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

Good afternoon, ladies and gentlemen, and welcome to the Central Asia Metals plc Full Year Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. As the company can review all questions submitted today, and we'll publish our responses where it's appropriate to do so on the Investor Meet Company platform. And before we begin, I would just like to submit the following poll. And if you'd give that your kind attention. I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from Central Asia Metals plc. Nigel, good afternoon sir.

Yes. Good afternoon, and thank you to everybody for spending some time with us to go through our 2023 results. So I will just go through the slides and we can go -- you read the disclaimer here now. Well, as you, if you wouldn't mind, company overview, first of all, on the next slide, just to remind the audience where we operate from, we have two operations, the first one in Kazakhstan, which is 100% owned. And that's an in-situ dump leach SX-EW, which stands for solvent extraction electrowinning processing facility in the central part of Kazakhstan. We've been in production there now for nearly 12 years, and our life of operation remains out till 2034. On the back of the success there, we invested in an underground zinc and lead mine in North Macedonia called SASA. Again, we own this asset 100%. And we've owned it since late 2017. I've now been operating it for 6 years. The life of mine of this particular mine, and we'll talk more about it later, is up to 2039. So just some highlights on the next slide, please [ Emma], about the results that we announced this morning, some financial highlights. First of all, we generated a revenue just north of $200 million with an associated EBITDA, that's earnings before interest, tax, depreciation and amortization of $96.5 million and a free cash flow of $57.5 million. That's a very solid financing performance in what was fairly challenging markets with zinc, in particular, and all three metals declining in value or price, sales price over the course of the year and obviously, with ongoing inflationary cost pressures across our operating platforms. And on the money we generated there, the free cash flow, we've invested $27.8 million back in some projects, which I'll talk more about later on at SASA and the Kounrad. Then we paid a dividend announced the final dividend this morning of 18p for the full year. That's a 9p final dividend. And earlier -- later last year, September, October time, we announced our interim dividend, making a total of 18p for the full year, and that will cost us around about the $40 million mark of that free cash flow of $57.5 million. Just a few highlights there of shareholder returns that we've made over the past and see what a strong dividend payer, we are and the total dividends we paid since 2012 are close to $339 million in value or 170p. We remain debt-free, and we have $57.2 million in cash in the bank. Next slide, please. On the operational front, it's been a busy year for CAML. We met our production guidelines, top end for Kounrad with 13,816 tonnes of copper. And zinc and lead at the SASA mine in the middle of our production range, 20,338 tonnes of zinc and 27,794 tonnes of lead. So a good performance operationally as well as a safe performance operationally. We only had one incident on site at SASA, which is too many giving us an LTIFR of 0.4. It's also been busy on site in terms of the capital programs we've been delivering. In Kounrad, we completed our solar power project for a total of $3.1 million and that plant is now operational and has been since November and will ultimately provide around about 16% to 18% of the site's electrical needs. And probably more importantly, really at SASA we've extending a lot of energy this year on working through our transition project, which is effectively three aspects of the infrastructure. A [ paste backfill ] plant, a dry stack tailings plant and a new central decline to the lower levels of the ore body. I'll talk more about them later, but a lot of activity there and probably broken the back of it and intend to complete those projects later on this year. And the last thing operationally, we've also from the geological drilling we've been doing on site, increased our reserves by close to 1 million tonnes over the past year. Our investment case, I probably partly made in some of the comments I've made already on the financial and operational performance. But just to go through some of these points here, certainly in terms of profitability, I think we remain a very highly profitable business, and is a testament to our business model that in the challenging market, as we've seen with zinc, as I said before, declining by 24%, we still returned a strong EBITDA margin of 47% across the group. Solid dividend performer, we're dependent on that. We have a policy just to remind everybody of 30% to 50% of the free cash flow in this particular period, we've gone outside of that range from our strong balance sheet and confidence in the future operations. In terms of productivity and production. We've got a good record of delivering in line with our production guidance. And this year, it's 25,452 tonnes of copper equivalent for the numbers I've already mentioned. And then from the sustainability and ESG angle, strong corporate governance and stewardship. I've already mentioned strong health and safety record. Certainly from last year was particularly good. And also in terms of our sustainability projects that we're looking to do, and we've reduced our greenhouse gas emissions since from our 2020 base with a target to reduce it by 50% by 2030. We're 41% into that particular journey of reducing greenhouse gas emissions. So a good company to invest in with solid metrics across the patch. And last but by no means least, before I hand over to Gavin for some more details on the financial performance. [indiscernible] point on quite a busy slide, I'm afraid, but the main points I wanted to highlight here -- just on the right-hand side of the slide, you'll see what our key objectives are for the business. In the short term, looking to target low cost and high margins. I think we've demonstrated that already, ensure that we allocate our capital very prudently. Again, I think we've demonstrated that from last year's performance and a focus on sustainability. And for a company of our size, I think we're well advanced in terms of both reporting and what we do on the ground for sustainability initiatives. And last but certainly by no means least, our longer-term strategic objectives remains to grow the business. We have things we'll announce -- we announced this morning, Louise will talk more about it later in terms of early-stage acceleration projects, but the larger transformational project, we're still looking to deploy capital on one of those opportunities when we come to the right one. And on that note, I'll hand over to Gavin to give you more details on the finances. Thanks, Nigel.

