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

Good afternoon, and welcome to the Central Asia Metals plc Full Year Results Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO, Nigel Robinson. Good afternoon, sir.

Good afternoon, and welcome to everybody to Central Asia Metals plc's Full year results for 2022. As mentioned, my name is Nigel Robinson, I'm the CEO here; and I'm joined by my CFO, Gavin Ferrar; and Director of Corporate Development, Louise Wrathall. Next slide, please. Standard disclaimer, I'll let you read that at your leisure. And then let's move into a quick company overview before I hand over to Gavin for details on the financial results of 2022. Next slide, please. Just to remind people on the call who we are and what we do. Central Asia Metals plc or CAMLS we're affectionately known in the markets, I think, operates out of Kazakhstan and North Macedonia. In Kazakhstan, we produce pure cathode copper from solvent extraction electrowinning processing facility and from in-situ dump leaching. We've been in production now almost 11 years. On April 30 of this year, we'll be producing copper there for 11 years. We have a life of mine out to 2034, and last year's production came in as a record year 14,254 tonnes of pure cathode copper. On the back of the success in Kazakhstan at Kounrad, we invested over 5 years ago now, $402.5 million to buy an underground lead and zinc mine in the northeast part of North Macedonia. Production had been going there since 1960s and the life of mine that we now have at Sasa is out to 2039. 2022 production was 21,473 tonnes of zinc and 27,354 tonnes of lead. And our guidance this year is between 19,000 and 21,000 tonnes of zinc and 27,000 to 29,000 tonnes of lead. Just moving over to the next slide. Just a quick summary of our results for 2022, some good financial numbers here. Revenue at just over $230 million, with an associated EBITDA, which is earnings before interest, tax, depreciation and amortization of just north of $130 million. That represents a 57%, sorry, EBITDA margin. And the free cash flow that we generated last year from those operations is just shy of $90 million. And that's led us to propose this morning a final dividend of 10p, making 20p for the full year 2022. We have $60.6 million of cash in the bank, and we paid off all our debt that we took on Board to Sasa operations 5 years ago last August. And so the balance sheet is now also debt-free. And just finally, we had an LTIFR, which is lost time injury frequency rate last year at 0.83. We set ourselves a target last year to beat the previous year of 1.69, and we managed to achieve that. Next slide, please. Just to emphasize what CAML is about and what our purpose is in life. Our purpose is to produce base metals that are essential for modern living profitably and in a safe and sustainable environment for all of our stakeholders. And that drives -- that purpose drives all our strategic objectives. You can see on the left-hand side of the slide there, we have a strong focus on sustainability, and Louise will talk more about that in a minute. We also target low-cost, high-margin operations, and Gavin will emphasize both Sasa and Kounrad and the low-cost nature of those operations. And we ensure that the money that we make from those operations is prudently allocated, both to giving money back to shareholders in the dividends, paying off the debt and investing back into growing our business. And our long-term goal is to grow beyond Kounrad and Sasa by acquiring operations outside of those in the jurisdictions that we operate in. And on that note, I'll hand over to Gavin for a bit more detail on the financial results.

