Central Asia Metals plc (CAML) Earnings Call Transcript & Summary

Hello, and welcome to Central Asia Metals Full Year Results Call. [Operator Instructions] Today's call is hosted by Nigel Robinson, Chief Executive Officer; and Gavin Ferrar, Chief Financial Officer. I will now hand over to Nigel Robinson to begin today's conference. Thank you.

Many thanks. Well, good morning, everybody, and thanks to all of you for attending 2019 results presentation for Central Asia Metals plc. I hope, first of all, that all of you are keeping well, looking after your families and are all safe during these very difficult times that we're experiencing. It is somewhat surreal presenting these results to, I have to say, from the comfort of my home study in Teddington. But let's give it a go. And I'll just say thanks for all listening in. These results are the results to the year ended 31st of December 2019, which in many ways may almost have been a decade ago or 5 years ago, given the tumultuous events that have happened in Q1 of 2020 and the impact that's had on everybody's business effectively and the whole world economy. But what I think they do serve to show is the underlying strength of the Central Asia Metals business platform from last year's results and as we're moving through this year, what we've managed to achieve in Q1. But having said all that, probably the first thing, as I move slides from the first presentation slide, the standard disclaimer, that's Slide 1, and into Slide 2 now, I think the first thing that's probably most relevant is to give everybody on the call an update from Central Asia Metals of how the COVID-19 disease has affected our business in the countries in which we operate. First of all, the countries we operate in, North Macedonia, as you know, and Kazakhstan. Both countries declared a state of emergency. In both countries, the borders are closed for movement of people, not trade. So at the moment, trade is free to move between the different countries adjoining to our countries of operation. So we're looking in that regard. But that can change at any one moment as we all know. In Kazakhstan, the cities of Nur-Sultan and Almaty, and I think yesterday evening at midnight, the city of Karaganda are all in lockdown. And that effectively means no movement of people, no aircraft flying in, no train movements, complete lockdown of the cities. And in Macedonia, there is a curfew overnight in the whole of the country. And all the schools have been closed down, probably for the past 2 weeks now. So the disease is affecting both countries that we operate in. The latest number of cases we have this morning was 348 in Kazakhstan. That's up from 20 just a couple of weeks ago, so an increasing number of cases, primarily in Almaty and Nur-Sultan. But a few cases now, 13, I think it is, in Karaganda. But fortunately, none yet in Balkhash, which is the town closest to us that we operate in. And also fortunately, no cases of any diagnosis amongst our staff either in Kazakhstan or North Macedonia. And likewise, in North Macedonia, there are no cases at the moment in Kamenica. So the disease is affecting those 2 countries that we're operating. The government has put in fairly stringent measures at the moment to try and control the disease and the spread of the disease throughout the country. But fortunately, we've managed to maintain production throughout Q1 of 2020 and managed to ship the goods that we produce, both at, say, Kazakhstan, the copper cathode, and also the concentrate across the borders into the smelters at Bulgaria. But against that background, that background of uncertainty and increasing measures to control the spread of the epidemic, we, as a Board, have taken the decision that no final 2019 dividend is recommended. Now we've got a great track record of actually paying out dividends to our shareholders. We intend to continue that track record in the future when there's a bit more clarity. This is not a change in direction of CAML's strategy or the way we operate. It is simply a prudent response from a prudent Board to manage the situation, which is pretty unique as we all recognize with high risks to a potential interruption to our production at any 1 day caused by either significant measures from the host government or the fact that we can't ship the products across the border because the border is closed or indeed maybe a force majeure issue with our offtake of our products. So a number of threats, as we move into Q2 2020, that we're facing, which we felt, as a Board, it's wise to review this in a few months when there's a bit more clarity. So this is a unique situation. It's not a change in our strategy. And it's certainly not a change in our dividend policy per se in paying money and good money back to shareholders. And I just wanted to emphasize that at this point. We do go into this crisis at the moment in a strong position. We have strong cash balances. And as Gavin will come on to explain in a minute, we had a good performance last year. So let's just move on to that. Just moving on to Slide 3 now. Just some of the highlights, 2019 results. Revenue was down in terms of the metals that we sell. Copper year-on-year was down about 8% as was lead with zinc down by 11%, having about a $24 million impact on the revenue, which feeds through to the EBITDA. But the positive message here is that we've managed to maintain our EBITDA margins broadly at the same level as 2018 at 60%. It was 61% in 2018. That's down to a basis of strong cost control as we're known for at the operations. So C1 cash costs at Kounrad were $0.52 per pound, down from $0.54. And more or less the same at Sasa at $0.47 per pound, slightly up from $0.46 per pound in 2018. So a strong EBITDA position, strong cash generation, free cash flow generated close to $70 million in 2019, down from $73.8 million. And in terms of the balance sheet, we've managed to repay $38.4 million of our debt and taking us down to a gross debt position now of $108.8 million, a net debt position of $80.2 million. We do hold cash in the bank of $32.6 million at the year-end. And so we're in a strong financial position on the back of last year's results and also strong performance in Q1 of 2020. We only had 1 LTI last year on the safety front, which we're very proud of. That's one too many, obviously. But it's down from 8 due to strong health and safety procedures on site and improving culture on site for health and safety. So all in all, a good year both in terms of our sustainability in health and safety, in terms of our financial performance and in terms of our production, which came in on track with the guidance. But we are entering -- I'll just reiterate, we are entering for both operations in Kazakhstan and North Macedonia a period of great uncertainty with this COVID-19 pandemic. And on that point, I'll hand over to Gavin, if you just want to flick over to Slide 4, for Gavin to talk you through more of the details of the financial results. Gavin?

