the onset exactly what you are looking for. So this little chart shows a little bit the same information in a simplified manner. And in green, the green box is a D'Kar Formation. The pink box is in Ngwako Pan formation and then as a context, that's where you find the copper deposits. And if you follow our announcements, you will certainly have seen that we have hired the services of the geologies called Dave Catterall. And Dave has over 15 years experience in exploring in the Kalahari Copper Belt, also both in Botswana and Namibia. And he has been involved with most projects and still involved with most projects and with most discoveries. So he knows very well the geology of the area. And one of the brilliant ideas that he had was to gather as much regional data as possible to create a very extensive regional database in particular, using airborne physical service, magnetic airborne physical service. If you look at these little boxes on the right-hand side with colorful boxes with some blue, some green, some yellow and some red. So the top line corresponds to different processing product of magnetic data for the D'Kar formation. And the bottom line corresponds to the same products but for the Ngwako Pan formation. And you can immediately see that the texture is very, very different. The aspect of these boxes is very different. And this is true all over the Kalahari Copper Belt. So what that means is that by observing airborne geophysical maps, magnetic maps, you can actually identify and pinpoint the position of the D'Kar formation, the position of the Ngwako Pan formation, and you can pinpoint the position of the contact between these 2 formations, which is where you expect to find the copper and silver deposits, and this is where all known copper-silver deposits in the Kalahari Copper Belt allocated. So when you put this on a map, this is how it looks like. This is from the PhD thesis of someone called Wesley Hall. So this geological map was built using airborne geophysical data, airborne geophysical surveys and you have different colors. And this identifies the position of the different formations. All of these little red and yellow dots are copper-silver occurrences. The bigger square is the location of the Zone 5 underground Khoemacau mine, which again is very close to where we are. And in the red, you can see the outline of our prospective license 2329, which is our license to Sesana project. So to make it a little bit more clear, I have highlighted in blue the contact between the Ngwako Pan formation and the D'Kar formation. And this is what we are looking for. So this contact, you can see several parallel lines. It is repeated across the Kalahari Copper Belt because of folding. There is very tight folding in these sedimentary formations. So that's why you don't see the contact only once, but you see it repeated several times in the favor of this folding. And what you can see is that one of these folds, one of these blue lines is passing through prospective license 2329. -- so let's look a little bit closer at the license. The license as a surface area of 274 square kilometer. The background of this image is a satellite image, high-resolution satellite image. If you look at the top part, you can see the location of the Zone 5 Khoemacau underground mine. And that black frame, a black box shows a zoomed-in view of the Khoemacau mine. And you can see 3 structures, 3 alliance structures which corresponds to the 3 mine portals. You've got 3 incline shafts, and these 3 shafts are aligned against the area where the contact between the 2 formations outcrop. So or which is mined by MMG at the Zone 5 mine is currently taken to the Boseto plant, which is the rest of the mine. And the company has constructed a 35-kilometer to road to link the Zone 5 mine and the Boseto plant. So when you go to PL2329, you actually drive past the Boseto plant, passed and around the Zone 5 mine and then you go through the bush to the PL2329. The earning agreement that we have with the owner is a relatively low cost, which is quite important for us, because we are conscious of making the best possible use of our resources in the ground, in the field, into exploration, into geophysics and to drill holes. So it's quite important for us. The total cost of the earning agreement to get us to 85% is USD 370,000 over a period of 4 years and 1/3 of this is in cash and 2/3 is in sales. So it's quite accessible for us in terms of cost. So if we go back to the position of the compact zones, they are shown here in blue. The background of this image is actually the licensees who also have grown. So what you can see in light range corresponds to the ground held as prospective licenses by MMG. And what you can see in darker orange correspond to the mining licenses. So you can see the mine license about in the middle around the green square, which is the Zone 5 mine. And you can see 3 of our green squares. So all these 4 larger green squares correspond to the deposits, which have been identified by MMG and for which they have published recently reserve statements, or resource statements. The smaller green squares correspond to deposits for which they are not yet reserve statements, but they are resource statements. And then the green triangles corresponds to discoveries. So if you look at the discoveries which are closest to where we are, you have the Zone 9 discovery, and you have the Mawana fold discovery. There are other U.K. [ general ] exploration companies active in the area. There is Arc Minerals and there is Galileo. Galileo is actually located at the PL39 actually located just next to ours, and they are located on the same structure, what they call the Galileo fold and we are in announced some very encouraging soil geochemical anomalies. This is actually the same structure we are on. We might challenge the name of the fold and not call it Galileo, but it's the same structure. And if you are familiar with what Arc Minerals is doing, they are currently drilling where there is this black sort of circle between Mawana and Zone 9. And they've just actually announced today morning some very good drilling results not yet great, but they have intersected the correct geological formations. And they have even seen in the course, actual visible copper mineralization. So this is very, very exciting. So we've got 11 kilometers of contact passing through our license, and this is where we are going to forecast exploration. The next steps for us, as you will have seen in the RNS which we published on Monday, we exercised the option. So now there is a little bit of administrative and legal process to put things into place and to move the license to a special purpose vehicle between us and our partners in Botswana. But at the same time, we have started the environmental processes and the stakeholders' consultations, which