Central Asia Metals plc ($CAML)

Good afternoon, and welcome to the Central Asia Metals plc Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to the management team. Gavin, good afternoon, sir.

Good afternoon, and welcome to everybody, and thank you for joining us for what is a significant announcement by Central Asia Metals. I'd like to draw your attention to the disclaimers in this presentation. There's 4 entire pages of it, mainly because we don't want any of you getting into trouble. I do take the time to have a quick scan of those, please. And not going to do that now. We'll jump straight into the presentation, which we're very happy to announce that the Boards of CAML and Cygnus Metals agreed to enter into a transaction whereby CAML will acquire the entire issued share capital of Cygnus Metals via a scheme of arrangement in Australia. The value received by Cygnus shareholders will be AUD 232 million, and the share price paid is AUD 0.176. This means that the pro forma ownership of the company moving forward will be 70% CAML and 30% Cygnus. Cygnus Metals owns the highly prospective and high-grade Chibougamau project in Quebec. And the transaction will be subject to shareholder votes on part of Cygnus shareholders who need to achieve 75% of the votes in favor and CAML, which will be an ordinary resolution. So therefore, a simple majority of 50% of votes in favor of the transaction. We have got 29% of the Cygnus register that is going to vote in favor of this transaction. That is via some formal agreements called voting intention statements. And that, together with the Cygnus Board means that 31% of the Cygnus register will vote in favor of this transaction. We will look to obtain the TSX listing as part of the transaction, and the transaction is expected to close in September. So what are we buying? Chibougamau is a high-grade copper gold project. It's situated in Quebec, which is a Tier 1 mining jurisdiction. It also represents a high potential brownfield opportunity. Comprises 5 copper gold deposits. They are listed in the map on the right-hand side in the little black boxes that's Cedar Bay, Golden Eye, Devlin, Corner Bay and Joe Mann. And there's also an existing plant and administrative complex and tailings dam at Copper Rand, which is in that photograph in the top right-hand corner. The acquisition includes a mineral resource estimate of 6.4 million tonnes of measured and indicated resources. Those are really attractive grade, 2.3% copper, 0.8 gram a tonne gold and 7.6 gram per tonne silver. There's an additional 8.5 million tonnes of inferred resource at similar grades. So overall, very attractive mineral resource, and we're not taking any discovery risk with this asset. Cygnus is actually in the process of updating a PEA. The owners before Cygnus published a PEA, which is available on the SEDAR website for those of you who are curious about it. But since that time, Cygnus has increased the resource base by around 78%, added significantly to the land package and also spent a lot of money drilling, including making a discovery at Golden Eye. So they are updating the PEA to take all that into account. And CAML, once it takes ownership, will continue that process with that PEA and also bringing our operating and engineering experience to bear in the development of that technical study. The project is close to the town of Chibougamau, which is effectively a little mining town in Quebec. It's accessed year-round by road, rail and air, and also benefits from clean energy and water. So we're not looking at a remote location here. This is an area that is steeped in mining and also has all of the benefits of the existing infrastructure, skills and so forth around it. We're also very excited about the potential of growing that resource I spoke about earlier substantially on the existing land package here. So I'll hand over to Louise just to walk you through the transaction highlights and rationale.