Thanks, Nigel. If we look at Slide 5, I think Nigel sort of spoke briefly about the commodity prices that have declined through the year, sort of year-on-year. The performance of copper sort of outshone lead and zinc ever so slightly. But the average prices that we received in comparison to the prior period have been, as Nigel said, down 8% on copper, down 8% on lead and down 11% on zinc. The currencies, we had a bit of a tailwind there with the tenge, which effectively went from 300 -- I'm sitting in a car on the side of the road because my power has gone out in my -- so KZT 383 to KZT 345 -- from KZT 345 to KZT 383, I beg your pardon. So we get that all glitch out of the way. If we -- the outlook, as Nigel said, is just really uncertain at the moment due to the COVID panic. So we go to Slide 6 on the income statement. Clearly, due to those commodity prices, the revenues dropped off by 11% to $180.8 million. And what's encouraging is that we've retained our margins, EBITDA margin of 60%, which is only down 1% from the 61% on the prior period. And that's due to sort of good cost control plus a little help from the currency as well. Gross revenue, just to note, is after the treatment charges. We had seen some increased treatment charges throughout the year, and I can talk a little bit about those later. For each of the operations, they performed really well. Kounrad, the gross revenue of $81.7 million is primarily down due to that copper price decrease, where we received an average of $6,500 a tonne in 2018 versus just over $6,000 a tonne in 2019. At Sasa, the revenue of $99.1 million is down from [ $111.5 million ], again primarily due to the decreases in commodity prices. But also treatment charges went up as of 1st of April last year. And we had an increase of $4.1 million of treatment charges versus 2018. If we look at the split by metal in terms of revenue, we're looking at about 45% of our revenues from copper, 33% from lead and 22% from zinc. Now your latest cost of sales is down slightly, which is encouraging. Again, this is due to some cost controls that we've put in place. But also, we have our depreciation and amortization charges embedded in here. They have reduced primarily as a result of certain assets being fully appreciated by the end of last year. We also had lower concession fees, which are the royalty fees that are charged in North Macedonia and lower mineral extraction tax, which is also the royalty charged in Kazakhstan. We did have a few increases in costs. Reagents, for example, we used a little bit more coal due to a colder winter. And also, average pay rise of 6% at Kounrad and 5% at Sasa feeding through into that cost line as well. You'll note that the admin expenses have dropped remarkably by 24%. A lot of that is noncash. This is primarily down to a share-based payment charge because of the change in vesting conditions on options that are issued to senior management and staff. And there's also been a slight change in the number of options issued as well. In 2018, there was a higher number of options issued there. So getting down to the bottom line, profit before tax is a decrease of 7%, which if you think of that in light of the 11% change in the revenue number is actually a pretty good result. And EPS is down 6% to $0.2936. Moving on to Slide 7. Just the waterfall slide shows the EBITDA developments through the year or year-on-year at least. So we've seen again just a huge impact that commodity prices have had on this number with copper, lead and zinc revenue all down, there's $4.1 million of treatment charge in there. We went to reduce the G&A, as I said to you, due to those share-based payment charges. Then there's a small other number there, which is really foreign exchange. That's a tenge devaluation that I sort of was all [indiscernible] about a few minutes ago, some G&A savings at Sasa and also lower legal fees that we incurred during the year, resulting in an EBITDA for 2019 of $108.6 million. Slide 8 shows your Kounrad C1 copper cash cost. Now for those of you who are unfamiliar with the mining game, C1 is an industry-wide measure that sort of was developed by Wood Mackenzie, an industry analyst. It allows you to compare projects on a like-for-like basis across the year. And what you see here is Kounrad is one of the lowest-cost copper projects in the world. We've reduced copper at $0.52 a pound. The change year-on-year has actually gone down $0.02 on that. And that is again primarily due to the devaluation of the Kazakh tenge. Slide 9, a similar slide for Sasa. It is a little more complicated because we actually convert -- we present that in a zinc-equivalent basis, where we use the proportion of costs allocated to zinc. Again, a good result here. We were $0.46 in 2018, $0.47, 2019. And you'll notice that we've also produced a table for you on the left-hand side, which shows our dollar per tonne costs, which have increased ever so slightly from $38.8 million to $40.3 million. And that is primarily due to the increase of treatment charges and also the salary cost I mentioned earlier of 5%. Slide 10. We're looking at the C1 cost on a group basis. What we do here is we convert all of the lead and zinc production into copper. And that equates to around 17,500 tonnes. And you add that to the 13,700 tonnes that we produced at Kounrad and -- which results in an increase in C1 cost on a group basis from $0.87 for 2018 to $0.94 per pound for 2019. That is primarily down to the treatment charges that I mentioned at Sasa. But there's also a slightly lower production of copper coming through from the averages, leading to that. But what is noticeable here is that our group average cost is still in the lowest quartile for the copper industry, which is encouraging. Slide 11. We have the fully inclusive cost. And here, what we do is include capital expenditure; tax, including the royalties, the MET and concession fees I mentioned earlier plus interest on loans and corporate overheads. What we illustrate here is actually a decline of 9% year-on-year from $1.64 a pound to $1.50 a pound. There are 2 main drivers to that. One is the capital expenditure, which you can see is down 33% year-on-year, primarily because we have -- we had largely completed expenditure on the tailings facility at Sasa during 2018. We had much lower expenditure on that during 2019. And then again, corporate overheads, for the same reason I mentioned earlier, where the share-based payment charges have reduced remarkably there to lower that number by 35%. So again, this is a really good indication on the margins that we're producing as a business, even through this declined commodity pricing that we saw through 2019. Slide 12 on CapEx. The group CapEx came in for 2019 at $11 million. Sasa at $7.5 million includes underground development of $2.6 million, and as I said earlier, $1.9 million on TSF 4, which is the latest tailings dam that we have completed this year -- sorry, completed last year. The total of that project was $16 million. And that will sort of feed into a few things Nigel will talk about in terms of the future for us later. At Kounrad, CapEx is stable at around $1.5 million versus $1.4 million the year before. And that is really just laying the irrigation pipes, a little sustaining CapEx in the SX and electrowinning areas and a small fleet purchase that we made there. Current guidance for 2020, we are maintaining at $12 million to $14 million, but we are looking at additional savings we can make there in light of trying to preserve cash in the current COVID-19 environment. Moving on to the balance sheet on Slide 13. Really good year for the balance sheet really, reducing that net debt number down to $80.2 million from $110.3 million, having paid off $38.4 million in debt. We ended the year with a cash balance of $32.6 million. And there's nothing really too notable in terms of big numbers in other liabilities. But we do have a big difference for the other liabilities that is in relation to the $6.5 million of deferred consideration that we paid last year. We're also looking at a similar number of debt payments in 2020 of $38 million to $39 million. And what we are pleased to announce here is that we've reduced the interest margin that we are paying by 75 basis points to 4% from the previous 4.75%. We've also had LIBOR reducing quite remarkably through the year. So we do expect to have savings over the next 3 years of debt repayments there. Cash flow on Page 14. Again, a waterfall just to demonstrate the sort of cash generation to get to that free cash flow number of $69.8 million that Nigel mentioned at the outset. We generated $105.1 million of cash from operations. During the year, we invested $11 million of CapEx, we repaid $38.4 million of debt and paid dividends of $32.2 million. So that should also translate into additional value that we've created for shareholders there. As I said, we ended the year with a cash balance of $32.6 million, which will hopefully see us through any sort of difficulties we anticipate over the next few months. On that note, I'll hand back to Nigel, who will talk you through the sustainability and other aspects of our business -- and operational aspects of the business.