Let's start off with the commodity market conditions and particularly those that affected us in our business through the year. And starting with commodity markets on the left-hand side, the only really notable thing there has been around the zinc market, where we've seen a little bit of oversupply of metal, which caused the prices to come down. The prices came down about 24% during the year, and that resulted in a couple of mine closures, which was somewhat helpful, but sad for the people on the mines, but the treatment charges that is the money we paid to smelters to transfer our sort of product into the sort of saleable metals. Those had gone up year-on-year as well as a result of the energy crisis that we started back in 2022. So we saw a few zinc smelters closing down, less capacity to smelt the concentrate we produce and therefore, prices went up there as well. Moving on to the right-hand side of the page, we're not immune from global inflation and certainly within Kazakhstan and North Macedonia, those rates approached 10% over the year. And to respond to that, we provided pay rises to our staff just to keep those competitive and to combat the cost of living that they were suffering, some problems there as well. That is countered by a fall in electricity prices. They've come down from $0.18 a kilowatt hour average in 2022 to an average of $0.11 a kilowatt hour, which is a nice sort of tailwind for us through the year. They're still slightly above what we've achieved historically in North Macedonia, so we continue to watch that market carefully to see whether we can lock in a more favorable price at the right time. You recall at our interims announcement that we announced a couple of new taxes in Kazakhstan that had come into effect in 2023, the first being a withholding tax on dividends that are leaving the country, the rate that we pay there is 10% on any money leaving the country, and that resulted in a $7.7 million charge in the year. And the Kazak government also raised their royalty rate, which is known as MET or mineral extraction tax in the country by 50% to 8.55%, which was a $3 million additional royalty that we paid in 2023 there. There were some accounting changes, a new accounting standard that was introduced, which resulted in an additional $1 million in the CIT line on the income statement. The foreign exchange move ever so slightly against us and the biggest impact, which you'll see on the income statement. If you'll go to the next slide, please, Emma. On the right-hand side, while we're on the FX, you can see that FX loss of $3.4 million. It's about a $10.2 million swing. The key thing to understand there, that's noncash. That's all related to intercompany balances with -- that are booked in one currency in the operating jurisdictions and booked in U.S. dollars here in London, and we have to make that currency translation there. So not to worry about that on. When we go through the income statement and the highlights line by line. You can see the impact of those lower commodity prices going through on the gross revenue line. Cost of sales, up 6%, which I think is a very good result given that our jurisdictions of operating were around 10% inflation. That includes the depreciation charge of around $28 million in it -- that includes that additional royalty that I was talking about on the previous slide, the payroll that I was talking about. And we're also seeing some inflation coming through on reagents and spares, and there was an actual slight foreign exchange impacton that as well. Going back to the right slide, now administrative expenses have gone up partly due to our increased business development activities. Those are accounted for in that line. also accounted for there are foundation contributions. Those are contributions to our charitable foundations in both Kazakhstan and North Macedonia. We also have taken on a few extra staff to affect these capital programs that we're carrying out in North Macedonia, in particular, and Nigel will talk you through what the benefits of those are in a few slides time. Taxation, I mentioned that line there. You can see that's gone up significantly 34% year-on-year, and that's that withholding tax, plus also that IAS12 treatment that's going through there as well. So overall EBITDA margin at a very respectable 47% given the macro environment that we operated in. And if we look at the segmental analysis on the left-hand side of the slide, we can see that the gross revenue at Kounrad has come down. That's a function of copper prices dropping ever so slightly, but also lower number of copper units there, around 438 tonnes less production year-on-year. And the size of gross revenue, that reflects both the commodity prices plus also those increased treatment charges of around $1.5 million coming through in that line. So going on to the next slide, I can show you some elements of the EBITDA year-on-year. We can see the metal revenues on the left-hand side, copper and copper revenue down $7.3 million, zinc revenue down $16.3 million. That's the 24% drop in the zinc price. Other notable items there are the royalties at $2.6 million. Cost of sales, excluding royalties, has gone up. As I said, we've got some inflation coming through now. And then the business development and the foundations on the right-hand side, they are taking you through to that still very respectable at $96.5 million of EBITDA for the year. If we look at each of the operations in turn and the cost base is there, just to pick out a couple of the highlights. As I mentioned before, we're looking at a $0.09 year-on-year increase in your C1 cash costs