Chrysos Corporation Limited (YI1.F) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Chrysos Corporation Limited Trading Update. [Operator Instructions] I would now like to hand the conference over to Mr. Dirk Treasure, Managing Director and CEO. Please go ahead.

Thank you very much, and good morning, shareholders. Thank you all for joining us today. As usual, I'm joined by our CFO, Brett Coventry. As you may have seen from the results, we've had a slight delay to releasing our annual report while the auditors work through our international tax position, particularly with respect to the accounting of deferred tax assets. We're working closely with the auditors and confident that we will resolve this shortly and issue the full annual accounts before the end of August. In the meantime, I'm pleased to present a very exciting trading update, capturing what has been a big year for Chrysos as well as the achievement of some significant milestones during the 6 weeks post year-end. Slide 4, please, operator. I'll start off with a very brief introduction of who we are and how we make money. Our flagship technology, PhotonAssay, is the best technology available to analyze gold. For a gold miner, analysis is a nondiscretionary spend such that it would be impossible to run a mine or exploration project without it. Prior to adoption of PhotonAssay, gold miners have predominantly been using a technique called fire assay, which dates back to a time before Chrysos. Our PhotonAssay technology is faster, more accurate, requires reduced labor and sample preparation and is better for the environment and for operators. Chrysos's business model is based on a fee per sample and a take-or-pay, which is designed to be competitive to fire assay, allowing us to offer an improved service to miners at the same or better price. Our contracts are typically 5-year renewable contracts that offer secure long-term revenue, mostly with Tier 1 counterparties. We operate lease agreements with minimum monthly assay payments or MMAP. Each unit offers further upside based on utilization with increased utilization leading to additional assay charges, or AAC. Our growing fleet of PhotonAssay units operates at a gross profit margin of between 70% and 80%, and our global patent strategy protects us from direct competition. Without getting ahead of myself too far, we now count all 4 of the world's biggest laboratory companies as partners and fulfill the analysis requirements for 7 of the world's biggest gold miners in at least one of their mines. Even with our rapid growth, we represent only a small proportion of the global gold assay market, so there remains plenty of opportunity for future expansion. Slide 5, please, operator. Chrysos has finished the year strong and is out the gate for a cracking FY '26. Our total unaudited revenue of $66.1 million is up 46% on FY '24, reflecting excellent adoption of PhotonAssay throughout the year. At the conclusion of the first half, we were guiding towards the lower end of our guidance range of $60 million to $70 million, but have comfortably come in above midpoint as a result of the final 4 months of the year, demonstrating a solid recovery in sample volumes in the industry. Unaudited EBITDA for FY '25 of $16.1 million demonstrates solid growth of 80% on FY '24. Similarly to revenue, this follows our most recent guidance of below the midpoint of our $9 million to $19 million range. Our improved result here demonstrates the strong flow-through of revenue to EBITDA and the strength of our business model, which is designed to capture upside in the industry. Our EBITDA margin for the year was 24% compared to 20% in FY '24. Our net cash position made up of cash and undrawn debt with the Commonwealth Bank totaled $91.1 million, providing substantial runway to support future growth. We deployed a total of 11 units during FY '25, supported by 9 new agreements. This brings us to a total of 40 deployed PhotonAssay units operating. Next slide, please, operator. In May of this year, we are pleased to announce our partnership with Newmont for deployment of PhotonAssay to their gold mines. Newmont operates 13 major gold mines around the world, including the 2 joint ventures that Newmont have with Barrick, which includes the Nevada Gold Mining Complex, which is supported by 3 PhotonAssay units. The structure of our agreement in May was to implement a master services agreement with Newmont, which would streamline future PhotonAssay adoption for the miner. Newmont initially committed to a single unit for deployment to their Ahafo mine in Ghana. And I'm pleased to announce today that we've expanded our relationship with Newmont with their commitment to deploy PhotonAssay into their Merian gold mine in Suriname, South America. Their rapid adoption into a subsequent mine site illustrates their confidence in PhotonAssay and demonstrates the efficacy of the master services agreement. Our initial deployment to Ahafo in Ghana is now expected to begin before the conclusion of the first half FY '26, and the Merian deployment will be following close behind it. Next slide, please, operator. With the deployment of an additional 11 units during FY '25, we concluded the year with 40 deployed PhotonAssay units across 4 continents. I mentioned before that we've had a running start for FY '26, and that's captured on this slide. In addition to the Merian deployment secured with Newmont, we've entered into our first contract with Bureau Veritas in partnership