Okay. Thanks, Gavin. Just moving down to the slides now. Sustainability. If you look on Slide 16, I would just talk to Slide 16. Just to reemphasize what Gavin has mentioned there, we have got a strong financial performance and we are doing the right things with strength. But through this period now of almost survivability, sustainability hasn't gone away. It was a big theme in 2019, and it's something which we put a lot of focus on last year and we'll continue to do so. And this slide really just shows what our purpose and our culture is, what our values are. I think we've always been fairly open and transparent as a business. Our purpose very much is to produce the metals that we do produce for modern living in a safe and a sustainable environment and just some of the values that we adhere to there on the right-hand side of Slide 16. So looking after employees is a core value, their health and safety, in particular at the moment during this COVID-19 crisis, their well-being on site, looking after them to make sure they're well protected and we give them as much support as we possibly can. Taking responsibility for developing the business in the local areas and also in terms of minimal impact on adverse environmental issues is important to us. Embracing change, when we talk about the life of mine, we're doing what we're trying to do on site at Sasa, that's what we value, whereby we can use technology at this -- and be at the forefront of technology to improve the businesses that we own and operate both in North Macedonia and Kazakhstan and be very open and constructive in our communication, both with all our stakeholders, our team members on site, our stakeholders externally and obviously, clearly our shareholders. So strong purpose, culture and values. One of the things, if we move to Slide 17 now, that we are producing for the first time this year is a sustainability report. We have taken feedback from shareholders on our performance in sustainability and ESG at the back end of last year, in the second half of last year and responded to that to do a sustainability report. That will be out shortly in the next few weeks in April. And it gives a basis really of how we're traveling down this path of sustainability. We did do a desktop review on this just to see what were the main material items that we should be focusing on as a business really to maintain this focus on sustainability. And there's really 5 pillars. And you can see them there on the slide, which is focusing on the people, looking after our people, making sure that they're well trained, inducted into the business, that they're properly have the right training in place for the jobs that they do, looking after their health and safety on site, making sure that we manage the business in a strong corporate governance standpoint, looking after the environment and all the aspects of that may include in terms of energy usage, climate change, looking after the quality of the air in the area and any pollution and water usage, all things which we have done historically. We've had a -- in fact, we've got a sustainability director on site since 2013, as many of you know. But I think we have to up our game now to actually measure some of the things and give some metrics in terms of how we're performing and how we're improving things in the areas in which we operate. And the final leg of it really is working very closely with the community. During this current crisis on COVID-19, we're working closely with the local community to make sure they've got the proper PPE equipment. With the local hospital in Balkhash, we're trying to provide them with a standby generator just to support them through this crisis. And it's all about working with them and actually working with the community to make sure that we're respected citizens in the areas that we operate in. Just moving on to Slide 18, just a little bit more detail on health and safety. We had a good year last year. We did have 1 LTI, which is unfortunate. But in terms of what we measure as lost time incident frequency rate, that's how many incidents per million man-hours worked, we were down at a score of 0.42 for 2019 compared to 3.76 for 2018. So all in all, a good performance there on LTIFR. And if you measure it with medical incidents, we had 2 in the course of the year. So that is a score of 0.85 against a score last year of 3.76. So on both benches, a good performance on health and safety. But as I've said several times on these presentations, you can never relax with health and safety. You've got to always be on the front foot to make sure that people are aware of all the incidents that can potentially happen on site. But we've now gone over a year at both sites without a significant incident, which is encouraging. Our people. We have now over 1,000 people within the group. I won't labor on this slide, but we have got a low staff turnover. You can see the measurements there, Sasa and Kounrad, only about 10% of those people would actually leave in the course of the year. And that will be through either moving to another job or be it retirement, in the case of some of the people in Macedonia and Kazakhstan. And so we're pretty low on staff turnover overall. And that's an indication of looking after your people. And that's something we put quite a lot of focus on, too. Caring for the environment. This is an area where we certainly need to look at some more quantitative measurements of how we are improving the environment in which we operate. We've had 0 significant spills of anything from an environmental point of view at either operation last year, and 0 air quality exceedances at either operation. We have made some inroads in terms of net water consumption [Audio Gap] we've managed to reduce that by 43% by recycling some of the water that comes out from the flotation plant. So that's something we're looking to improve as we go over the course of this year. Trees planted at Sasa. So they're all things which we're doing to try and improve the environment for which -- within which we work -- in the areas in which we work. And also looking at carbon emission intensities, Scope 1 and Scope 2, and reporting those and looking at measures whereby we can redo so. We've just commissioned a local study in Kazakhstan to see how we can possibly replace some of the electricity we use off the national grid, which, as we all know, is pretty low cost and see whether or not we can make some inroads into either solar power or wind power basically. And we've commissioned a study for $40,000 to have a look at that and see whether there's anything we can do to improve our emissions at Kounrad. Communities. We still contribute to our communities and work very closely with them. In terms of donations, about $600,000 both at Sasa and at Kounrad last year, $300,000 on each one. About 0.25% of the revenue is what we always voluntarily donate to the communities. And we do a wide range of projects with them to actually have the long-term legacy projects or shorter term help in their local health center or be it sporting groups or gym facilities at Sasa. So I think that's something which is something we've done over the years and something