there. That's attributable to the payroll costs of $0.04 on reagent costs, particularly sulfuric acid and Escaid. Escaid is what we call the organic it's sort of paraffin derivative that helps us separate the copper-rich liquids from the asset that we put on the raffinate. And then also lower output, as I said, we had record production in 2022. That's come off by [ 400 ] tonnes, so that's a $0.03 impact. Given all of that, we're still operating at an extremely good EBITDA margin in Kazakhstan at 71% because the asset itself is probably sitting right at the lowest end of the cost curve, the cost curve compares all the copper producers in the world. So we're still very proud of that position that we hold there. Moving on to slides [ I am going to ] present this in dollars per tonne. So we take out the sort of confusion that the multiple metals potentially introduce there. You can see the cost per tonne have gone up about $3 per tonne year-on-year. Now that is down to, again, payroll because as I said earlier, the inflation, we had to respond to. We have taken a decision to increase our spare parts inventory, and that has added $1.3 million, and that's with the view to improve equipment availability and the performance of the equipment. So we'll see the benefits of that coming through soon. Drilling and training. Clearly, there's a lot of investment to do in the business. The drilling work has paid off, and Nigel mentioned that in terms of the increase of the reserves of SASA plus also training in anticipation of this transition to paceful mining, that are clearly a very important investment there. And then as I said earlier, electricity costs have come off around 40%, and that's been a $4.5 per tonne benefit, so still a creditable result. Keeping cost down has been key to our thing, and that's one of our major sort of strategic focuses as well. And you can see that revenue line, if you remember, with the price coming off by 24%, that's been the main driver behind that EBITDA margin coming down to 39%. If we move on to the investment in the business, that $27.8 million that Nigel was talking about earlier, that sort of money invested into the projects themselves. At SASA, the sustaining CapEx included underground development, that is boring the tunnels and opening up new mining areas for exploitation, upgrading the flotation equipment that effectively turns the rocks into the sort of final concentrate product that we sell. And then we're going through a fleet management and fleet replacement program, where we spent $2.8 million on new equipment underground partially to sort of assist with this transition as well. Kounrad sustaining CapEx. We guided, I think, $1 million to $2 million. So we're right down the middle of the fairway there for the year. And that's a new irrigation system in dripper pipes, about $700,000 spent on that. And then these SX-EW anodes are the sort of fundamental part of the plant where we plate the copper cathode and we expect $200,000 on those, and there's a little bit more expenditure to complete the downward replacement program that will happen this year. But importantly, we've got the power project that's now complete. That cost us $3 million during the year, and we've also invested $14 million in North Macedonia and SASA and that's on completion of the paste backfill plant, plus underground reticulation. That's the pipe work that transfers the paste back underground for replacement back on the ground. Central decline is another -- a new major access into the mine will become the primary and main access in and out of the mine. And then the DST is the dry stack tailings plant. That's a plant that will produce a product that we can then place on surface rather than into a wet tailings dam and we spent $7.5 million on that plant last year. That plant is scheduled for completion, probably early H2 this year. Balance sheet. Look, we've run pretty lean balance sheet over the last few years since we repaid the debt almost 2 years ago now. The only debt that we have on the balance sheet is a small overdraft facility. We used just to manage working capital in North Macedonia. Other notable items that you'll note there is that PPE, property, plant equipment has gone up. and that reflects that investment in the new plant that we're making there and other assets is a little bit higher because we mainly because we overpaid taxes in both jurisdictions by $6.8 million, and that's reflected in that line there. But as you can see, healthy cash position and no debt, so a good platform from which to grow. Last slide for me is the cash flow slide. We can see the sort of development of cash flow from first of Jan, 2023 $60.6 million. We add on the operating cash flow. And then things that we've spent money on and we invested in through the year on a cash basis, the major items being dividends paid. That would have been the final 2022 dividend plus the interim 2023 dividend, income tax and capital expenditure taking us to a closing cash balance of $57.2 million. Free cash flow generation during the year, $57.5 million. There's a helpful table in the -- in the release that we put out this morning. But just to summarize that, that's net cash from operations, which was $66.4 million. We then subtract sustaining capital of $10.8 million from there. There's some intangibles. I think it was about $50,000 or so. And then we earned $1.9 million of interest and that takes you to the $57.5 million. But yes, I do refer you to the release on the little table, that's quite handy to help you calculate that. And on that note, I'll hand back to Nigel to talk you through the operations.