for South America, starting with the deployment into Antofagasta in Chile. This means that Chrysos has now partnered with all 4 of the global major laboratory companies being SGS, ALS, Bureau Veritas and Intertek, with each company endorsing and openly marketing our technology to the industry. While the agreement with BV is only for one unit initially, we look forward to working with them and exploring further opportunities in this new region. Further to Newmont and Bureau Veritas, we have contracted the first of our next-generation XN PhotonAssay units to SGS for deployment in Perth. I'll provide some more detail on XN later in this presentation. We've also secured an agreement with Intertek for deployment at Pantoro's Norseman gold mine in Western Australia and have actually just completed installation of that unit. This is a testament to our ability to move quickly with the units that we have available and ready to ship. With respect to those units, we've now reduced their number to 9 units, and these remain available to be quickly deployed into an accelerating market. Next slide, please, operator. I won't go into all of the detail on this slide, but we're often asked about our sales strategy. In brief, we work closely with the laboratory companies, which support PhotonAssay adoption by directly marketing to local miners and explorers. Within Chrysos, we have a team that supports their efforts with the obvious outcome that higher utilization of our deployed hub-and-spoke units drives unit margins. Our mine site deployment strategy is targeted toward the larger gold miners, conversion of which creates an adoption blueprint and provides confidence for other miners to adopt PhotonAssay, effectively creating a snowball effect. These deployments are further supported by our technical services team, which is made up primarily of metallurgists and geologists that can ensure that miners are getting the best value out of their adoption beyond just a like-for-like replacement for fire assay and ensuring the best experience with the technology. While most of our samples come from the hub-and-spoke laboratories, as shown on the right-hand side, we have a growing volume originating from mine site deployments, which remains a key focus for Chrysos. I would also point out in this chart the increasingly sharp rise in sample volume, reflective of ongoing adoption of the technology and more recently, accelerating sample volumes coming through the industry. Slide 9, please, operator. The chart on the left here illustrates our current penetration into the mining industry. Mindful that we've only had PhotonAssay operating for 7 years in an industry that is conservative and often slow to adopt new technology. We consider this to be a huge achievement and it showcases the near-term future potential. Each slice represents one of the largest 20 gold mining companies by production. The yellow slices indicate those companies that are actively using our technology across one or multiple mines, either directly or via one of our laboratory partners. Every one of these companies offers future growth where we are not yet running all of their samples because they are all multi-mine operators. The blue slices represent those companies where we've completed one or more paid feasibility or implementation studies. For some of the larger companies, this often spans multiple deposits and ranges through exploration, geology, production geology and metallurgical analysis. These companies are each near-term conversion opportunities where we remain in active discussions regarding either technical or commercial aspects of PhotonAssay. All of the studies have successfully illustrated PhotonAssay's applicability to displace existing analytical techniques. Lastly, the gray slices here represent future potential, albeit some of these are within countries that we're not looking to operate in at this time. Over the past couple of years, we've demonstrated an excellent track record of mining conversion, most recently bolstered by our agreement with Newmont. Slide 11, please, operator. Our view as a company is to be the world's leading provider of innovative assay services and technologies, and that really starts with our PhotonAssay technology. The goal with PhotonAssay is to convert all major gold mining projects around the world to PhotonAssay, displacing their incumbent analytical techniques. We're building strategic partnerships with our customers, which are both major miners and laboratory companies. We're now supported by all 4 of the major global laboratory companies, complementing our relationships with our other laboratory partners, MSA and Britannia. These partnerships are key to our success, and we work closely with our partners on new opportunities. Our business model, which operates as a fee per sample, reduces barriers to entry, minimizing the investment required by our customers, making for a very simple adoption proposition. Our commitment to availability and performance of the equipment supported by our global maintenance team derisks adoption for a technology that becomes critical infrastructure for the mine site. For Chryso, the business model offers a long-term annuity style revenue post deployment, where our economics are supported by our minimum monthly assay payments. We also retain exposure to industry upswings where our additional assay charges can drive unit profitability higher as we're seeing over the last few months. On the right-hand side, we