we will continue to do, which is in our DNA effectively working in those areas. Just moving on to Slide 23 now into the operations side, having finished a slight review of our sustainability aspects. Just an update on Sasa. Many of you know what Sasa is. It's a zinc and lead mine in North Macedonia on the border with Bulgaria. It is -- it's got a long life. It's out to a life with reserves and resources to 2038. It's a mechanized underground mine. We're currently operating it in a sublevel caving method at the Svinja Reka ore body, you can see on the diagram there. There are 3 ore bodies at this underground mine, Svinja Reka, Kozja Reka and Golema Reka, which have all historically been mined at some point in the mine's life. But currently, we're operating at Svinja Reka 100% on a sublevel caving mode. And we'll come on to talk about the life of the mine and a potential move over to cut-and-fill mining. Slide 24 is a production update. Last year, we mined 817,000 tonnes of ore. We've put through the plant 821,000 tonnes of ore, combined grade of around about 7%. And zinc recoveries there increased year-on-year between 2018 and 2019 by about 2%. And on the lead recoveries, you can see that had a 1% improvement in lead recoveries. So good performance at the plant. An increase in the throughput or ore mined, should I say, effectively from when we took the mine over in November 2017, so about 6% from when we took it over to where we are now. And our guidance this year is to further improve the throughput of ore mined at 825,000 to 850,000 tonnes is our range, producing metal of 23,000 to 25,000 tonnes of zinc in concentrate and 30,000 to 32,000 tonnes of lead in concentrate. And I must add at this point that we are maintaining that production guidance despite the risks we're facing in Q2 of the COVID-19 now. But we've had a good Q1 start. We see no reason to change that until further notice, and we're monitoring that daily as we go through this risky quarter. Moving on to Slide 25, some of the improvements, underground mining improvements. We've brought the mine in some ways into the 21st century with 3D computer software. We've increased the automation of some of the underground fleet with line of sight remote control loading, which is planned and now they're currently being operated on site and also using some of the data from the black boxes we've purchased from one of our suppliers in terms of getting data through the Internet that we're installing underground, some real-time information on how those machines are operating, how they're being utilized and the performance data for them, which is improvement from what they've had in the past. And the underground fleet review, we've ordered 6 new units. And as Gavin mentioned before, we are looking very closely at our capital plans for this year. We had a guidance of $12 million to $14 million. We would expect to reduce that, given the preservation of liquidity we're looking for. And certainly in Q2, we've tightened up significantly on delegation of authority at Sasa and Kounrad such that everything has to come through either myself as CEO, Scott as the COO or Gavin as the CFO, so really scrutinizing all the capital. But these particular units are really the future of the mine. And we need to continue to invest in the mines for the future despite the short-term risks that we're facing on COVID-19. On the processing side, we've made several improvements there. We've modernized the laboratory. And on the crushing circuit, we installed both secondary crusher last year and the new tertiary crusher was commissioned shortly into Q1 2020 and that is now operating. And the plant is capable now of a throughput of 850,000 tonnes per annum with the additional crushing capacity that we've installed there. And looking to the future. As many of you know, with our production update in early 2020 that we announced, we have in principle agreed that we'll move to cut-and-fill mining. Studies supporting that decision are ongoing. We expect to complete those in the summer of this year. And obviously, metal price-dependent, we would intend over the next 5 years to transition over to a cut-and-fill mining method, which is a more accurate method of mining. We would expect to get higher recoveries, lower dilution. And also a key factor on that is the management of the tailings at Sasa, whereby upwards of 40% of those tailings will be then put back into the voids of the underground mine, thereby saving capital on new tailings dam facilities further downstream from the mine. Tailings at Sasa, just touching on that. As you know, we've now completed our -- what we call our TSF 4 facility. That will give us capacity for another 6.5 million tonnes of tailings. This is Slide 27, sorry, if I didn't say that. And so enough capacity for the next 5 to 6 years of tailings to the production at Sasa. But we do have to look beyond that and look at what capacity we need, as I say, and that's part of the life of mine review for whether we do dry stack tailing or whether we cut and fill up to 40% underground. This particular tailings facility is downstream. All the facilities at Sasa are downstream construction, which is a safer type. And we've had various reviews done by Golder's, by the university, to ensure the safety and the security of that particular tailings facility. And we have complied with the Church of England Pension Board disclosure requirements, which are on our website, so full disclosure. And we're as confident as we can be as management that, that is a secure tailings facility. Slide 28, just little stuff on Sasa. It's really the reserves and exploration. You'll see there at the bottom, our reserves, the tonnage we've got in terms of probable reserves is 8.9 million tonnes, sufficient for current levels of outputs of over 10 years. And then these are included in the resources and reserves. In the resources, we've got at Svinja Reka at an indicated category, 12.3 million tonnes. And at an inferred category, we've got another 2 million tonnes at Svinja Reka, which we would hope to convert into indicated and then into reserves over the course of the year to getting our life of mine out to 2038. We have done some drilling over the years, primarily focused last year, in 2019, on Kozja Reka, the middle ore body I mentioned on the first diagram. We've done close to 1,400 meters of exploratory drilling. A little bit too early to interpret some of those results. Maybe we'll be able to do that during the course of the year as we have another 3,000 meters planned for Kozja Reka and another 7,500 meters planned for Svinja Reka, which is more drilling to see how the ore body progresses underneath the level 830 and 750 levels and see how that ore body develops lower down. Moving on to Kounrad, Slide 30. First of all, just an overview. Many of you know the asset itself. Really just highlighting that we're getting to the end of the life of the Eastern Dumps now. We've been leaching there since 2012. We probably got another 2 to 3 years left on the Eastern Dumps with the remaining recoverable resources of around about 10,000 tonnes. And at the Western Dumps, we still have the remaining recoverable resources -- and I say recoverable, not contained, recoverable resources. These are about 150,000 tonnes. So 160,000 tonnes of resource still left at Kounrad with the asset effectively fully developed and fully capitalized. Slide 31 now. Just on the performance. In-situ dump leach and the SX-EW plant, we are, as I said before, transitioning over to the Western Dumps, and we've been doing that since April 2017. So we're 3 years into that, to the extent that this year we would expect about 75% of the copper on our guidance to come from the Western Dumps. And the guidance, just to reiterate that, remains as we stand here today, 12,500 to 13,500 tonnes of copper. Last year was 13,771 tonnes, just slightly less than 2018 production, and that exceeded our target. And you can see just on the bottom, leach recovery curve there, that we are performing very much in line with what our plans have been all along in terms of each of the individual cells that we leach. So we're on track with the kind of leach recoveries. And just to remind to those of you in the audience who don't know this, the recoveries in the east, we plan on 45% to 50% with a leach time of 8 months. But in the west, it's a far longer leach time of around about 20 months and in the copper recovery of 35% to 42%. Just moving on to Slide 32 now. Just a few statistics there. No LTIs at Kounrad last year. We only spent $1.6 million CapEx. And that's the level that to about $2 million that we'd expect throughout the life of mine now at Kounrad. So as I say, fully developed, fully invested and small levels of sustaining CapEx due to the end of the life of that mine. Last year, the Western Dumps contributed 68% of the production, moving up to about 75% this year as we transition completely over to the west over the next 2 to 3 years. I mean the plant availability is recorded there at around about 99.6%, tremendous availability of the plant and a testament to the design of it and the maintenance of it throughout the years. And we produce a high-quality cathode product, which many of you know we ship out to an offtake at Traxys out to Turkish wire manufacturer over the border. Final slide on the Kounrad really is just some more statistics on how we progressed over the course of the year. The dripper network from London to Nur-Sultan, that we'll be laying 6,089 kilometers of drippers, small drippers like market garden type pipes with a small nick in them that we irrigate the dumps from and we've now laid over 6,000 kilometer. That's the distance between London and Nur-Sultan. And the area at any one time that we're currently leaching is about 100 -- sorry, 56.23 hectares. You'll see down the bottom table at 2019. That's about 104 football fields. So a large area, low grade, low volumes of copper, but sufficient to give us our 50 tonnes a day, which produces the copper guidance that we need. And the outlook, important on the outlook, I've said several times on this call that we're facing very uncertain times as we come into Q2 2020. But in terms of capital allocation as a business, we're very focused at the moment on deleveraging the balance sheet. We're paying back $3.2 million of debt per month. We would hope that we can continue through that through these uncertain times with COVID-19. We have -- as I will reiterate, we have made a decision not to recommend the final dividend for 2019, but that will be reviewed when we come out the other side of this crisis. And in terms of capital expenditure, we are looking very closely at that to reduce the level, certainly in Q2 2020 and beyond for the rest of the year, while still maintaining sufficient CapEx to invest in the business for the future. So returns to shareholders is still a very vitally important part of our business. We recognize some of the loyalty of our shareholders who're investing in us based on dividend being paid back to shareholders, and we will recommend that and review that situation when we come out of these very difficult times that we're going into with the potential for production to be cut back at any one moment for an unknown period of time. I have to emphasize that even at these low metal prices, we are still profitable. We are still a profitable business even at copper at $4,774 and lead down at $1,600 and zinc down at $1,800. We're still profitable on that basis, but the risk to us is the risk of having to shut down the production for an unknown period of time. So the dividend that we have paid for 2019, just to remind people, is 6.5p. That was paid back in October. That was our interim dividend. That will probably represent on the current share price about a 4.5% dividend yield on its own even without a final dividend for 2019. And the total dividend since 2012, just to reiterate our track record on paying money back when we're out of these uncertain times, is $176 million or 98p per share. Just quickly on business development. We've effectively put that on hold at the moment. We do recognize that maybe coming out of this crisis there will be some opportunities. But at the moment, our focus is very much on the well-being of our staff, looking after them and making sure that we survive through this with a strong business and looking after the actual business itself and managing the balance sheet. Moving on to Slide 36. Well, there's a fancy diagram here, just to show that we have got a good track record on dividends, industry-leading EBITDA margins and the 3 pillars effectively of how we view our business, which is: low cash cost of production, which produce strong EBITDA margins even against low metal prices; stay in those first quartile cash cost to give you market-leading business; and sustaining strong long-term margins, which is really the -- underpins the strength of the Central Asia Metals business. And finally, Slide 37, before I move on to questions and -- from the floor. Just to reiterate the outlook. We are facing very uncertain times, as everybody knows, with the pandemic. But we are maintaining our guidance for this year at the moment as we've managed to carry on production throughout Q1 of 2020. So just to reiterate that guidance: 12,500, to 13,500 tonnes of copper, 23,000 to 25,000 tonnes of zinc and 30,000 to 32,000 tonnes of lead. That's slight increase at Sasa for the work we've been doing on improving productivity and the investments we've made in that particular business. We are a sustainable business. We have a strong focus on ESG and sustainability, strong operational performance, very good financials, a low-cost base metal production facility and we are diversified in terms of both geography and the metals and as Gavin has mentioned on a number of the slides, strong balance sheet, which we're rapidly deleveraging throughout this crisis. And in the next quarter, we would've paid off close to $10 million of debt from a starting position at the beginning of this year of $108.8 million, which is down effectively half from when we acquired Sasa back in November 2017, when we had about $200 million of debt on the books. But the focus now is employee welfare and preserving our cash balances. And on that note, I will hand it back to the host for any questions that there may be from the floor.