Thanks, Nigel. If we could move on to Slide #8. And just as a background to the performance -- the financial performance, we had metals and currency markets were fairly volatile, but what you can see from that table in the bottom left is that of the 3 metals that we produce, there's really only zinc that outperformed in the previous year, up around 11%, whereas copper and lead were around 8% and 4%, respectively. We did have some improvement on our treatment charges. They improved 14% -- decreased 14% year-on-year. That is the cost of us converting the concentrate from Sasa into metal and we sort of had a little bit of a benefit from those costs. That was against a general inflationary background. I think we're all aware of inflation for the last year or so. Particularly acute in countries like Kazakhstan and North Macedonia, where inflation rates ran at just over 20% in Kazakhstan and 14.2% in North Macedonia. That impacted the cost base through higher wages. In order to isolate our staff from those inflationary pressures, we gave pay rises in dollar terms of around 15%. And of course, energy markets, again, no surprises here, but CAML not isolated from that move in the markets. And you can see the chart at the bottom right of your screens, the brown line are the energy prices realized at Sasa and North Macedonia versus the blue line, which was the spot prices at the time. You can see, at the end of June, where our fixed rate contract ran off an almost 4x an increase in price. And over the rest of the half, we had prices of around $0.36 per kilowatt hour on average versus $0.10 in the first half of the year. So that impacted the cost base by around $4.7 million just in that second half. So we go to the next slide, please, which is the income statement. You can see revenue more or less flat on the top line there. That is in relation those copper, lead and zinc price movements and also the treatment charges. The cost of sales, given that background of 8% increase, up from $80.5 million to $87.3 million, again, primarily down to electricity costs and wages. We did get some tailwind from the currency movements of both tenge and the Macedonia denar. If we look at the -- moving down the P&L sheet, the impairments of $55.1 million. I'll talk about that in more detail. Admin expenses, primarily noncash, again, share-based payment charges had their finance costs down as we repaid our debt and less interest payments to be made. The profit before tax, reflecting that impairment. But if we adjust that into sort of pre-impairment number, profit before tax actually is more or less flat for the year, reflected in net adjusted EPS of $0.4815 per share versus $0.4769 per share over the previous period. EBITDA margin is still strong at 57%, just again underlining the strength of the performance financially for the business as a whole. Breaking that down into Kounrad and Sasa, on the left-hand side of your slide, Kounrad's gross revenue, again, off from the $132 million to $123.7 million, reflecting lower copper prices, but EBITDA margins still really high at 77%, which makes this one of the highest margin copper producers in the world. Sasa gross revenue up slightly because zinc's performed 11% higher, as you saw on the previous slide. But the cost base really impacted by the electricity price, bringing EBITDA margin down from 56% to 52%, still a very credible performance from that asset. Moving on to the next slide, please. Just over to the development of EBITDA year-on-year. Clearly, the 2 dominant features there are the copper price coming down, impacting EBITDA by $8.4 million and cost of sales, of course, going up, that's an additional $9 million onto that cost of sales in that EBITDA development. Still $131.6 million, a very good EBITDA outturn and at that 57% margin. So next slide, please. If we're focus in on Kounrad, cash cost of production, still very much at the lower end of the cost curve, $0.65 a pound, up from $0.57 a pound on prior year. That 8% increase is primarily down to payroll cost. That is a $0.06 increase. That is, as I said, that 15% payroll increase in dollar terms. It's actually, in this case, what we've done is paid the lower end of the staff and on the operational side, around 41% increase and the G&A costs going into that payroll are only a 7% increase on that one, so just to give you a little bit of color there. The only other thing that's moved remarkably there is the realization costs have gone up, and that is because we are now forced to root our copper around Russia to get it to the market. Previously, we would traverse Russia. Clearly, for the reasons that are obvious, we can't do that anymore, and there's a little additional cost in terms of getting that product to market, but ultimately, that 77% margin for the final result for that moment. Moving on to Sasa on the next slide, please. Run-of-mine costs reflecting that increase in electricity cost. So $11.5 a tonne. That is the way we measure it at Sasa. $6.9 of that is ascribed to electricity costs. We did have some low units coming through there, so that's another $1 a tonne. And then general inflationary increases across consumables and fuel adding to those costs as well, as well as some labor costs as well, which was somewhat mitigated by the denar depreciation that I mentioned earlier. With a 52% margin at Sasa still is a really good result and drives that underlying strong performance. Going on to the CapEx slide, which is the next slide, on Slide 13, please. Group CapEx $17.4 million, that is slightly below our guidance, but doesn't include around $4.7 million of prepayments that we've made as well that does sit on the balance sheet and receivables. Sustaining CapEx at Sasa of $7.7 million, generally within the range that we guide. Similarly, Kounrad, slightly higher than the usual range, but because we had an anode replacement program underway, which cost $0.5 million. That occurs every 3 to 4 years. So nothing surprises us there. Cut and Fill Project, which Nigel will give you much more detail on there, that forms the bulk of the expenditure around $11.9 million of the CapEx, including that $4.7 million or prepayments, and that's to do with the new pace of active plants, underground reticulation, which is pipework that we're installing underground, a central decline, which is a new tunnel access into the ore body itself, plus dry stack tailings, which is a new tailings facility that we're constructing at the moment. So CapEx, well in hand. We have deferred some of that CapEx into 2023, which is why we're below the guidance of $28 million to $30 million. We maintain that similar level of guidance of $28 million to $30 million for 2023. Next slide, please, which is the balance sheet. You'll notice from here that big reductions in the PPE and the intangible assets. That is that noncash impairments, and I'll stress that is noncash coming through on the balance sheet. And that simply reflects a change in the valuation of the Sasa asset versus its book value. We've run the impairment of $55.1 million to intangible assets, about $20.9 million going through there and $34.2 million impacting the PPE number. That's due to a number of factors, including macroeconomic issues. We spoke about the increased costs that we've suffered. So those go through into the projections. Low commodity prices as of 31st of December versus today, also impacting that projection. And importantly, the new reserve and life-of-mine plan, where we have lower production rates forecast for the rest of the Svinja Reka ore body at 830,000 tonnes versus previously assumed 900,000 tonnes. And that has also impacted the valuation of that asset at this 12.52% discount rate, which is a lot higher than what the market usually applies. So again, we're not too concerned about this. It's noncash. It's a balance sheet impact. And the -- no impact on the underlying performance of the business itself. So going on to the next slide, which is Slide 15, cash flow, which is king, obviously. Free cash flow of $89.7 million generated over the year. And you can see the developments of that cash flow piece as the year progressed. Obviously, dividends being a big portion of the outgoings there, and repayments of borrowings, which is value to shareholders that we generated there ending the year with $60.6 million of cash in the bank, leaving the company in a very good position. And on that note, I'll hand over to Louise to take you through some sustainability issues.