Thank you very much, Gavin. So you can hear and listen to the strong financial performance. So just a bit more color on the operations. The slide you can see in front of you at the moment is an area of photograph of the operation here. As we know, it's not traditional mining. There's an SX-EW plant, you can see there on the far right on side of the dumps. Eastern Dumps and Western dumps. We estimate we have close to 100,000 tonnes of recoverable copper still to go for in the Kounrad mine with the life of mine out to 2034. Next slide, please [ Emma ]. Just a few facts and figures around. I've already mentioned the production this year, which was 13,000 -- sorry, the last year, 2023 to a 13,816 tonnes. We're guiding similarly this year. Effectively, Kounrad is very stable and steady operation. And we're looking -- if you look back on that history around at the bottom there, you'll see for the past 8 years since 2016. We've been around that kind of guidance range for 8 years now, and we intend to continue that as long as we can. Although as you can see, another 10 years of life with about 100,000 tonnes recoverable, there will be a slight drop off towards the end of life of Kounrad. Operating in both the Eastern dumps and Western dumps, obviously most of the material now is left in the Western dumps. And also in the Eastern Dumps, finally we're getting slightly better than some of the 42% to 51% theoretical plant recoveries as we've beaten the leach curve and gone back to certain areas to get extra copper, small marginal improvements there, that -- it all counts and what's a very low-cost operation. Next slide, please, Emma. And lastly, on Kounrad, as I mentioned before, and I think we probably mentioned enough already on this presentation, but we've completed our solar power project. It is working now. It is contributing to the electrical costs of the plant. But around about over the course of a 12-month period, we estimate it will be about 16% to 18% contribution electricity and have given us around about a 10% reduction in our greenhouse gas emissions within Kazakhstan. I think it's around about 6% at group level. So it's a project we've done ourselves, build it ourselves coming at a very low cost per megawatt hour. It's only 4.77 megawatts. So I think in terms of cost per megawatt, it's pretty competitive facility that we've built there, Kounrad. So that's probably Kounrad and SASA, a lot of activity going on at SASA. Just to remind what SASA is. It's a Scarnhosted deposit in North Macedonia. It's the more traditional underground mine. Historically, the mining method has been sublevel caving. When we acquired it in late 2017, we did a life of mine review and decided that as we go lower in the ore body with various geotechnical stresses and the changes in the ore body, it would be wise to transition to a method of mining, which is quite well known throughout the world known as cut and fill paste, long hole stoping with high-density paste to fill in. And we'll touch on where we've progressed on those projects in a minute. We have got reserves and resources at this mine out to 2039. Next slide, please. So in terms of the activity on site this year, I've mentioned already production, we came in on guidance. We've got similar guidance for 2024. Similar level of ore will be mined as we make this transition with an intention ultimately to get that output of up to 830,000 tonnes in the coming years. But just to remind you all why we went down this path of changing the mining method. As I say, it was because of the geotechnical stresses going lower in the ore body and the change in the orebody widths and everything that we just added a couple of years ago to embark on these projects effectively in order to maximize the extraction of the mineral resources, ultimately extend the life of the mine, and as I say, it's now up to 2039. And one specific objective was to actually manage better the tailings storage. We have a wet down facility on site, which, as a consequence of the project now will last through to 2039. And so the rest of the tailings will be deposited either underground through the cuts or fill mining methodology or placed on surface through the dry stack tailings project. And it is ultimately a slightly safer operating environment. But as you've heard already, our safety statistics are also currently very good in terms of the mining methods we employ at SASA. There's a table there, you can see with the actual statistics, I don't intend to talk to that necessarily. And at the bottom, Gavin has already mentioned, the amount of capital we've invested in these projects. And we will finish off these projects this year and make the transition to paste fill mining. Next few slides really just a bit of a highlight of where we've got to. So I'll run through these paste backfill plant. We have completed it. It is fully commissioned and operational now. The reticulation system, which is effective with the pipe work that takes the paste from the plant down into the underground void is virtually complete and certainly complete into the areas where we start operating initially. We have a complement of staff now that have been engaged with and are finishing off their training, and we're ramping up the operation up to a 24-hour day. It won't be every day of the year that this is needed. But when it is operational, we will be running full days operations of paste fill operations on site. In terms of the mining associated with this, we've established crews and training as a game begun, the transition to do some long-haul mining has also commenced. We've identified faces and headings in the 800 level for cut and fill stopes and I've already mentioned about the pipe work to get the paste into those mining areas, which is well complete. The only way we've had a slight delay is some of the boreholes, and we expect to complete that in the next couple of months actually, taking the paste vertically down into some of the areas that we're mining. The DST that sends to dry stack tailings plant, similar kind of plant, probably more simplistic plant is where we take moisture out of the actual tailings themselves to put it into a cake format. That's work in progress still, but we have done a lot of the work on this. The earthworks have been completed. The concrete has all been laid for the foundations. Many of the still works but, as you can see from the pictures there on the slide. We're nearing completion on that aspect of it. And the equipment will then be installed over the coming months, with the intention of commissioning it in the summer of this year. The other side of the project is the land form, i.e., where you put the cake in an organized and engineered fashion onto the actual surface itself with drainage carpets and civil engineering and converts to take away moisture from it. So that's being cleared, the vegetation has been cleared, been leveled, and we intend to complete that as well in the coming months into summer. So the whole aspect of this part of the project will be operational in the summer of this year. And last but no means lease on the project, central decline. The big success last year was holding through in May we met with the [ 910 ] level that was in May 2023. We did about 1.1 kilometers of development on the central decon last year, and we've got approximately another kilometer to complete the whole project, which should be completed by the end of this year. And it will provide a lot of improvements, both to the haulage cycle time due to shorter distances, improve the ventilation and allow us to ultimately to take the pace of reticulation down the new central decline with greater space. It's a far broader and wider tunnel than the current development tunnels we have at SASA. Just moving on quickly to Geology. I've already mentioned this, but you can see the diagram there, just to remind everybody, we don't just have one ore body as such. So we actually have three that have all been mined historically. The wall that we're currently mining is the one to the left there. Svinja Reka, but we've also got the Kozja Reka and Golema Reka ore bodies and we've been doing quite a bit of drilling in 2023, around about 9,500 meters of exploration drilling with a further 6,600 meters planned for this current year to actually find additional resources, either lower down or in between the ore bodies themselves and what we're calling a GAAP target. Just go to the next slide, some of the results of that work has left us with the results at the end of 2023, where our reserves are now classified as total reserves, 9 million tonnes. And if you go back previously to the end of 2022, it was 8.8 million tonnes. So it's a 200,000 tonne increase in reserves. But given depletion over the year of about 800,000 tonnes, that's a net increase over the year with about 1 million tonnes of reserves, which is positive. And the bottom table there just shows since we acquired SASA, how we've improve the reserves through drilling and finding additional tonnage, be it through the assumptions we've made on the mine reserves and the calculations for them or actual increase in resources. An increase in resources over that 5-year period or 6-year period, 2.4 million tonnes from drilling, but a reserve tonnage that has increased by 3.1 million tonnes. And on that note, to complete in the operational update, I'll hand over to Louise for a bit more on to the sustainability and the growth aspects of the business.