[Operator Instructions] The first question comes from the line of James Bell from RBC Capital Markets.

Just if you look at a shutdown scenario due to COVID-19, where you've maintained the required care and maintenance, employee salaries, et cetera, what would your monthly cash burn be ex debt repayment? And then maybe as an extension to that, if you were unable to ship concentrate at Sasa or you suffered force majeure on your treatment contract, would you stop operations there or would you build working capital?

Good question, James. I'll try and reiterate question, but the question is basically around what is our burn rate effectively at the operations and what would cause us to close down the operations? From -- just answering -- and I'll ask Gavin to chip in as well. But just answering on the burn rate, we enter this kind of difficult period, this risky period with around about $32 million of cash. Our burn rate without anything going into care and maintenance is around about $14 million per month, including debt service repayments. Now going into care and maintenance, if we have to close down the production facility for whatever reason, we estimate we could bring that down to $8 million per month with around about $3-and-a-bit million of that being the debt repayments. We would like to think we could continue debt repayments and deleverage. But clearly, if the situation deteriorates even further, we would look at that and negotiate with the banks and discuss with the banks how we could potentially have a holiday for that during this period. So that's the level of burn rate that we've got. Clearly, the kind of cost that you wish to incur on site if you go into care and maintenance, we would look to maintain all the staff with no plans at the moment to cut headcount. The more the situation would deteriorate, the more we'd look at salary cuts for senior management, I think, it's fair to say, and cutting back as significantly as we can. We're already doing that on the capital in Q2. As I said before, tightening up on delegation of authority. So it's only absolutely essential capital what we spend in Q2 and for the foreseeable future until we see a way through this particular crisis. In terms of what may cause us to close down, be it a force majeure from -- it's difficult to say. I mean the 2 countries are very different from a risk perspective, I would say. At Kounrad, we have storage facilities on site. They're probably up to about 5,000 tonnes of copper, lots of space. We can put it in containers so it doesn't deteriorate from a visual quality or a chemical quality. So we could store and build up balances if we saw that there's going to be a rising copper price towards the back end of the year, but that will very much depend on how we manage the cash balances in the short term. We have no major issues with Traxys as our offtaker in Kounrad in terms of selling to them, and I can't see many reasons for a force majeure in that particular instance. But clearly, in these unprecedented times, you have to work with your partners such that you work alongside them. They may have problems selling the end product because of the nature of the impact on the world economy. So I think we've got to be realistic about it as opposed to refer to a contract and be practical with them. But I think Kounrad is less of a risk personally because we can store it. At Sasa, we -- if we hit a problem with a force majeure from the smelters, which is possibly more likely, I would argue, given the fact that their end product has to go into zinc and lead, possibly into the automotive industries, which have already closed down, so if they hit a problem, we would potentially have to close down because we have limited storage on site at Sasa. We probably have about a month's worth of storage for the zinc and lead concentrate, albeit we can look for other facilities in the nearby area. And we are doing that, in fact. The working assumption at the moment is that that's probably the bigger risk in terms of having to shut down because of the force majeure from the Sasa lead and zinc concentrate. Does that answer your question, James?

Yes. That was very detailed and very clear. I guess just one sort of extension and then one other. So just on the debt facility, is there any option to refinance that with a facility where you wouldn't be required to make these monthly repayments, potentially with the revolving credit facility? Or I mean given the volatility in the market and kind of where things are, I'm guessing that's pretty unrealistic in the short term.

Yes. Do you want to answer that, Gavin?

Yes. Sure. Look, James, I think -- one thing I'd just add to Nigel's explanation is that if -- as we anticipate, if Sasa was the most likely project to shut down, we could still service the debt with the Kounrad cash flows. Now if you recall, when we put that debt facility in place in 2017, it was structured purely against Kounrad, and that was of a $120 million. So our gross debt is at $108 million now, Kounrad is still capable of servicing that debt load on its own. The -- we were in constant discussions with the banks, by which I mean we've got weekly conference calls with them on updates of our operations and what effect the virus is having on them. And they're also updating us on various solutions that may be on offer should we go into a shutdown. So there are 2 potential outcomes there: one is that we enter into some kind of payment holiday on the principal and the second is that we are provided with a standby facility, whereby we would draw down on that to repay the debt. But I think it's -- this is an ongoing discussion we're having with the banks. I guess they have various other problem children on their books at the moment, given what's going on in the world. So we're fortunate to have that strong balance sheet and enough cash to ride this out [indiscernible].

That's very clear, Gavin. And then maybe one more, just on the dividend. Maybe I'm being a slight optimist here. But if we get through the situation in relatively short order, could we -- could you see a scenario where if there weren't shutdowns, things get back to normal on a relatively rapid basis, say, on 3 to 4 months' time without any operational shutdowns, could you see the interim dividend as being topped up by some of the payment which may have gone out with the final dividend? Or should we think of this as more of a reset and -- of kind of where the level of dividends are going forward?

Good question, James. And I think [Audio Gap] looking after the employees and also [Audio Gap] importance. However, we have been paying [Audio Gap] just don't know at this stage. And it will depend on a number of factors really. One is what does the balance sheet look like? What are our cash balances? And what does the future look like for the impact it's had on metal prices? So a number of factors will be borne into consideration. But all I can emphasize, and I do wish to emphasize this, is the fact that we're in a strong position going into this, we are being prudent for a unique situation and we recognize that we, historically, have got a very good track record on paying dividends back to shareholders, and we don't intend to change that. So the policy -- I mean it's a moot point. The policy, as far as I'm concerned, is still the policy. We have a policy in place. We've only not paid a final dividend because of the unique situation. But it's the same policy we will consider when we look at the position post coming out of this particular crisis. So I wouldn't rule anything out at the moment, and we'll look at it when we come out and we have a look at how we've performed, so to speak, through the next quarter in particular, where -- which I personally see as the riskiest quarter given the nature of the pandemic. Once we come out of that, we'll know what the impact has been, how we've stopped production. And the key to the decision the Board made was more -- it was completely really based around the uncertainty of having to cut your production. It's not the metal prices per se because we have -- we operate in the lowest quartile, and we know that we can still be profitable even at these low metal prices, so that's not influencing the decision. It's the potential risk to having to cut production for 1 month, 2 months, 3 months and therefore preserve liquidity and preserve the business. And so if we come out of it unscathed, we will certainly look at it to be rewarding back to our loyal shareholders for the support they've given us over the years.