Great. Thanks, Gavin. If you don't mind moving to Slide 17. Thank you. Yes, I'll just give you some sort of highlights as to what we've done in 2022 in terms of our sustainability approach. So this slide just really lays out our framework. I think as we've explained to you before, we've been writing and publishing sustainability reports for 3 years now with our fourth coming up and due to be released in Q2, which will give you more information as to what we have been working on last year. With just a quick flavor, we've got these 5 pillars, delivering value through stewardship, which is really governance, maintaining health and safety, focusing on our people, our employees, caring for the environment and looking after the communities that are close to where we operate. The key change there this year is we revisited this materiality assessment. And that's a stakeholder-led process where we reach out to our various stakeholders, and ask for their opinions as to what they think the most important aspects are for our business. We then take that information, and we report externally on the most material topics, because obviously, they are the ones that our stakeholders want to read about. So there's been some ups and downs in movement, but interestingly, we've got environmental compliance as a new topic, which is the highest priority and moving up our topic has been hazardous waste management, including responsible tailings management, which I suppose is no real surprise to us, so that's an interesting angle. We've also looked again at the United Nations Sustainable Development Goals that we believe that we contribute towards and we felt comfortable adding an initial 2 to those, which is #9 based on industry innovation, and #12 which is based on responsible production and consumption as well. And we've also separated a sort of 2-tier approach to the primary SDGs, which we think we contribute quite materially towards, and also 3 supporting ones as well. So our next slide talks about delivering value through stewardship and is a summary of what we've done for our governance assets last year. I think 3 key points I want to make, 3 pieces of work that we did do last year. First, we developed our own training platform for our employees, and we put, effectively, 4 training courses onto that platform. And we also started screening our suppliers using social assessment criteria. And that really means aspects like child labor, human rights, minimum wages. We want to make sure the businesses that we have business with are also responsible. And the third key aspect of our work last year was to undertake the human rights assessment and review effectively on our business and on how we affect the people that we interact with, our suppliers, our employees, members of the local community. So going forward into this year, we'll be looking at human rights work, taking into account some of the findings of this review and we'll also start including some environmental criteria into these suppliers that we screen as well. So if we move on to health and safety, which is Slide 19. Nigel's also already mentioned our LTIFR, which is what we target ourselves on. We had 2 LTIs at Sasa, unfortunately. We have 0 LTIs or other injuries at Kounrad. And what that meant was that we had a frequency rate which is 0.83, and that was below our target of 1.69. So on that basis, we have reduced our target for this year to 1.3. So we need to deliver a target below that 1.3 level. Key as ever is to keep training up to ensure that our employees are able to recognize when they may be putting themselves in potentially dangerous situation. And we managed to deliver a 14% increase on our group health and safety training versus the previous year. On to focusing on our people on Slide 20, please. This covers various aspects of how we look after our employees and various aspects are important to us there. One of the key pieces of work effectively that we did do last year was we put a lot of effort into building a really strong training team, which will also tie into health and safety, really making sure that our underground miners are ready, able and capable to safely transition the mining method from the sub-level caving method to the paste fill method that we're introducing this year. So that's been a key piece of work for our people. We also put in a lot of focus on diversity as well. And the mining industry notoriously has relatively poor gender diversity. We're around 13% at CAML as a group. So we've put some diversity and inclusion of focus groups together to get our heads together, really, and see how we could improve this and move towards our long-term target, which is a 25% increase in female employees by 2025. I mean it's worth pointing out, we've always been proud of our local employment statistics. We have 100% local employment at Kounrad in Kazakhstan. We have 98% local employment at Sasa and that really translates to 12 expats out of our workforce of over 700. And go on to the next slide, please. We've just put some information here on our progress in terms of climate change. It's one of the key areas that lots of our institutional investors want to ask us questions about. And we have stated a target of a 50% reduction in our greenhouse gas emissions, that's Scope 1 and Scope 2 emissions by 2030 from a base of 2020. And what this waterfall chart effectively shows you is by the end of 2022, over that 2-year period, we have achieved a 40% reduction in our greenhouse gas emissions. Obviously, we've still got that additional 10% defined by 2030. But what we're really trying to demonstrate here is that when we build the -- when we complete construction of the Kounrad solar power plant, that will contribute a large part to that remaining 10% that we have to find. We started building that in Q4 last year, and we'll complete that construction by the end of this year. Next slide, please. Another slide here on environmental aspects, excluding climate change. Think 2 additional key pieces of work from last year. We undertook an asset retirement obligation study for Kounrad, which really makes sure that you're planning to close operations at the end of the life in a responsible manner and leave them fit for the communities thereafter. So we completed that piece of work, and those numbers are reflected in our financials as well. And we're also delighted to have our environmental social and impact assessment approved for the Cut and Fill Project that Gavin has mentioned in terms of Sasa that we will be delivering on this year. Going forward into 2023, we're going to put some more focus on biodiversity and how to pull together, really, a group strategy for that. We'll be finalizing our water management strategy at Sasa and also beginning to transition to paste fill mining approach at Sasa will also help us with 2 key long-term targets that we've got, which is a 75% reduction in surface water abstraction at Sasa by the end of 2026. And also, we want to be storing 70% of our tailings in a more environmentally responsible manner, again by the end of 2026, and that feeds into the paste backfill and the dry stack tailings plants that we are constructing this year. And my final slide in terms of sustainability is the next one on Slide 23, which just talks about how we try to add value for our communities. This comes in, in various aspects. There's local employment, which I've already touched on. There's local procurement, which is really important as well to develop other businesses around you. And we spent $54 million with local suppliers in North Macedonia last year and over $11 million with local suppliers in Kazakhstan as well. We've got charitable foundations at both of our sites, and we invest -- we have previously invested 0.25% of our revenue into those foundations. And going forward from this year onwards, we're increasing that to 0.5% of our group gross revenue. And we've supported some things that we can be really proud of. We've improved -- with, last year, some improvements to the disabled daycare center in the town called Kamenitsa which is close to our Sasa operation. At Kounrad, we've supported a new children's rehabilitation center in Balkhash, and we've paid tuition fees supporting medical students from the local area to be able to do their medical studies and then stay within the Balkhash area. And also looking back over a few projects we have supported some years ago, which is the last 3 bullet points on there. We provided refuge for 42 adults and 36 children in the crisis center, which is for families fleeing difficult domestic situations, and that's who we provided refuge for last year. We provide continued support for children with special needs in the Kind Heart Center in Balkhash and also 130 people continue to use our center for the blind, which we also supported a few years ago in Balkhash as well. So I'll hand back to Nigel to talk about our growth since then.