illustrate market penetration into our total addressable market. Our TAM is made up of hub-and-spoke laboratories accounting for around 200 deployment opportunities and miners, which account for around 410 opportunities. Once the mine is large enough, it requires site analysis to operate. Otherwise, it would be effectively running its process plant and mining operations without any information. As a gold mine processes more tonnes, it generally correlates to a higher volume of samples. We've estimated our total addressable market as those mines around the world, which are mining at least 40,000 ounces of gold a year, equating to around $120 million in annual revenue. It's important to note that we consider the total addressable market as the number of sites for deployment around the world. And while we have 40 units deployed, we're only on 29 sites. This highlights that while we have had excellent adoption to date, we're still at less than 5% market share. So there's still considerable upside from here. Next slide, please, operator. This slide shows the distribution of our total addressable market and highlights why our expansion into South America is so important to Chrysos. South America represents around 20% of those mines producing more than 40,000 ounces of production, so it will be an important part of our global market. We're excited to be supported by Bureau Veritas for our entry into the region and consider that their well-established platform of laboratories in South America will accelerate adoption by miners in the region. Next slide, please, operator. I referenced our XN unit earlier in the presentation with that unit soon to be deployed to SGS into their Perth laboratory. We're excited to showcase XN and look forward to providing some of the quantitative differences between XN and our first-generation units in the future. XN is focused on providing the same groundbreaking photon assay analysis with even greater efficiency. That means less time to install, lower transportation cost, simpler operator interaction and reduced maintenance requirements. In essence, this system is designed to be even easier for customers to use while costing Chrysos less to install and maintain. We've successfully demonstrated the new automation used in XN when we upgraded one of our initial Intertek units with the Australian design and built system. We're pleased with the results and are now moving to roll out the complete XN generation. Next slide, please, operator. While the gold market remains our primary focus, there's considerable opportunity beyond just gold analysis. We currently operate PhotonAssay globally for gold, silver and copper and our scope to broaden that into other elements as well as other applications. Our ability to offer this broader service has been important in securing contracts with customers that have products that extend beyond gold. We're seeing increasing interest in our broader suite of analysis and have been working with our laboratory partners around the world to enable these additional services on their units. Slide 16, please, operator. We're pleased to provide guidance for FY '26, indicating another strong year of growth ahead. Revenue guidance has been set at $80 million to $90 million, an increase of 30% on FY '25 at the midpoint, and we are guiding to an EBITDA range of $20 million to $27 million, which is a circa 50% increase on FY '25 at the midpoint. While we see elevated samples in the industry, and we are cautiously optimistic that the cycle is on the way up, we remain conservative in any flow-through into the guidance range. Next slide, please, operator. Summarizing the year, we've had robust growth of revenue and EBITDA, up 46% and 80%, respectively, supported by an increasing EBITDA margin from 20% to 24% year-on-year. We fulfilled our original guidance for both revenue and EBITDA despite guiding towards the lower end of our guidance during our first half release, reflective of accelerating deployments and increased industry activity following the first half. We deployed 11 new units during the year, bringing our deployed units to 40 at the end of the financial year. Between FY '24 and a couple of months post period, we've had some excellent progress from a strategic standpoint with strong growth in our relationship with SGS with 4 units related to SGS deployed during the year, including 2 direct to mine sites in support of Barrick and OceanaGold. We're also excited to be deploying the first of our next-generation XN units to SGS in the coming months. Our master services agreement with Newmont has already streamlined adoption of their second PhotonAssay unit with units to be deployed to Ahafo in Ghana and Merian in Suriname during FY '26. We've entered a foundational partnership with Bureau Veritas for deployment into South America with an initial deployment into Antofagasta in Chile. While this currently has only one related unit, we look forward to the opportunity to convert a new region of gold miners to PhotonAssay supported by Bureau Veritas. We've also had our first unit where we've contracted directly with a miner where a major laboratory company has been separately contracted to run this unit. This 3-way partnership between Chrysos, OceanaGold and SGS is performing well and delivering the miner the best outcome. Finally, we remain well supported for future growth with cash on hand and available debt totaling $91.1 million at the end of FY '25. Thank you, and we'll move to questions.