The next question comes from the line of Richard Morgan from Mirabaud.

A couple of questions. Just on the CapEx. The CapEx guidance is $12 million to $14 million for this year. Can you just give us an idea of how much of that is discretionary and how much is absolutely essential this year? Sorry, perhaps not discretionary, but how much is essential this year and how much could be deferred? And also, are you spending more working cap on building up key consumables at site with a view to logistics problems? That's question one. And question two. On the dividend, in the past, I think you've mentioned that you -- apart from the 30% to 50% of free cash flow restriction, you also look at how much cash you've actually got at the point where you make any given payment and you have a minimum cover ratio. Can you just remind us what that is, please?

Sorry. Just say the last part, Richard, if you don't mind again.

You've mentioned in past presentations that any given dividend payment, you like it to be covered by a certain amount of cash at that point and you've mentioned the ratio, and I think it's something like 2x or 3x cover.

Yes, yes, yes. Okay, yes.

Could you just remind us what that number is?

Well, at the moment, we don't specifically have any guidance on that as such. In the past, when we have the dividend policy based on revenue, we have that kind of caveat as 2x cash cover. All I can really answer really in that sense, Richard, is we are very prudent that we will make sure. Hence, you can see we're being prudent on recommending no final dividend at the moment given the uncertainties, and we've got $32 million in the bank. So we need to make sure that we have a level of cover that gives us comfort that we can operate into the future with those kind of burn rates I mentioned to James a minute ago. Coming back to the CapEx question. I haven't got a number off top of my head to answer that and -- or a detailed number, should I say, but we are reviewing it. There's no -- we're fortunate in the sense that there's no one aspect of our $12 million to $14 million that I would say is absolutely critical. The one area that we have made a decision to, so we already made a commitment on this, is the 2 -- just over $2 million expenditure on the new equipment for underground machinery at Sasa. So that will go ahead. It is program of deliveries, and it's facing some delays as we sit here today. So that will go ahead. But I would say we could certainly get down to fairly significant changes to that capital number. And as we say, we'll certainly restrict very heavily Q2 CapEx. And then we'll review it when we come out, if we come out of this particular situation. In 2 months, 3 months, we'll review it for the rest of the year, be it a deferral into 2021 or be it something that will be a catch-up in the second half of 2020. Depending on the same question asked before about the review of the dividend when we come out of the situation, we'll have to review everything in terms of capital moving forward and dividends moving forward in terms of where we sit. Did I answer your question, Richard?

Yes. You did. And also the other part of the CapEx question was are you spending additional working cap on building up key consumables with a view to potentially...

Not -- sorry, I missed that point, I apologize. Not specifically, no. We look at the critical spares every day. We get a daily flash reports on the number of cases and any impact on any change in government regulations, and with that comes a kind of inventory level of the reagents we've got on Sasa and Kounrad. And we're fairly well stocked at the moment. I mean it's a different bag for explosives from mix and from SK and from different things that we need at Sasa. But I think in most cases, it's just ongoing business because we've not suffered yet, fortunately, any major interruption. So we have stocked up on explosives, for example, so we invested a little bit in that. But there are not any material amounts that we're having to invest in to protect ourselves, say, for 6 months' inventory. We've probably got about 3 months' inventory on average probably I would suggest on site, some things more than that, some things a little bit less because there's no major supply issues.

The next question comes from the line of Laurie Kimman from Berenberg.

Just a quick one for me. How should we look at the sort of cost profile for this year at Sasa and Kounrad? Is it something similar to previous years? Or can we expect, I guess, the exchange rate and the currency the better part of it as well? Just sort of to get your views on that would be great.

Yes. It's a good question. We don't actually give cost guidance out, Laurie. So that's nothing we'll give. But in answer to your question, we don't see any significant changes to our cost base, other than we are experiencing some headwind, as we've -- I think Gavin's already alluded to, on treatment charges, and that's happening. You'll have seen announcements recently for tech announcing a $300 per tonne treatment charge on zinc, for example. So we are experiencing some cost pressures there. In terms of other cost pressures, certainly, the devaluation of the tenge over the past couple of weeks will help us. We have about 50% to 60% of our -- I think it's probably slightly more than that as you go into -- as our C1 cash cost at Kounrad is actually local currency. So that will be a favorable tailwind we'll get out of that, and it's devalued [Audio Gap] and that will fluctuate because oil and gas is depressed. So I think we'll get some benefit as we had last year here when you see Gavin announced a reduction from $0.54 to $0.52. Quite a bit of that was actually devaluation-assisted, so to speak. So we'll get some benefits from that. We're looking at reduced electricity costs at Sasa. We're just going through that at the moment. Actually, we're trying to renegotiate that, and we're seeing some savings there because there's a reduction in electricity prices in Sasa. So it's a bit of a mixed bag, but I'd say it's business as usual, providing we can get through this Q2 with all the risks that it throws up in terms of losing production. And if we lose production and we have to go into care and maintenance and we incur casualty, our unit cost will suffer as a consequence of that. But until we hit that, I can't really give you more accurate answer than it's -- than what I've just given, I don't think.

Okay. Great. And then just one last one for me. What's the -- in terms of the fixed and variable cost split, and what is that, both operations?

What, in terms of percentages?

Yes.