Thanks very much, Louise. So if we turn to Slide 25, please. But just to emphasize, Gavin, as highlighted there, the profitability and the cash generative nature of our 2 operations. And I think Louise has quite succinctly emphasized how much focus we put on sustainability aspects of the business. Just moving on to add a bit of color to the 2 operations themselves. In Kazakhstan, our operation's called Kounrad. It's what's known as an in-situ dump leach project. So we don't move any of the ore or the waste that we process the copper from. And we have what's known as an SX-EW processing plan. That stands for solvent extraction electrowinning. And what we effectively do is from the picture you can see there, that's an aerial photograph of the site itself. It's a huge site that's open pit. You can see more or less in the middle of the picture, is a huge open pit of about 500 meters depth. It's 1.5 kilometers north south and east west. And to the right-hand side and to the bottom left and to the Southwest, as you can see it there, you'll see what looks like dump, effectively. Those dumps, we irrigate with highly diluted sulfuric acid. It's known as a leaching process. We pick up small amounts of copper, which is then extracted from that through the stripping stage and the electrowinning stage in the plant. And that process is well known and well used throughout the world for about 30% of the world's copper, but it is extremely low cost, because none of the ore is moved and we do it in-situ. We estimate at the moment that we've got about 111,600 tonnes of recoverable copper from the eastern dumps and the western dumps, most of it from the western dumps now and about 85% of our production in this current year will come from those western dumps. Just moving over to Slide 26. Just a few facts there about the production over the past 10 years that we've been producing almost 11 years now. And you can see pretty steady state production from 2016 around between 13,000 and 14,000 tonnes. And as I mentioned before, we had a record year last year of 14,254 tonnes of copper at Kounrad. But the project itself is well established. It's optimized, not a lot more capital is required to be invested into this project, and it has a life of mine out to 2034. The leaching characteristics of 2 different dump areas, the eastern dumps and the western bumps are slightly different. And you can see some statistics there the average leach time in each area and the average recovery rates that we base our planning on. So 45% to 50% in the east and 35% to 42% in the western dumps. We mentioned the solar plant as part of our sustainability initiatives, quite a small solar plant by standards. It sits on the next slide, sorry, Slide 27, if we could just move to that. There's a picture there. We will start construction of that solar farm in the next couple of weeks and expect to complete it this year. It's, as I say, quite small by international standards and is a 4.77 megawatt unit that will provide around about 16% to 18% of the plant's electrical requirements. And that's a project which is to help on our greenhouse gas emission target that Louise mentioned a minute ago. Just turning over the slide, just quickly summarizing on Kounrad, a very successful project. We've owned it now. We've been operating it for well over 10 years, but it's been in production nearly 11 years now. And during that time, you can see some of the statistics that we've generated from basically waste rock that we produced nearly 139,000 tonnes of copper cathode at a very low C1 cash costs, as Gavin mentioned. Average over that 10-year period is $0.56 per pound, and that equates to about $1,100 per tonne. So with copper selling at around about north of $8,000 per tonne, you can see the profitability of the project. Most of the workforce -- in fact, all of the workforce is now 100% local, and we employ around about 337 employees and 78 contractors. And you can see the margins that we've already mentioned. Total CapEx invested on the project to date is close to $82 million. Moving on to Sasa. So moving quickly over a couple of slides to Slide 30, if we could. Again, an aerial shot of the actual processing plant and the facilities on site at the valley from Kamenitsa, the town of Kamenitsa, where the mine is. And this is a more traditional underground mine. It's currently a sub-level caving operation, which we are investing money in to transition to what's known as a paste fill mining approach, and I'll talk more about that in a minute, and it has reserves and resources out to 2039. And the mining methodology, very different to Kounrad in the sense that we mine, we drill and we blast and then we crush the ore that comes to the surface and putting it through a mill and flotation plant, remove the moisture, put it into storage and then ship it out on a daily basis out to the local smelters to get it into refined metal. Slide 31. The next slide really is just a few statistics about our production. 2022 production was 21,473 tonnes of zinc and lead was 27,354 tonnes. And a few more statistics on the ore that was mined, the plant feed and the grades and the recovery on the table to the right-hand side. And our guidance this year is to maintain actual ore mined between 790,000 and 810,000 tonnes, producing metal of zinc in concentrate 19,000 to 21,000 tonnes and lead 27,000 to 29,000 tonnes. So just putting a bit more color if we turn over to the next slide on the projects that have been mentioned, investing a lot of money at Sasa in excess of $30 million over a number of years to do a number of aspects to introduce cut and fill mining. The first aspect is the central decline development. This will improve the access into the ore body as we go lower in the actual ore body at Svinja Reka. We started this a couple of years ago. We've now done nearly 1.5 kilometers of tunneling and we will tunnel through from the surface down to the 910 level in the month of May in the future. And total length of the decline throughout the whole period that we're constructing this decline is 4 kilometers, and it will go below the 750-meter level. And the reason for it, it will make access easier, as I've mentioned, improve the ventilation and make us potentially able to use electric vehicles in the future, which will help some of our initiatives on reducing greenhouse gas emissions and make it a far more productive mine in terms of accessing that ore body. The other large aspect to the construction project is the paste backfill plant. We progressed well over the winter months with that. We started construction on site in September and have worked throughout the winter to now have a position where the building and a lot of the equipment is now fully installed and we're moving into the commissioning stage at the back end of April and into May. It will be the wet commissioning. We've got installation of reticulation pipes has commenced and is well on track for taking the pace into the various voids. And the paste backfill plant is on track, as I say, for completion in H1 2023. Moving slides again, dry stack tailings plant, that's Slide 34. Just a picture there of a diagramatic picture of it because we've not started construction of this facility. And it's another way of managing the waste on the sites of Sasa. The design is being adapted to North Macedonian standard and its major equipment that we've ordered -- was ordered in the month of February and will be delivered in the second half of the year, ready for construction, and the earthworks will start early in the second half of this year. We've worked closely with a company called Knight Piésold to complete the detailed design of what's called the Landform, which is the area that you put the actual cake on to such that it can be managed and you can manage the water aspects of it and the drainage facilities for that particular civil engineering landform. And we're well on track for that to be completed in the second half of this year. So those are 3 elements of the transition projects at Sasa. Just moving on to Slide 35, if we could. And the background work has been done, and we've recruited quite a few technical people to help us with this, a group geologist, that we never had previously at Sasa and also group technical services managers to help us improve our understanding of the resources and the reserves at Sasa. We have updated those. And there's a table on the right-hand side, you can see to the 31st of December 2022. And I believe the work we've done over the last 12 months has given us a far better understanding of the ore body itself, combination of some deeper drilling, about 120 holes that we've drilled to inform our knowledge of the ore body and it helps us in terms of modeling the life of mine plan and the reserves through software such as Leapfrog and Deswik. We've incorporated -- instead of just a standard great percentage cutoff approach to the reserves, we've incorporated what's known as an NSR approach, very similar, but it allows for a polymetallic [ manner ] that you take more of the actual metals that they're economic in that particular aspect in the block model. The consequence of that is that the Svinja Reka, and I'll show you in a minute that there are actually 3 different ore bodies at Sasa, the mineral resource estimate has decreased by 1.2 million tonnes. And the Svinja Reka ore reserve has decreased by 0.7 million tonnes. A number of factors have gone into that. As I said, we have a far better understanding, we believe, of the ore body. And some of it is also depletion as we've had in other years' worth of mining. Just turning over to Slide 36, if we could. I mentioned 3 ore bodies at the Sasa mine. The one that we're currently operating in is one on the left-hand side of the diagram, the Svinja Reka ore body. That's where most of our work has been since we bought the mine in late 2017. But there are 2 other orebodies next to it and adjacent to, which we are doing some drilling on this year, the Kozja Reka ore body and also the Golema Reka ore body. And the -- improving the resources and the reserves at those 2 ore bodies will inform us in terms of the life of mine moving forward. And this is all upside for the current life of mine, which is primarily on the basis of Svinja Reka and indicated in the inferred resource is at Golema Reka. As I say, a program of drilling in excess overall in the 3 bodies of 10,000 meters. As with Kounrad, just a summary there in the first 5 years at Sasa. So we've been producing at Kounrad for just over 10 years and now first 5 years of ownership at Sasa...