Thanks, Nigel. So yes, just a few key highlights in terms of sustainability in 2023. We had a strong year on the environmental side. We completed the solar power project at Kounrad and we've also spent a lot of time developing a corporate biodiversity strategy as we know that, that's an area that a lot of our stakeholders are increasingly interested in and focused on. And we also finalized our water management strategy at SASA as well. In terms of health and safety, we also had a strong year. We had 1 lost time injury, LTI. With now obviously, one is one too many, but it was an improvement on the previous year, and it also was within our target rate as well for the LTI frequency rate. Finally, on this slide, we've also doubled our commitment to our charitable foundations in Kounrad and in SASA during the year. And we spent a lot of time focusing on long-term sustainable development in both of our countries of operation and also as well addressing any immediate local needs as well. Going to the next slide. Just to give you an update as to where we are in terms of our business development efforts. As I think we've explained to you before, business development is a top priority for us. And we've got a strong platform from which to grow with these two high-quality, long-life, low-cost operations, which Nigel and Gavin have talked to you about. Those generate significant free cash flow from us. We've got a strong balance sheet with no debt as well. And our business development strategy remains the same. We're still focused primarily on base metal opportunities. We're still looking at the European time zone plus Kazakhstan as our preferred jurisdictions. And we have, in recent years, been looking at things from very early stage exploration all the way through to production opportunities. And in particular, we'd like to deliver on a really big and transformational acquisition, which gives us the size and scale and liquidity that we're looking for to sort of move us to the next level. That said, we're really pleased to be able to have updated you in the last two sets of financial results that we've presented to you, two business development transactions that we've undertaken in the period. So just to recap on our CAML exploration or CAML X opportunity that we initially told you about last September with our interim results. We've moved that forward. We've now fully set up the NewCo, which is 80% owned by CAML and 20% owned by our exploration partners in Kazakhstan. We've been busy making applications for new licenses. We've got two licenses that have been granted to us to-date, and there's another six currently in the pipeline as well. And we will soon be setting to work on trying to identify drilling targets this year that we can drill next year. So that's our plan there for this year. Moving on to the next slide, Emma. And hopefully, you will also have seen this morning, we made a separate announcement as well as our 2023 results. We announced a proposed investment into Aberdeen Minerals, which we're very excited about. The investment is in two stages, totaling GBP 5 million in total. The initial investment is for GBP 3 million for a 29% stake in the company. And as well after that, we've got effectively what is a warrant gives us an option to invest an additional GBP 2 million to take our ownership up to 38%. And we were really impressed with the Aberdeen team, particularly the CEO; and also his wider team that are all based locally close to the assets. Aberdeen's key asset is a copper nickel project called Arthrath. They've already had encouraging geophysics and drilling results from there. And they've got a compelling exploration model, which essentially looks for higher grades of copper and nickel at depth and the latest drilling that they completed themselves last year seems to demonstrate this. That's what we're looking for. That's what's encouraged us to invest. In terms of our funding, what will that do for Aberdeen. It should enable them to drill 10,000 meters of drilling at the project. Depending on results there, they then look towards doing a mineral resource estimate and again, dependent on that look towards doing a PEA or scoping level study. There's also some district scale exploration opportunities, which they will look to advance as well. So I'm very pleased to have been able to announce that one this morning. So just to wrap up our presentation, we hope that we have demonstrated to you a strong financial performance during a period of particularly lower zinc prices year-on-year. And we're looking forward to the rest of 2024, which we expect to be a truly transformational year for us at CAML. And we will have completed all three of the main components for the capital investments at SASA and we'll be well on our way to being a solely paste fill mining operation there with only really sustaining capital investment required for the long term then for that mine. At Kounrad, we aim to deliver consistency of performance there. And as we get towards the summer months, we'd expect -- our investment in the solar power plant to be realized as we get to the longer daylight day. And finally, we look forward, hopefully, to some exploration successes at SASA, also at CAML exploration in Kazakhstan and also with our new friends and partners at Aberdeen, whilst we continue our focus to find that big transformational acquisition that will really set us up for the long term.