Thanks, Gavin. Yes, just looking at the rationale. This Cygnus deal will be truly transformational for CAML. If we look at potential production in the kind of medium term, if we look at just simply at the resource tonnage, the resource grade and the process -- the existing processing plant capacity, it's very easy to see how there could be very meaningful additional production for us on top of what we already deliver from Sasa and Kounrad. It's also the exploration potential that really attracted us to this. There's the 15 million tonnes, which is measured, indicated and inferred added together, as Gavin said, at very attractive grades. But on top of that, there's also about 18 kilometers of strike extent and other prospects, which are very worthy of exploration. So we're excited about being able to look across that trend for finding additional resources on top of that 15 million tonnes that Cygnus already has. And it's the jurisdiction that was really attractive to us as well. This project is in Quebec, and that's a world-class mining jurisdiction, one of the better rated and ranked mining jurisdictions in the world. And the town, as Gavin mentioned, is a mining town. It's a mining province, and we're close to a mining town with mining expertise with all the kind of services that you'd expect from a mining town as well. And this also has the added attraction of adding diversification to our geographies on top of Kazakhstan and North Macedonia as well. And finally, in terms of the rationale for us, we could really see the pathway to project development. Cygnus has a really good Canadian team already in place. And on top of that they've -- they've got PEA studies being updated that are underway. There's environmental work already underway. And we believe that combined with the strong Canadian team that they have and also our skills operationally, project development and our technical team, we can really see how in-house we'll be able to deliver this project and actually really bring the full potential out of the Chibougamau area. In terms of what's in this for Cygnus, we believe -- both sides believe this is truly a win-win. Cygnus is able to maintain exposure to Chibougamau, which they're very, very keen on doing, but believe that actually development of that will be fast tracked under our ownership in terms of the balance sheet that we bring to mind. And it's worth pointing out that together, there'll be a combined cash position between bringing the 2 businesses together in excess of USD 100 million, which means that we can -- we've got the wherewithal to push ahead with the development studies whilst also not being restricted on what we can afford in terms of exploration as well. And what would we look like as a group together? So I think we've talked in the past about our kind of exploration to production pipeline at CAML, we've had this early-stage exploration potential in CAML. X in Kazakhstan and in our stake in Aberdeen. And obviously, we've got our cash flow generation at Kounrad and Sasa. What Cygnus and Chibougamau does for us it sort of fills the gap in the middle, which arguably was missing before. What we've got in Chibougamau is both a development project that we can move towards production in the fullness of time and actually brownfields exploration as well and some additional targets where we can use to add to the 15 million tonnes that's already there and been identified within the portfolio of ground. I'll hand back to Gavin to talk a little bit more about the resources.