Next slide.

Sorry, next slide, Slide 37, just a few statistics there. The CapEx we've spent today, it is $54 million. EBITDA generation of $301.5 million. We employ around in excess of 700 staff on site there and some information of how much we've contributed to the local society and also tax to the government of North Macedonia. It is 98% local employment. As Louise mentioned, we do have a number of expats helping us out with the transition programs, but the intention would ultimately to get to 100% local employment. Moving forward on slides again, Slide 39, if you don't mind. Capital allocation priorities, I mentioned this is one of our strategic objectives before, something I think we've got a good track record in as a company. We've consistently paid good money back to shareholders since we started generating cash from Kounrad. And the final dividend this year of 10p would represent on today's share price, a yield in excess of 8%. But to remind people on the call, our policy as a company is that we return 30% to 50% of the free cash flow, that number of close to $90 million back to shareholders annually. And this year's dividend and the full year dividend for last year represents 47% of that free cash flow number. Total dividend since we started paying dividends back in 2012 is nearly $300 million now or 152p per share. So we would turn back to shareholders. We've also paid up full the debt last year in August. That was capital allocation priority for the 5 years since we acquired Sasa. We've been investing it in the business at Sasa and at Kounrad. And the final element of capital allocation is business development and how we grow the business, which is one of our challenges facing us, because effectively, what you see is what you get at Kounrad and Sasa. There's not a lot of organic growth there. So we do need to look to expand the business outside of those particular assets in the jurisdictions that we operate in. So we're looking North European -- or European, sorry, time zones. That stretches down into Africa, obviously, and also, we're comfortable operating Kazakhstan. The metals we're interested in and the base metals I mentioned before are copper, zinc and lead. But other base metals that we feel we could mine economically. And stage development would go anything from early stage out to a production facility or even development, and each opportunity that we look at, it is opportunistic, and we do look at them basis of being accretive to our shareholders. And finally, just moving on to the last slide, which is Slide 40, just a summary and outlook, just to wrap things up before we move on to questions. I believe we have a strong, sustainable business. We've demonstrated that in the presentation, hopefully today, strong discipline on capital allocation, giving money back to shareholders, paying the debt off in time and investing back into the business. And the outlook for this year, we believe there are metal prices ahead for us. We've got a good confidence in our guidance on the production for this year. We are now debt-free. And internally, our challenges are to complete the projects at Sasa in terms of the paste backfill plant, the dry stack tailings plant and the central decline; and at Kounrad, the solar power plant and then attempt to find that next opportunity to grow the businesses to the next level. And at that point, we'll stop the presentation and hand over for any questions and answers from the audience.