How confident would you be in completing the purchase of a new resource in the next 12 months?

You can answer that?

I suppose I can have a go. Well, I don't think I'll be able to give you a percentage, but the way I could answer it is that we've started 2024 with a strong pipeline of opportunities to look at in terms of business development. And so if I had to compare how confident I would be this year versus this time last year, I would say, I'm more confident this year that we would be able to complete a transaction. And indeed, that is what we are working towards.

In percentage terms, how confident would you be that your exploration team in Kazakhstan will locate a commercially viable copper resource within the next 12 months.

I see a theme here with these percentages. Look, I think that's not been realistic. That's not what we think we'll be able to deliver this year. What we aim to do this year is to identify targets for us to drill next year. So that's going to be early-stage exploration, we'll be taking some soil samples, we'll be doing geological mapping and geophysics and with a view to finding the best locations to put drill holes, which we will then drill next year. I think in all reality, it's probably a few years away being able to deliver a project if indeed, the results from the exploration are able to demonstrate that, but that is a couple of years away, I would think.

If you might have answered this next question, but I'll read it anyway. What is the situation with the exploration of new fields? What are the reserves in the fields confirmed or unconfirmed. How many years will they last? And what are the future plans and capacity forecast?

Yes, it's very early stage. The projects in Kazakhstan, in particular, the CAML exploration, very early stage. So we'll -- I think we seem to have licenses with good potential and the ones that we've applied for as well, we're excited if we're able to get those, but it will be a longer, slower process really than being able to answer that question right now.

What dividends are planned for 2023?

Well, I think we've answered that really aren't we -- we've announced an 18p dividend for the full year for 2023.

If a suitable project is found in Kazakhstan, how do you see it being funded?

I think as I said earlier, we've got a clean balance sheet. So we've got the capabilities to sort of leverage off of the back of that. We're building a cash balance. We've got strong cash flow, strong margin assets that are currently cash flowing. So we'll be building up cash from there. And it's really horses for courses. So depending on the size of the project, the location, and the stage of development as to what kind of financial structure we've put around it. But I think we've got the real luxury and benefit of having that clean balance sheet that gives us a lot of options, plus support of shareholders as well if we should need to go down that path.

What is the rationale with investing in an exploration company in Scotland, where do you see the anticipated payback given the difficulty of implementing a successful mining operation in the region and risk of finding nonviable ore?