Thanks, Louise. This is a bit where I get chance to arm wave a little bit and expand on the exploration potential because I think it is a key part of our rationale for purchasing this suite of assets. So Chibougamau itself, as you've heard, is an area rich in mining history and has been a significant producer of copper and gold in the past. In fact, several of the assets we aim to acquire here are past producers. And therefore, we're taking brownfields risk on exploration. So the assets that I mentioned earlier are all open at depth and along strike, which is really neat, it's what us geologists get super excited by because finding new ore bodies is always easier around existing ore bodies. And then you've got around a strike length of 18 kilometers with a whole bunch of other targets on it, which include Henderson, Portage, Jaculet, all of which have been past producers. Those 3 I just mentioned have produced almost 1 million tonnes of copper in the past and 350,000 ounces of gold at decent costs. So adding to that resource inventory is going to be a really exciting opportunity for us. Cygnus has been the first company that's really utilized modern exploration techniques, geophysics, also compiling a bunch of historical data with the AI in order to make sure that the interpretations and geological interpretations are refined and will guide future exploration as well. So basically, alongside that development of Chibougamau's core assets and around that core mineral resource estimate we spoke about, we will be continuing to drill to add to that inventory and keep more projects coming through that pipeline, as Louise was explaining earlier. The area we've spoken about again, but just to reemphasize what we've got here and why we think the brownfield's nature of this will allow us to fast track this project for development. We've got the existing processing facility at Copper Rand plus the tailings facility. You can see that in the top 2 photographs. Now those will require a significant amount of refurbishment and new equipment coming in there, but we do have a head start effectively on the construction of those facilities. Plus also given that they were past producers, we also have a head start on the permitting, which is super important in a jurisdiction like Canada. As we've mentioned, great access, right? So we've got sealed roads all the way to site. We've got access not only for the reagent inputs and supply chain that will keep mines going, but also easy access to the market via that rail and road network plus also the port network as well to get to the seaborne market, and there is a smelter quite nearby to the mine as well. Louise spoke a little bit more about the town. What is quite key there is that it's really a 10-minute commute from the mine to the plant -- sorry, from the town to the plant. So we're not looking at a fly-in, fly-out sort of situation here, and there's a local skilled workforce that we could tap into. So what are CAML's capabilities and what do we bring to the party here? So we've got many strengths that we're going to deploy to deliver the Chibougamau project. We have -- we're an experienced operator in base metals. We have a strong financial position with little to no gearing, as Louise said, a healthy combined cash balance of a little over $100 million. We've got good access to capital through our relationship banks. And we have expertise that's relevant to Chibougamau in terms of the underground mining methods that will be deployed, mineral processing and also tailings deposition. We also really experienced the community relations at both of our operating assets plus our exploration assets, and we really look forward to engaging constructively with the Ouje-Bougoumou Cree Nation in the area. And we've also got an excellent track record in environmental stewardship, which should help us in terms of doing the environmental impact assessments, plus also getting that permitting into -- getting all of the documents into state -- a good state to get the permits in place. So -- and then we've also got resources in-house that will help us with the project development, plus also the exploration activities, which we've spoken about. So in terms of next steps, we've built a really good relationship with Cygnus over the past few months as we've been cooking up this transaction, and we'll continue to work together to complete the transaction with the timetable looking at September 2026 for the completion of that court-led scheme of arrangement. As I said, Cygnus is busy updating that preliminary economic assessment for Chibougamau, which includes drilling, metallurgical test work and mine and infrastructure design. That will continue over the next few months with some input from CAML. And when we take ownership in September, we will start really implementing our own ideas into that PEA and any of the associated technical work that will go around that. We also have experience of operating underground mines, dry stack tailings, which is the tailings method of choice here and also winter operations, and that's going to be really valuable, not only in delivering the projects but also operating them moving forward. As I said earlier, alongside that PEA and the other study work, we're going to continue with some exploration drilling. And we'll also be working in close collaboration with the host communities and other key stakeholders such as that Ouje-Bougoumou Cree Nation, the city of Chibougamau and the government of Quebec. And that will leave us in good stead in terms of the future of this project. But what is important for us to realize is that purchasing an asset such as Chibougamau really secures the future of CAML. We've got enough resource there to mine for the foreseeable future. We've got great resource upside and ultimately have the ability to materially replace and complement the amount of production and cash flow that we're currently making. So at that point, I'll conclude the formal part of the presentation, and we'll move to some questions, which I can see are already rolling in from the audience. So Richard, do you want to start reading those out?

Yes, sure. First question, what is the expected approximate CapEx...

Well, we're under a few restrictions in terms of what we can say because of Australian rules. But there is the PEA that Dore Copper produced, which is available publicly on Cedar. So I definitely go an have a look there. But what we've done in terms of our analysis is we've looked at that number. We've also conducted a huge amount of technical due diligence, including site visits and looking at that plant that, as I said earlier, needs a lot of refurbishment and effectively derived the capital number, which is clearly going to be higher than what's in the '22 PEA, but we believe is realistic now, and that has driven the economic analysis we've done to make sure that the price we pay now is going to be accretive to our shareholders. I'm sorry, I can't give you an exact number. But as I said, we are under a number of regulatory restrictions here, but there is a number out there in the public domain. And rest assured, we've scrutinized that number very carefully, plus added a healthy kind of margin to it to make sure that we're not confronted with any horrible surprises.

Right. Next question is, can you give an indication of timelines for the permits needed?

That's a good question. Now it's something we're going to have to bottom out properly, so I can give you a much more precise answer to that. But if we think about the project development here, so if we're going to do, as I said earlier, drilling and the PEA, finalize that, move as quickly as possible into a definitive feasibility study, that alone is probably going to take almost 3 years. And then you've got -- once you have that DFS, that is the first step in terms of making your permit applications. And there are a number of factors that are going to drive the sort of fast permitting there. One is the brownfield nature of the project. One is the quality of the work we do. What I can tell you is that there are baseline studies underway in terms of environmental monitoring that will again put us in good stead, and those will carry those through into the permitting as well. And ultimately, those community relationships that we need to establish and continue the good work that Cygnus has done in terms of the community relationships because they have a key stake in the asset plus also a key say in the permitting. So that's going to be key.