Nigel, Gavin, Louise, thank you very much for your presentation this afternoon. [Operator Instructions] Just while the company take a few moments to review those questions submitted today, I'd 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 our investor dashboard. As you can see, we have received a number of questions throughout today's presentation, and thank you to all investors for submitting their questions. Louise, could I ask you to read out the questions where appropriate to do so, and I'll pick up from you at the end.

Sure. Yes, thanks. Will do. Okay. I think we had a couple of presubmitted questions. So I'll start with those. The first one was please to provide a country breakdown reearnings and production. So if we can ask Gavin to answer that one.

Sure. No problem. Best place to look at that, if you've got the question, Louise, in front of you is note 5 on the accounts, but I'll save you the trouble by telling you that Kounrad, which is the copper producer, accounted for 53% of our revenue. And if you look at that on a copper equivalent basis, it's roughly around 53% of the production as well, so easy one there. Thank you for the question.

The next one is, how do you see the debt funding landscape going forward with the rising rates across the piece? Has this impacted your view on funding methods for potential acquisitions? And if so, how much more attractive do acquisitions need to be in order for your acquisition criteria to be met? So another one for Gavin.

Yes, very good question, actually. I think we've all seen interest rates rising, and that's been across the piece and across the whole yield curve. I think for us, in terms of our creditworthiness, the margin we would pay over a base rate hasn't really changed. I think when we speak to our banks, they're looking to charge us the same sort of credit margins for any borrowers we contemplate. It's the underlying base rates that are important. And we have seen those increasing from 1% to around 3.5%. So it is a significant increase. However, it's still a lot cheaper than equity. So if we were to do a large acquisition, we would still contemplate debt as being a part of that. And I think in terms of the criteria, I think the criteria ultimately is just making sure that shareholders benefit from any acquisition and any acquisition is accretive, therefore. So the capital structure that we apply will ensure that, that accretion occurs.

Okay. The next question is from Mark Atkinson, who is asking if we still own the assets at Copper Bay. And if so, what is the situation regarding its disposal? Gavin again.

Another one for me. Thanks, Mark. We still do own Copper Bay. It's carried -- in fact, we've written down the value on the balance sheet and it's discontinued operations now. We have run a formal sale process sort of a year ago, which resulted in no deal occurring. We're trying to sort of reinvigorate that process and invite offers for the asset right now, and we'll update you as and when appropriate.

Okay. And we've got another question from Mark, who is asking -- stating that the Kounrad life of mine is 2034. Sasa's is 2039. Would any acquisitions or volume maturity coinciding around this time frame? Well, surprise. I think we'll give that one to Nigel.

Okay. Thanks very much for the question. I think I understand what the question stated. I mean, we would hope that we could find an opportunity in an asset to acquire that extended beyond that, because that will be the intention. But I don't think it will be a problem if it did also have a life of mine within -- between 2034 and 2039. I don't think it would be specifically a problem because it will give us still some breathing time to actually look for another opportunity outside of that particular one. So what you're looking to do effectively is build a profile, because as with all mining assets, they're finite assets, and you want to extend beyond 2034 and then beyond the 2039 and into 2040, et cetera. So it's a question of building a pipeline of projects effectively.

Okay. The next question we got [ Alice M. ] is with the new developments in battery technology, lithium is very important. New minerals might evolve, would you see a future in this technology? Should I do this one?

Yes.

Off we go. So yes, it's an interesting question. It's a good question. We often ask whether we're interested in battery metals in general and critical minerals going forward. And I think the answer is yes. We've always stated that we -- our bread and butter is base metals and we understand that space very well. But obviously, whatever we do in terms of acquisition, we want to position ourselves in metals and markets that we think are going to have a positive trajectory for the future. So lithium would clearly be one of those. I think what we're conscious of is some of the types of extraction methods and certainly some of the types of processing are very different to the sort of mentality that we deal and more on the lines of chemical engineering in some cases. So when we have looked at some of these opportunities, it will be with a view of probably with a partner who is particularly experienced in areas where we are not. So base metals, we get extremely comfortable, something on our own. But if it's something we haven't had much experience of ourselves, it will probably be something looking at with a partner and lithium would probably be one that would fall into that category. The next question is from Mark. "You've said you have assessed a number of potential acquisitions, none of which have met your criteria. As time moves on, how determined are you not to dilute the criteria you insist on? Should we go back to Gavin.

Sure. Another very good question. I think we've got the luxury of time here, Mark. So I think the previous question might even be new. So I've said that life of mine out to 2034 and 2039 on each of the assets does give us a little bit of time to play with, so we don't feel under anyone's pressure to pull the trigger on an investment or an acquisition now. Would that change? I mean I'd like to think not. I think we've demonstrated that we're a disciplined management team. We took quite a long time to come across or to at least decide to buy the Sasa asset, started production in 2012, bought that 5 years later. And we'd like to sort of think that discipline still exists within the same management team. So no sort of any sort of requirement to change the investment.

Next question, I think, is one to Nigel from [ David L. ]. "Can you give some guidance on how output from Kounrad will cease? Will it produce 12,000 to 14,000 tonnes per annum right up until the end of mine life and stop suddenly? Or will production drop off over a number of years as the end of life approaches?"