Gavin? I don't know that off the top of my head. All I can really refer to is if the ongoing burn rate at the moment, say, operationally, say, $11 million -- just over $10 million, $10.5 million, we could probably get that down to half. That's probably not as neat an answer as you want because you could argue headcount is variable. I -- as I say earlier, I personally view our headcount not as variable as expected, and I would not intend to cut back on headcount at the moment, though I would hope this is a temporary thing. And when we come out of it, I would like to ramp back up straight to the kind of production levels we currently have, really.

Yes. I was just going to say exactly the same thing, Nigel. I think the fix/variable equation is key. We look at it on a basis of some of the agents and electricity and all the other inputs. But labor, we've kept flat in all our modeling because we want to come -- we'll be fully staffed on it when this all ends.

The next question comes from the line of Peter Mallin-Jones from Peel Hunt.

Richard's done a lot of detail, and you answered the questions I had around the potential CapEx deferrals and so forth. So really, it was more maybe sign posting around the dividend. Would I be right in interpreting your comments as, realistically, the next point perhaps you and the Board would look at a dividend announcement, be it an interim or some form of sort of exceptional to cover the final '19, is really at the interim results when you said you'd hope to be through the worst quarter, fingers crossed, unscathed and therefore maybe built a bit of a cash buffer that could relax some of the current pressures you're feeling. Is that sort of the certain time line you're thinking?

I think that's a realistic view, Peter, if I'm honest because -- I mean if you think about the actual pandemic we're going through, we're probably not going to have any clarity in terms of lockdowns and the way governments are responding to it for maybe 2, 3 months, if we're optimistic. It could be longer than that. But if it was 3 months, we'd then be into our first half of the year. And what you would want, really, is you'd want some indication of how did you perform in the first half of the year. So you'd want those results to hand together with all the other information, forward-looking information, historical information, cash balances, et cetera, to make a good -- a sensible decision on what you set as moving forward. And as I said before, I view it as a CEO that our dividend policy is just the same as it was. You could argue that technically I'm wrong because we haven't paid a final dividend on 30% to 50% free cash flow. However, these are unique situations, and they require unique decisions or exceptional decisions. So we haven't changed our direction of travel. We haven't changed our policies in that sense, and we will review it in the light of how we fare through these next coming months when there's so much uncertainty, really. So I think it's probably likely that it will be the interim announcement when we will back it all up together as opposed to a one-off announcement potentially in the summer months, which is a stand-alone announcement about something. But I'm not going to commit to that, Peter, because all bets are off at the moment because it's a difficult situation, and we're monitoring it day by day, week-by-week as we go along, as we all have been. I mean the thing has escalated so quickly from maybe 3 or 4 weeks ago, as a Board what we were looking at, to where we were the following week, the following week and it's changed rapidly. And I think that will probably continue for the next few months, and we have to manage the business through those difficult times. Does that answer the question? It's a bit of a wooly answer, I guess, in some ways, but -- and I -- for which I apologize, but it hopefully gives you the confidence that we're looking after the business so we come out of it stronger and that we are in a position to continue the good performance and the returns to shareholders we've had in the past.

No, I think that's clear. And clearly, circumstances are incredibly opaque and therefore your ability to plot courses can only be on scenario analysis. And you have to be prudent, as you said, to maintain cash, maintain your staff, maintain your operations so you can carry on paying dividends in future years. I was just trying to get a sense of when it's realistic that we could expect you to be in position to have a reassess and this -- thinking that around the interim does seem sensible. So that's clear.

Yes. Yes. It seems that's the most rational basis on which -- there's no really quick job. I think that's fair enough. And from a working assumption, that's probably the best way of moving it forward. But anything that changes, we'll communicate as soon as we can with yourselves and with our shareholders and everything to let you know what our -- what we're thinking given the latest situation.

The next question comes from the line of Alexander Pearce from BMO.

Just given the border restrictions in North Macedonia at the minute, I wondered if you've seen any impact to the flow of, let's say, consultants for the engineering studies that you're doing at Sasa? And if the border remains closed for people, when potentially that could impact some of the kind of critical path items to deliver that study by the end of the year?

Yes. In answer to that, Alex, we have had a couple of -- they're not consultants, they're full-time employees, as I said before, who were stuck in Sofia, and they can't cross over the border. That's more because Sofia's in lockdown. I think with the various permits, you probably could move. But as a business, we've stopped all nonessential travel, and I would class that as nonessential travel. I think you probably found yourself, and I think everybody's found, actually, you can actually do a lot of business using Zoom and video conferencing. So the life of mine study has not just stopped dead in the water, it's still ongoing through video conferencing and Scott's not traveling, obviously, and he's a key component of that study. He's meeting up in -- well, he was until the past -- he's stuck in his house now. But he is continuing dialogue with the relevant people to move that study forward. So I don't think there'll be a major impact. There might be a slight slowdown because it's more difficult to do it. But we're still aiming for the middle of this year to have an end to that study and some more detailed design we're looking and make some decisions based on metal prices moving forward. So I don't think it will affect that. In terms of trade, what we've had to do and the guys have done a good job at Sasa, whereby they've had to go to the ministry and kind of argue our case to keep goods moving and get the right paperwork and the right permits. So that's an ongoing daily thing, but we do have the kind of allowance, the permissions, if you like, to go across the border into Bulgaria. We've looked at all kinds of things, whereby we're going to stop trucks from Bulgaria coming into Macedonia, so we were going to change the chassis over at the border. And so there are all kind of creativity going on to make sure that we can maintain the flow of goods across the border into Bulgaria. And again, we monitor that on a daily basis, but it's not impacting that particular aspect of our operations at the moment, but could do. Life of mine, I see less of an impact because I think we can do things alternatively through video conference and moving it forward.

We have no further questions in the queue.

Okay. Well, listen, on a final note, thank you to everybody for joining in. I hope you all stay safe through these difficult periods in isolation and stay mentally safe as well and mentally aware and look forward to when we can all meet in a more normal basis. But thank you very much for listening in this morning.

Thank you for joining today's call. You may now disconnect your handsets.