Also on time lines, what is the life of mine of the acquisition?

Well, it's again difficult to say because we are -- well, Cygnus is currently drilling, plus we will continue with some drilling. But if you just take that measured and indicated and add some of the inferred into it and divide by 900,000, which is the plant capacity, you can get a good handle on what the life of mine will be at least at this.

Okay. Question about the assets. Would we be looking to develop the non-copper assets, i.e., the gold assets? Or would we be selling those?

It's a really good question. So I think the initial sort of idea would be to go for the copper gold assets. So we're talking Devlin, Corner Bay, Golden Eye. There's only one asset in that suite of 5 really that's predominantly gold, and that's Joe Mann. So I think there's enough to do and enough drilling in terms of the copper gold stuff to keep the mill filled before we start looking at that. But at the moment, there's no plans to kind of rationalize the portfolio at all.

I think they made the main lithium...

Yes, it will be worth it...

Within the copper...

There are -- yes, I mean, you delve deeply into the sort of Cygnus stuff and into the announcements we made, there are a couple of other assets that are in the portfolio. We did not take those into account in terms of our valuations, and we will make a decision regarding the future of those once we take the key...

That's the lithium and the ones in Western Australia.

Yes.

Okay. Specific question on Golden Eye. The writer says, "Golden Eye looks like a key asset, but it's under a lake. Is it apparently -- it is apparently accessible in the winter via an ice pad? Is this a concern?"

No, it's not a concern. The accessibility via the ice pad is for drilling. So you need the lake to freeze, and it's very common in Canada and even in Kazakhstan, where we operate that you can work out on these lakes once they freeze. So drilling from there to give yourself the geological information, once you're mining and you're underground, it's not a concern that you're underneath the lake.

Okay. Will this -- so this is on strategy. Will this acquisition sate our appetite for further acquisitions for the immediate future?

I think that's a good question, Mark. Yes is the short answer. I think we need to focus on over the next few months, closing the transaction and then focus on getting the Cygnus team integrated into the CAML team in Canada and continue with those technical studies, the PEA initially and then moving into a DFS. Once we've got all that to our satisfaction, never say never, but our focus over the near to medium term is definitely going to be integration and getting the study work done on Chibougamau.

Right. Is there any buyout option for the remaining 30% held by Cygnus? I think that's misunderstand I think that's a misunderstanding of the part of isolation where we talk about the ownership being...

Yes. No. But I think once the shares start trading, people can buy and sell as they would any listed business and just the initial pro forma company on the current metrics is that 70% will be owned by existing CAML shareholders and 30% by existing share...

Yes. To be clear, we're acquiring 100% of Cygnus. And then the expanded CAML would be owned 70% by the current CAML shareholders and 30% by the current Cygnus shareholders.

So it's not 2 separate companies, it's all in one company.

How do you explain the negative market reaction today?

I don't think it's been negative.

No, not to my knowledge. Let me just double check.

Check the share price again, but last time I looked...

Last time I looked, right. Yes. I'll do the next one and check that. So with this new potentially more profitable use for available funds, will you now discontinue share buybacks, which have reduced dividends and depressed the share price without bringing any other noticeable benefits? So the question is, will we now discontinue share buybacks?

Look, I think the capital allocation is obviously something that the Board debates at every Board meeting. And the share buyback we put in place last September was, I think, as we told everyone then, not necessarily a one-off, but we were doing it and it wasn't going to be a continuous share buyback. So with the acquisition of Chibougamau, we will have a capital allocation program that looks at development of the Chibougamau assets. We'll look at continuing to fund the exploration around Chibougamau plus also our exploration in Kazakhstan which we're really excited about as well. And then also keeping that dividend policy in place at 30% to 50% of free cash flow, that's the other place that capital will go. So I don't see at the moment that we'll be reinstating any buybacks. But again, never say never, depends on what the share price does. But in terms of where we see our cash going right now, it's into investing into the business and making sure our shareholders receive returns.