Okay. I knew that one was coming my way, and it's a good question. As I've presented there, I mentioned that the -- our estimate -- best estimate like this, because it's not an exact science as of the remaining recoverable resources was 111,600 tonnes, which makes it sound like an exact science, because that's quite an exact number. But the reality is in both the areas, the eastern and western dumps, we would have expected maybe to have ceased leaching in the eastern areas by now, but we've still got another 5,500 tonnes to recover. And I suspect we'll be leaching beyond that. But what I can say is that if you take the maths of it out to 2034, that's about 11 years left of production, we won't be producing at the levels we're currently producing at because I don't think we'll find that much copper in excess of what we're planning to do. But marginally, we will improve in eastern dumps. We estimate and we plan on a maximum of 50% recovery. But we are in some of the dumps as we follow a process of what we call rinse and rest and go back and leach in those areas. We're up to 55% on some of the dumps in some of the cells there. So we will squeeze out more copper, but I think it's fair to say that towards the end of the life of mine, production will -- the production profile will reduce from where we've currently been over the past 6 years. And that will probably be beyond 2030 as it starts to decline. But we'll use whatever methods available to you, be as creative as we can to actually leach as much copper out of those cells as we possibly can.

Okay. The next question from [ Steve S. ] I think is a finance question for Gavin. Doesn't the need to impair the Sasa mine by $55 million imply that the company overpaid $55 million for Sasa, using what we know today about the future.

That's a good question, Steve. I think the short answer is no. If we -- if you just consider the discount rate that we've used in this impairment analysis of 12.52%, it's quite a lot higher than the discount rate that we used when we first evaluated Sasa. And if we use that initial discount rate then, there'd be no impairment. And having said that, what we know about the mine is, as Nigel said, produced around $300 million of EBITDA to date and there's another almost 17 years to go, so I don't think we overpaid for this. There's a lot of value in that mine, and we'll realize all of that over the life of it.

Okay. Our next question from Douglas M. says how much was CAML paying back each year for the corporate debt facility that's now fully paid? So will that amount now just drop through to the bottom line effectively given how much in terms of million dollars extra free cash flow each year. Gavin?

Yes. We're paying $38.4 million in principal off every year on that facility. So in theory, yes, it should filter through to bottom line. But what we are doing, as Nigel described, is spending around about $30 million on that Cut and Fill Project as well. So we have that as part of the capital allocation program as well. In the absence of that, then it would all just go say through to the bottom line, yes.

Okay. Our next question from Bob M. is looking forward, what additional impairment or the charges would you anticipate? And what impact would these have on the share price, quite a difficult one, I think, Gavin?

Well, I guess, I'm getting all the tough questions but...

I'm just going to go for a cup of tea.

Bob, that is another good question. It's difficult to tell whether we expect any other impairment. What I can say, though, is that in terms of headroom that's available at Kounrad, we don't expect any impact of an impairment to occur at Kounrad at all. And post this impairment at Sasa, again, we don't expect to impair in the future on Sasa as well.

Yes.

And I guess the last part of that question, what impact will that have on the share price, I guess that's up to our shareholders.

Yes. We would anticipate none, but I'm sure that's up to a personal opinion, isn't it. Okay. [ Xin P. ] is saying how near did you get in 2022 to finalizing an acquisition? Do you want to take it?

What time is it?

Yes.

I think if you look at that little triangle, in the little pyramid in the presentation, we did perform a couple of site visits, which means that we got interested enough past the first blush review. We thought the valuation was attractive and went up to site. I mean, some of these things will take a little longer just to settle than otherwise. And in other cases, sometimes you just can't reach a sort of agreement on valuation, so we'll keep plugging away at these things and hopefully convert. And next time we speak to you guys, we might have some better news, I suppose, or some interesting news. But I mean, we can't guarantee anything. We are constantly looking at assets, constantly signing NDAs to get more information, so we can perform these valuations and hopefully, at some point, with revaluation with someone and convert.

[ Kate Paula ] is asking, "With successful deployment of the Kounrad solar plant, will you reset your carbon target reduction in 2024 for 2030?" I can take that one. I don't think we've got any plans to reset because on top of the target to reach a 50% reduction by 2030, we've also got an additional target over that, which is to be net zero by 2050, so we're certainly not thinking that we're done and we've ticked the box by the time we get this 50% reduction. But I think we are conscious and confident in the countries in which we operate. So in North Macedonia, we're now receiving 100% renewable power, which is the bulk of our emissions there, effectively reduced to zero. And the remaining emissions there are generated from diesel, effectively, from the mobile fleet that we have. So at some point in the future, we will look to electric vehicles and other technologies in that regard. But in Kazakhstan, we are -- it's quite difficult there to reduce emissions effectively. The solar plant, which we're constructing is really our best effort to do that. Kazakhstan, itself, as a country is dominated by fossil fuel, particularly coal power. And so they're also looking to increase their renewable power to, I think, 15% by 2030. So we would hope that in the fullness of time, there's additional renewable power we can also buy in Kazakhstan, and that would have knock-on effect of assisting our emissions to reduce towards the net-zero stage as well. But if that is not to happen for us, then we will, of course, keep looking at other ways to reduce. It may be that we could expand our solar plant in the future. But I think for now, we're pretty comfortable with the targets that we've got in terms of the 50% reduction by 2030 and then net zero by 2050. Our next question we've got from Mark A. On acquisitions, we you provide any specific metals or geographical areas that you would consider. Do you want me to do one or…

Yes.