are necessarily before field work can actually start. And we are busy firming up our exploration program. One of the things we are looking at actually at the moment is a cost benefit analysis of doing airborne geophysical surveys, low elevation range physical service with a helicopter, where you can use different methods all at the same time and doing a ground geophysical methods where you actually have instruments on the ground. So we are looking at this cost benefit analysis. We are doing this cost benefit analysis, not only with efficiency and cost in mind but also with the time frame over which this service can be done because we want to fast track this project. We want to get to a point where we have actual drilling targets that we can drill as soon as possible. So why I like so much this project? Just summarizing into a few points. First, as I said, the geology is very well understood in the Kalahari Copper Belt. We know exactly what we are looking for. So it's quite straightforward. Second, this geology is associated to geophysical anomalies, which are very clear. So that makes processing easy. And it's well understood what we have to look for with which methods and that allows to fast-track projects. The other thing that I like is that there is a lot of prospective activities that has taken place in this area and that is still taking place. And this prospecting activity has been very successful. So we are not going like blindly into ground, which has never been explored yet. This ground has been proven already and there is a mine, which has been opened up, Zone 5 Khoemacau mine and which is producing. The last thing I like a lot, and that's more of a potential commercial aspect of the project, but it's also quite important is that we are just 25 kilometers from an operating mine. If we have a discovery, anybody who has a discovery in this area would be able to market it to the neighboring mine. This is something which is very logical. So the discovery doesn't necessarily have to be large enough to sustain building a new mine to be marketable. It just has to be large enough to contribute to feed an existing mine. So that's quite important because potentially, that opens up more avenues of marketing and realizing the value of this project. And for us, that's quite important. I'm hoping that very, very soon, I will be able to announce that we have started operations on the ground. Now that's it for Sesana. Let's talk a little bit about Monte Muambe, especially for some of you who may not be familiar with this project. So Monte Muambe a carbonatite hosted type of projects. It's not like an ionic rare earth project. We've held the project since 2021. We drilled so far almost 8,000 meters at Monte Muambe. And in October last year, we produced a scoping study with a maiden resource of 13.6 million tonnes with 2.42% Total Rare Earth Oxides and the sum of all the rare earth in the rock. This resource is about 60% of it is already in the indicated category, because of the way we designed our drilling plan to achieve these results. The other thing is that it is based on 2 areas with Rare Earth at Monte Muambe More, which we call Target 1 and Target 4. But at Monte Muambe, we actually have about 10 targets. So there is a lot of ground left for exploration, and we are very confident that we would be able to increase the size of the resource with further drilling. The scoping study was taken into consideration production of 15,000 tons per year of mixed carbonate over a period of 18 years. and that would entail a CapEx of $276 million, and that would result into an NPV 8 of $283.3 million, with an IRR of 25%. The completion of the scoping study since we have an earning in place with our local partners, enabled us to get our ownership to a level of 51%. And in December 2023, we launched an application for a mining concession for a period of 25 years, which is currently being processed. Our spending on Monte Muambe at the moment is focused on 2 key activities. We are at prefeasibility study level, but we are focusing our efforts on metallurgy. Metallurgy is the most difficult part of any rare earth rear project, and it is the same with Monte Muambe. So we have 100 kilo representative sample, which is with SGS Lakefields in Canada. SGS Lakefields has been working on it for a while now. They have completed the mineralogical characterization, which is a prerequisite before you can start any serious metallurgical work. You need to really understand the mineralogy, what type of minerals, where the rare earth is rock as the size of the minerals that you can determine how much you need to mill the ore. And we have started rougher flotation process. So if you are a little bit familiar with flotation, you know that flotation can sound simple, but it's actually very complex. There are many different types of reagents, which can be used. There are many different sets of parameters, which can be used like the pH, like temperature of the fluid, lots of things to look at. So SGS is currently working on this, and they have had some success with some of the parameters into producing good concentrates, and they are going to continue this test and then go further into the reasonable flotation process to the rougher. So this is an important thing for us to make sure we get the best possible concentrate, rare earth concentrate because the grade of the rare earth concentrate has got a good impact on the CapEx and the OpEx of the project for the hydrometallurgy part of the project. So that's quite important. We also want to see if we can extract [indiscernible] from the ore as a byproduct, because we know that this rare earth ore also contains [indiscernible]. So this is ongoing work. And I'm hoping that very soon, we will be able to start announcing some results on this. So stay tuned for this. The other activity on which we are focusing our attention from Monte Muambe is to progress the Mining Concession application. This is quite important for us to help derisking the project. I have a meeting with the Minister for Mineral Resources and Energy on Monday in Maputo and he assured me that he is very much on top of this and he is aware of the project. And it is one of its priority to make sure that this Mining Concession gets granted as soon as possible. The last point with Monte Muambe. As I've mentioned in prior presentations, is that we are looking for a strategic investor to contribute to funding the entire prefeasibility study. This is work in progress. We are having very constructive talks with different parties. Some of these parties are private companies. Some of these parties are governments or inter government organizations. So equally, I'm hoping to be able to give some feedback on this very, very soon. Right. I think that's all a reconnection. So I'm ready now to take some questions.