Yes, sure. It's a good question. I think, I mean, to answer the last part of that first. There's always a risk of founding nonviable ore and I think the thing to point out really is an investment like this, is on one hand, high risk because there's a high chance of not finding a mine in the future. But on the other hand, it's low risk because we're investing the sort of money that we have that we've generated ourselves to be able to have a go to see if we can find something. We were interested and excited by the geology and the potential there. And we think a lot of the things we've looked at Aberdeen shows a lot of promise. In terms of investing in exploration in the U.K., it is a very interesting question. I think what we would point out is in any of these opportunities that we would look out, we're, of course, interested in the geology. And then we move very quickly to looking at the legal and permitting and all those aspects. While we can never be fully sure that you're going to get a mine permitted anywhere in the world, the team has managed to get together over 40 license agreements with separate land owners in terms of mineral rights and also in terms of land access. So we -- from our site visit there, we are genuinely of the impression that the support for the project in the area. In addition, they've also received grant funding for some metallurgical test work for the mineralization that they've identified in terms of the copper, nickel and cobalt, which we also think demonstrate support from the British government as well.

Now, I'm looking at the SP chart, which seems to have shown a lot of weakness over 12 months. Is this due to general market weakness and poor commodity prices, what do your brokers think is fair value?

Good question. [indiscernible] answer in some ways. And yes, it is a bit disappointing on the share price performance. We have to admit. I suppose as management here, though, we focus on delivery in the business on the projects, production, safety, and controlling our cost effective and the share price will be what it will be. But what's causing that, probably an element to general market weakness. I don't think the mining sector is particularly looked at the moment. Obviously, we've had a reduction in our zinc commodity prices and the others less so, as Gavin mentioned, whether it's the optics to do with the fact that we haven't got growth. I think this is probably a point in our share price weakness that people look at us and now we've got two good operating assets, but actually, we are looking for growth. And hence, why a lot of this presentation has been focused on what we're doing to achieve that growth, be it the early-stage exploration where we've had a couple of successes and we're now going to work through those plans -- those programs. But the key one is, as Louise mentioned, we have to get some scale [ liquid ] to get the more transformational opportunity. A lot of work going on in that. There's a good pipeline for the future of those opportunities. And I think that's probably as much as anything reflected in a weaker share price. What do the brokers think? Well, I think the brokers will also reflect that, and we feel we're undervalued. If you look at most of the target prices that the votes put out, it's above the GBP 2 mark. So certainly, we would feel that we're undervalued in that sense. But what really caused it, it's very hard to put your thing on one particular aspect. And all we can do as management is make sure that we deliver on what we're paid to deliver on, which is a service, the production, the safety, the cost side of it, and growing the business as best we can.

What is your modeled cost to the solar electricity that will be produced at Kounrad and how does this compare to the good price?

Yes. The model cost, I think, of the electricity is around is [ $4.4 ] or something like that. And the grid price currently is $0.06. So there's not a huge economic benefit at the moment to it, but we and as well. We've got two things. One is that all of the grid power in Kazakhstan currently is coal-fired. So the only way we could sort of effectively bring down the greenhouse gas emissions at that asset was by putting in our own renewables, renewable energy facility. But we do see some structural changes potentially risk of these within that Kazak grid. There's a lot of talk about introducing renewable energy into that grid as well. That generally at the outset, a little bit more expensive. So that plant will become more and more valuable going into the future.

Well done on the deal with Aberdeen Minerals announced today. Do any of the CAML team have experience of working with Patrick, Tom and the rest of their team in the past. If you could also comment on the likely timescales for the 10-K drilling program, that would be useful, too.

Sure, yes. No, none of us have worked with them. We know a couple of the directors, but none of us have worked with them before. In terms of the time line, the 5 million, if we were to invest the full amount would last Aberdeen 24 months on the basis of their -- of their projections, and that would, of course, include the 10,000 meter drilling program.

As a jurisdiction, how supportive is the U.K. for commodity exploration. Kazakhstan to Scotland is quite a change.

Yes. I think maybe I haven't said that one in terms of -- I think the mineral code is quite different in the U.K. to other countries because there's lots of individual land owners rather than land being owned by the state. And so that's one factor, but I think for sure that there's a lot of effort from the government, particularly for long-term critical minerals supply strategic investment and trying to make sure that their own battery metals and metals for the energy transition for the long term.

Can you remind investors of the 2024 expansionary CapEx budget and planned projects?

Yes. No problem. I think split that in two a little bit. So our estimated CapEx for 2024 was between $22 million and $24 million. And I'd say around $15 million to $16 million of that is what we call sustaining CapEx. So that is just existing assets on, and that reflects a slight increase in the usual guidance we give at SASA. We used to give around $8 million to $10 million a year guidance. It's so we're probably going to go to $10 million to $12 million, maybe a little more this year. And then the balance of $8 million to $10 million that is going to be completing those capital projects at SASA. And that's all 2024. And then back to 2025, we'll be back to our normal sustaining capital run rate.

With that view of that large-scale acquisition in base metals, is the current market dynamics supportive of finding that opportunity at the right place, particularly on the headlines of metal shortages on the horizon?