Yes, we can do -- yes, in terms of metals, I think I've kind of mentioned this before, actually in the lithium question. Ideally, and we're kind of looking for base metals, really. That's what we understand well. That's our areas of focus. We're very comfortable in the metals that we're in. In terms of copper, zinc and lead as well. We see a solid future for all of those. I think copper, if we're honest with ourselves, will be our preferred metal. I think that's not a change in approach. I think we've always sort of said that. But we look at other base metals like nickel as well. So those will be our main areas of focus. Again, we would look into things like critical minerals and battery metals. I think it would possibly be lasting plan to go towards bulk metals, things like iron ore, metallurgical coal, those sorts of things wouldn't necessarily be right for us. And also pure precious metal plays wouldn't necessarily be right for us either. And geographically, I think we've spent a lot of time last year focusing on the European time zone and Kazakhstan essentially. So Europe and some African countries as well as Kazakhstan where we would love, if possible, to build a sort of earlier-stage exploration pipeline of projects, and we've been putting some effort into trying to move towards that in 2022 as well. [ Stephen P. ] is asking, while I appreciate that the impairment is noncash, it affects the share price of our investment in CAML. How likely is it that some of the impairment could be reversed in future years given that inflation may reduce and the company may reduce other costs and interest costs will probably ably reduce and that the metals produced at Sasa may well be in deficit. I guess another one for Gavin.

It's another for me again, yes. [ Stephen ], actually, you raised a very interesting point of that question because this impairment represents a real snapshot in time at 31st of December 2022. And all the assumptions that go into that analysis are of -- as of that date. So yes, those assumptions may well change in the future. And hypothetically, you could well reverse some of these impairments. It's unlikely that you -- we would in practice, because all we've done then is effectively created some headroom and thereby avoiding any future impairments should the macroeconomic situation move in our favor. So as again, in reference to the share price there, this is noncash. Our view is that from a reflection on the performance of underlying business, it has a minimal impact, and it's ultimately up to shareholders what they want to pay for our shares. So, like I said, a really good question, a real snapshot in time. Exactly.

Okay. Our next question is from Douglas who's saying, of the 17 NDAs that we signed in the further 2 sites, which are the most promising or exciting?

I don't think we can really answer that.

I'm not sure we can answer that one. Like I said earlier, Douglas, we'll keep looking. And hopefully, we can sort of -- we have [indiscernible] plus agreements on one of them, yes.

I think, to give you a little bit of color, I think we can say that there are a few things that we are looking at. We aren't looking at all 17 of those anymore. But of the few things that we are looking at, we are looking primarily at 2 kind of areas. One is more earlier-stage exploration-type project. And then we also, still look, as we've flagged previously, for a sort of more transformational-type opportunity, something which is maybe a similar size to us, which would allow us to grow towards -- to change our sort of scale and liquidity and the size of the business. So we're looking at things from kind of both ends of the spectrum. It's maybe a little bit more color that we can give you. Our final question we've got is on the significant shareholder page of your website. We noted that the percentage not held in public hand is 3.77%. Who holds this if you can say? If we can say...

It's effectively directors who hold shares and the EBT Trust, I think, which shares we hold for awarding staff in terms of long term incentive plans and being able to issue shares for them to exercise their options, et cetera. So that's where the 3.77% is. The rest, which you call, I think, free float effect, which is a high percentage for us as a business is over 96% in institutions, people who trade their shares freely based on the information that we give them on the performance of the business.

We've got another question from Bob M. "What are the probabilities of you getting to a $1 billion market cap in the next 3 years?" Well, I suppose that probably ties into the last part of the answer that I gave in terms of if we are looking for something, which we are, which is change the scale and liquidity of our business, we would -- that's what we would aim to be. I think that's a target that we would sort of talk ourselves around. It will be nice to be that kind of side business, because at the moment, we're not a small business, but we're not a big business with a lot of liquidity either. And I think in order to grow again and again, it's probably easy if you are a kind of billion-dollar-sized business. So that would be something that we would look towards. Hence, our focus on looking for the early stage exploration, but also the larger and more transformational acquisitions as well.

Nigel, Gavin, Louise, thank you. And I think you've addressed all those questions you have from investors. And of course, the company will review all questions submitted today, and we will publish those responses on the Investor Meet Company platform. Perhaps before redirecting investors to provide you with their feedback, which I know is particularly important to yourself and the company, Nigel, could I please just ask for you for a few closing comments.

Yes. I'd like to thank everybody who's participated this afternoon for all those questions, some good searching questions, things that we will take away and think about if we haven't already thought about answering those questions or how we've answered them. But I think in summary, I think hopefully, people listening in will realize that we have got a strong business. It's a sustainable business. We've worked hard on those aspects of the business to make it sustainable. We've got good operational performance. We've got plans to develop Sasa, to keep it in mind, thus operating up to 2039. I think you can see that our capital allocation, the way we pay money back to pay the debt down, to pay our shareholders, to invest in the business is strong good financial discipline there from the company. We have a strong team. And the outlook is looking good in terms of both our production for this year. I think the factors maintaining metal prices at the current levels are looking fair for the rest of this year in terms of supply and demand. And we've got the challenges of completing the projects we have on site at Sasa, which we feel we have a team in place to deliver on and start our Cut and Fill mining technology at Sasa later in the year. And the last thing is we are looking for those opportunities to grow the business, and that's the big challenge we face to add to what are 2 very good assets that we currently own and are fully paid down.

Nigel, Gavin, and Louise, thank you for updating investors today. If I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete and I'm sure will be greatly valued by the company. On behalf of the management team of Central Asia Metals plc, we'd like to thank you for attending today's presentation. Good afternoon to you all.