That's great. Cedric. Thank you very much indeed for updating investors. [Operator Instructions] I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via your investor meet company dashboard. Cedric, as you can see, you've had a number of questions from investors today. So thank you to everyone for your engagement. But I may just ask you to read out those questions and I'll pick up from you at the end.

All right. Thank you. So the first question is can you elaborate further on progress with regards to the discussions alluded to with respect to potential strategic partners? Right, there is not a lot of that I can tell you, of course, because this conversations are quite confidential. But what I can explain maybe is that when we talk about strategic partners, what we are looking for are parties that have an interest in getting access to the actual product. Not just investors, we are going to want to see the share price go up and then sell out, but person -- entities which have an interest in the very long term. And as you know, Rare Earth strategic mineral's, they are essential to the green energy transition. Strategic minerals means that there are governments or groups of governments, like, for example, the EU, we want to secure access to the sort of minerals on the long term. And the importance for the green energy transition means I'm sure you're aware that at the moment, China controls over 90% of the rate of market from the mining to the downstream magnet production. So there is there is a rest of the world out of China value chain, which is currently developing. And people who are looking at expanding their alloys manufacturing facilities, their magnet manufacturing facilities. These people are looking at securing access to upstream products like mix of carbonates or like separated praseodymium and neodymium oxide. So this is the soft operation ships that we are trying to build. And again, I can't give you a lot of details right now, but we are talking to several parties having very constructive talks. And I'm hoping that very soon we will be able to announce some more constructive tangible information. There is another question here. Do you have sufficient funding in place to meet your short-term ambitions? I forgot to mention this in the introduction of the company. But we recently completed a fund raise. We have raised almost GBP 1.3 billion, GBP 900,000 as debt. The remaining part was subscriptions, share subscriptions. And in addition to this, we also converted GBP 333,000 worth of a preexisting debts, which was converted into shares into stock. So I guess we are funded to cover our short-term ambitions, both with what I explained we are doing at Monte Muambe and even more importantly, what we want to do at Sesana over the next few months. The next question, what are the immediate next steps following the acquisition of the Sesana copper-silver project? And what is the time line for starting exploration activities? It's a little bit hard to tell because we are just in the start of the environmental and the stakeholder conservation processes. And also, we have not made a final decision on whether we go for ground geophysical survey or airborne physical survey. But I would expect it's a matter of weeks rather than months before we start activities on the ground. All right, the next question is how familiar is a company with [indiscernible] Limited, -- have you spoken or established contacts? Well, we are familiar with [indiscernible] Limited because we have entered into a loan agreement with [indiscernible], and [indiscernible] has also participated to the subscription. So of course, we spoke with them. [indiscernible] is a company is a private investment fund, which has been investing in selected mining projects in Africa. I'm sure if you go here around, you will see tons. And we have had in-depth conversation with the management of [indiscernible], and they understand what we are trying to do at Altona our diversification strategy, the way we want to try to balance our portfolio in terms of risk with different commodities, different jurisdictions and they like this, and we are very grateful for their support. One more question. Can you say a few words on the Zambia project? Yes, I can say a few words about the Zambia project. We are currently doing a review of the data. And that's why I've not mentioned anything here. That's because we are doing this review. Once we do the review, we will be able to decide what will be the next activities there. So I will kindly ask you to hold on a little bit. I think within the next few weeks, we will be able to say what we are going to do there. But in terms of geology, the context is a little bit like in Botswana. You've got this front cover at the surface. So we want to use the same expertise that we are using in Botswana to deal with the Zambia project. And you have a contact zone between sandstone formation, siltstone formations, again, a lithology contrast, and this is where we expect to find the [indiscernible].

Cedric, that's it. You've taken all the questions from investors. So thank you once again to everybody for your engagement this evening. Cedric, before I redirect investors to give you feedback that I know is particularly important to you and the company, I wonder if I may just ask you for a couple of closing comments before I send investors to give you their feedback.

Yes. Thank you. Well, again, I've explained where we are. The most important, which I would like to repeat is that we are funded to do what I've described, we want to do in this presentation. Monte Muambe, we've been working on this project. It's advancing. Sesana, as I've explained, it's a project that can be fast-tracked because of the geological setting, which is well understood, because of the exploration methods that are well understood. So now we have funded, we are ready to go to focus on advancing these projects as fast as possible towards discovery.

Cedric, thank you once again for updating investors this evening. Can I please ask investors not to close the session as we're now automatically redirect you for the opportunity to provide your feedback in order that management can be better understanding your views and expectations. So take a few moments complete, I'm sure it will be greatly valued by the company. On behalf of the management team of Altona Rare Earths Plc, we'd like to thank you for attending today's presentation, and good evening to you all.