[Operator Instructions] Your first question comes from Josh Kannourakis from Barrenjoey. [Operator Instructions] Your next question comes from Jules Cooper from Shaw and Partners.

Look, it looks like you've had quite a good finish to the year, just if we cast our mind back to the FY '25 closeout. The revenue came in a bit higher than what your guidance was that flowed through to EBITDA as we'd expect. But is that coming from, do you think that improvement in the cycle and additional assay charges coming through? I'm just sort of curious your comment there about remaining optimistic, but not factoring that into the guide. How have you handled that given what looks like a pretty strong finish to FY '25?

Yes. Look, great question, Jules. Thanks for the question. So it's certainly been a strong finish to 2025 with respect to additional assay charges. And I would say that's a function of 2 things. I talked earlier on about our sales strategy of supporting laboratories to bring in additional samples in the catchment regions that surrounds those labs. I certainly think that, that's bearing fruit. But in addition to that, we are seeing the industry itself picking up. Sample volumes are starting to increase after what's been up until 3 or 4 months ago, a relatively soft exploration market. As we mentioned in guidance, we're cautiously optimistic, and I think that that's reflected in what we've seen from some of the other companies that are releasing that are in a similar industry. And as I said, we just -- we haven't really baked a -- well, we certainly haven't baked any increase beyond where we are into guidance for next year.

Fantastic. All right. And just one follow-up one. Great news on South America, multiple units now going into that region. When we look at the cost base that's assumed there within the guide, if we just take EBITDA from the revenue, how much of that broadly is an investment into South America, do you think in terms of establishing a base there versus the other regional hubs you have and that sort of ongoing investment required in the business?

Yes. Look, that's certainly factored into those numbers. And the way that we've talked about this before is it costs us very little to deploy an adjacent unit to an existing unit, both for maintenance and kind of operating overheads. As we then have additional units in a country that we already operate in, that's a very small step up. And then it's new regions become a bit of a bigger step up there. So there will be establishment costs to get into the region, but those are included in the EBITDA. I think it's probably important to note as well that we've talked about having these 4 major regions for us. So APAC, North America, South America and Africa or EMEA rather. This then establishes us in all of those regions. So where we've had step changes in costs as we've expanded in the past, this now really has all of those costs built in and everything becomes incremental from here. Yes, excited to get into that region.

[Operator Instructions] Your next question comes from Sam Clark from CLSA.

Great result. I'd just be keen to understand the timing around the new XN model. You mentioned deployment is going to be a bit quicker. Just be keen to hear a little bit more about that.

Yes, absolutely. No, thanks for the question, Sam. This is something that we're always excited to talk about, but we probably don't talk about it much. So we have, within one of the Intertek units already in Perth, replaced the automation in that unit to effectively test our XN automation. So the automation is one of the big aspects of the upgrade there, and that's now been running for about 6 to 8 weeks at full capacity. The XN unit then that incorporates that automation, that's the complete new design, so smaller footprint, lighter, easier to install, easier to operate, easier to maintain, is probably 3 months away from being installed. So it's actually been built, factory tested in China, and it's now being boxed up and shipped to Australia. So this is a very near-term deployment for us. So later this year or early next year, you could certainly expect some more quantitative results as to how that unit is performing and the impact on exactly the things there that I'm talking about.

Great. And then yes, back to maybe the guidance. I just -- sorry, I didn't quite miss that a little bit from Jules. But -- so the $80 million to $90 million, is that basically assuming pretty similar levels of AACs now and then MMAPs coming through from the current deployments pretty much?

Yes, correct. So we take a conservative view on the AAC and then we build in our models for the MMAP that will come from each unit going forward. So I'd say that we don't consider the industry to be improving from where we are at the moment. So there's potential upside there.

Your next question comes from Josh Kannourakis from Barrenjoey.

Second time lucky, sorry, the web phone wasn't working. Can you hear me okay?