Yes. It's a good question, and it's one that we could probably all chat about and debate about. But what we focus on is our position, our cash generation, our debt capacity, our investors and what they'd like to see from us and therefore, our -- the value of our equity. And when we take all that into account, we think we are in a strong position to grow in terms of being able to borrow material amounts and also issue equity if required. So I think we can't focused too much on short-term ups and downs in the market. We have to look and try and find the best long-term opportunity and finance that accordingly.

Did you have any visibility ahead of the time of tax changes? Or was it a surprise? Could we see more tax surprises in the near term?

No. I mean, I don't think we were surprised. I mean, I think we certainly knew they were [ cut in the end ] and it was all in the public domain back in 2022 that those changes, particularly withholding tax regime in Kazakhstan were going to occur plus also the royalty tax. So I think maybe some people haven't picked it up properly. We do our best to kind of inform the market as to what -- what's out there. But I think in terms of future tax rises, there has been some noise in Kazakhstan in the past around future corporate income tax increases, but most recent pronouncements from the government is that those are going to be confined only to the banking sector and the rest of us will be fine.

What would the management team define as a successful 2024? In other words, what objectives do you want to achieve to define another successful year?

Yes, I'll take that one because I think really 2024, we know what we want to achieve in 2024. It's obviously safely meets our production guidance and control costs as we have been successfully in 2023 as best we can. I think inflation is reducing. So that will help. But in terms of actual delivery, obviously, the key is operationally to deliver on the project at SASA finsih this off and make that transition into place for mining, have the teams fully trained and make sure we do that. We have no major projects planned at Kounrad. It [ studies ] she goes in many ways at Kounrad. But then what I think all of us around this table with think that success is getting over the line and one of these business development activities, transactions. That's something we're putting a lot of effort into it. It isn't easy in many things, a number of factors you have to take into consideration. But we have got a strong pipeline, and we're hopeful that at some stage, we can bring one of those over the line. And I suppose the last thing on success for this year is really getting in CAML X and Aberdeen Minerals into our portfolio of assets and having hopefully some successful results in the drilling programs for Aberdeen, but also for the kind of statistical analysis and the geophysical aspects that we're doing in CAML X in Kazakhstan.

Are there any other copper dumps throughout the world that you would invest in?

If they have the same characteristics of Kounrad, yes, if they're in a good jurisdiction. We have looked for them. It's not that we don't wish to do that. Of course, we would do. I mean, who wouldn't want to buy another Kounrad. It's been a fantastic project for us. And if we can find something of a similar kind of nature with the mineralogical properties that we've got and the ground conditions and everything else, and we'd happily invest in it.

Okay. [indiscernible] earlier stated that sulfuric acid is in shortage, have you experienced a price increase or any difficulties with this.

Of course, I think well picked up. I think has prompted say that were experiencing some shortages. Now their demand for asset is far greater than ours. The way that they process uranium, consumes a huge amount of assets in comparison to what we do. We have a long-term arrangement in place for our asset supply. It comes from very nearby to the mine. It's got its own infrastructure, et cetera, et cetera. So we're very comfortable with the acid supply. We have seen a slight increase in the price of acid, but that's not too dramatic, and I think it's easily manageable.

Thank you very much. That's the end of the questions. Nigel, would you like to make some closing comments?

Yes, I'd love to. First of all, just in closing comments, just looking at to remind people what we're looking at doing this year. We've given out our production guidance, just remind everybody, copper, 13,000 to 14,000 tonnes, zinc similar to last year, 19,000 to 21,000 tonnes and lead 27,000 to 29,000 tonnes. That's what our outlook is for this year. We intend to deliver on that safely, as I said before. Finish our capital investments at SASA primarily, work on the exploration projects and deliver those successfully. And obviously continued active assessment of the business development opportunities we're looking at. But maybe in the final comments from me will be just to reiterate our business case, our investment case, I think, we've delivered strong margins, 47% EBITDA margin in a very challenging market and some good solid financial results, which is testament to our low-cost operations. We have a solid balance sheet, a strong balance sheet and also, we've demonstrated that we'll pay dividends in the good times as well as the bad times, make sure that we reward shareholders. But we would like to deploy some of that capital into this transformational opportunity we're hoping to find. And also strong delivery on production. We've shown again that we've met our guidance in production. I think we've got a very good record on that. And we've also got a good record on how we develop the business from a sustainability angle and ESG credentials with reductions in greenhouse gas emissions, strong governance and a very strong health and safety performance. So I think we've a very good business case that we've presented hopefully this afternoon to all of you, and we can look forward to an exciting 2024.

Nigel. That's great. Thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you now be automatically redirected for the opportunity to provide your feedback in order the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Central Asia Metals plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.