Yes. Just going back to the earlier question, we're off -- well, currently off 0.4%, less than 1p compared with last night. So -- and amongst our peers, it's a mixed picture, some similar to us, some slightly better. As a CAML shareholder, I found the Cygnus corporate video very informative. Following the transaction, will CAML adopt an approach that is similarly informative?

I'd like to think we keep the market fairly well. We've got one informed and we have corporate videos as well, but always happy to sort of take learning points from anywhere for sure.

Sure. Okay. A question about timescales of production. I think we've already covered that. Please, could you outline how you envisage the dividend policy to evolve following this acquisition? Do you anticipate the per share dividend in 2026 to remain broadly unchanged from 12p when factoring in the increased share capital but countered by the stronger copper price and presumably increased free cash flow compared with 2025?

I think we'll just -- as I said earlier, we're going to keep the dividend policy in place at 30% to 50% of free cash flow. And if we do benefit from much higher commodity prices and have excess cash, then we might pay out towards the top end of that range. If not, we'll be more to the bottom end of that range. So I think that gives us the flexibility to allocate capital sensibly and in a disciplined manner, ensuring that we are continuing to invest in the business plus also provide returns to shareholders.

A question about environmental side. Does the project have any presence of acid generating rock? And does this pose any environmental constraints?

Well, I'm just trying to think -- I'm not sure we've got any waste dumps coming into the portfolio here, which is really where the acid generating rock comes from. But underground, any exposed sulfides do tend to do that, but I don't think it's an issue here. Certainly, nothing in our DD that flagged as a concern on that front.

Right. Talking about the support of existing Cygnus shareholders, do you have the support of the institutions that took part in the raise earlier this year at AUD 0.16.

Yes, we do.

Next question. Are there any third-party royalties over any of the Cygnus assets? And what are the rates?

There are a number of royalties over various packages of land. It's quite a complicated package of tenements that are out there, probably too many to talk about now. But again, they've all been taken into account with our economic valuations. There's nothing crazy in there, nothing that's put us off all pretty standard for Canadian exploration properties.

I mean for people who are interested, it's possible to find them on Cygnus' public disclosure.

It is, yes.

And last question, I'm not sure if this has already been answered, but when do we envisage first production? So again, about time lines for production.

Yes. We sort of it's difficult to say with any degree of high precision here, but I would be banking on probably a 5-year plus time line to production.

Okay. And sorry, one more question just come in. Are the CAML directors currently in a closed period preventing them from purchasing CAML stock?

We have closed periods that relate firstly to the release of any kind of significant information, which would be our financial results. So we're always in a close period for at least 2 months before financial results come out, depending on what sort of other news is coming out, close periods are imposed as well. And clearly, because this -- we'll be working on this transaction in the background, we've all been in a closed period as a result of that.

That's all our questions there. I'll hand back to IMC.

That's great. Thank you for answering all those questions you have from investors.

Sorry. There's one just come in.

No problem.

Okay. No, it's fine. It's fine. It's not a question.

Perfect. Just before we do redirect investors to provide you with their feedback, which I know is particularly important to yourself and the company. Gavin, could I please just ask you for a few closing comments?

Sure. Thank you, Liz. Firstly, thanks again to everybody who attended today. We always like engaging with our shareholders. We are really excited by the potential acquisition of Cygnus. We've been working really hard to find something that's going to be accretive to our shareholders. And I think what we've got here is something that as I said earlier, secures the future of the business for the foreseeable future in terms of a really good quality, high-grade copper-gold project and all of the exploration associated with the land package that we're looking to acquire. So there's a shareholder vote coming up. I do urge you all to do some homework on this. We are available to answer questions. We'll be continuing to engage with shareholders over the next few months. And I think in terms of CAML's future and the opportunity that the Chibougamau assets represent to us as shareholders is a fantastic opportunity. But thanks again for attending, and I look forward to seeing you all soon.

And to the earlier question, the stock is actually now slightly up compared with yesterday. So it's constantly moving.

Thanks, Richard.

That's great, guys. Thank you for updating investors today. Can 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 may take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you all.