Goldplat PLC (GDP) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen and welcome to the Goldplat PLC investor presentation. [Operator Instructions]. I would now like to hand you over to CEO, Werner Klingenberg. Werner, good afternoon sir.

Yes. Good evening, James. Good evening to everybody that's dialed in. I must say it's a lovely spring evening here in the Southern Hemisphere. I'm looking forward to give you an update on the fourth quarter and also bring you up to speed with current events at Goldplat PLC. I think it's for all the new listeners, I would just want to give you a quick overview of Goldplat. The business is a cash-generative business, and I would like to talk a little bit more about that later. Our focus is on recovering value from previously mined material on behalf of current and historical mining industries. We get different types of feed material. And when we go through a slide later, I'll indicate to you what that exactly is. And we've got operations in Ghana. As well as in South Africa. Both of those operations and the three different types of material, all coming out of the gold industry. In South Africa, we do a little bit PGMs and the material that we treat is being sourced throughout Africa as well as South America. It's quite a niche operation. It's been going for more than 20 years. It's been listed since 2006. And we've got quite a good experienced management team throughout all management levels that's built expertise in terms of how to handle the material that we treat. I think most of you is aware of our tailings facility and the JORC resource. We've got on that facility that was done back in 2016. It's a tailing facility in South Africa, at our Benoni operation, which is basically the material that we have deposited over the last 20 years. It's got 82,000 ounces of gold on it as for the 2016 assessment. What needs to be noted that at that point in time, there was roughly 1.5 million tonnes of material on that facility. That has grown to 2.3 million. So obviously, the expectation is that those ounces contained has increased. The grade of that facility is running for the JORC resource at 1.76 grams a tonne. It might be slightly lower now around 1.5 grams a tonne, although that has not been evaluated and apart from our understanding of what we put on to the facility after 2016. As indicated, the material renew process comes from either the historical mining industry or the current mining industry. And is by products that, in a way, will become waste, if not handled or treated for those suppliers. And for that reason, we believe we are a green gold producer that is assisting the mining industry to maximize the value they recover from their activities throughout. So if we then look at what that means for the last quarter, which ran from April to June 2024, you'll see that we had quite an excellent -- not a quite -- we had an excellent quarter, specifically in Ghana, chief operating profit of GBP 4.3 million for the group. That needs to be noted that this excludes head office cost, listing costs in the group, which as well has been foreign exchange costs that we'll talk about now as well as interest charges and tax. Most of these profits was derived out of Ghana, achieving a GBP 3.7 million operating profit and South Africa turning operating profit of GBP 600,000 for the quarter 4, which is good news after the last experienced in quarter 3. Now all of this transpired into -- for the two operating entities combined a profit before tax of GBP 2.9 million. So that now includes foreign exchange losses, interest costs. And which you could see if you -- it's around GBP 1.3 million for the period. And we'll talk a little bit about what those foreign exchange costs relates to but the net cash position at the end of the period was GBP 3.8 million and remains strong but has been invested into working capital subsequent to 30 June, and we'll touch on that a little bit later as well. Now apart from the good results in the quarter, there was a few other events that needs to be noted. I think most importantly, in Ghana, apart from the good results, we also got to a point where from the authorities in Ghana, they are looking for more local beneficiation of material. They don't want concentrates to be exported. And our focus has turned towards beneficiating our concentrates to doré bar in South [indiscernible] in Ghana. That will require we submitted the proposal to authorities so roughly around GBP 900,000 of investment to enable us to recover that value in doré form for export. As indicated in our RNS, this means that in the interim -- well, not in the interim, actually, our business model in Ghana will be changing. We will see that our debtors in the future will reduce because you can turn doré bars into cash a lot quicker, probably within a week or two, but obviously, we need to upgrade our facility to be able to process materials. So we'll see a bigger increase into inventory on hand and on site over time. Our focus is to be able to find a way where we increase our ability to process to an extent that actually, we are going to be turning the raw material faster than what we've done in the past. If you recall, normally from smelters, we only got paid roughly 120, 150 days later. That's excluding shipping time to those facilities. So this change will result in us being able to -- as we establish better processing facilities in Ghana to turn around our material a lot quicker. But in the interim, it does mean that we are investing a lot of working capital into inventory, whilst we start recovering those value in doré, there is some changes required. Some of it is easier, if I say some of it is easier, some material can be recovered quicker and easier through our current infrastructure. Others will take a little bit more time. And we're doing good work and good progress with that and keeping on engaging with authorities to make sure they're comfortable with the changes that we are implementing on site. Apart from the changes, I think what's also important to mention around Ghana and the quarter that's passed, is that the good numbers was some -- as a result of good supply out of West Africa, Ghana, as well as South America during the quarter. Some of those was unique and although we have remain to receive a steady supply from different areas, it doesn't necessarily all indicate to material that will be repetitive quarter-by-quarter. And some of them might be over a longer period of time, but we won't see some of those material coming through every quarter. And we can talk about that maybe in a bit more detail later. I think further to that, if we look at South Africa and the performance in South Africa, it's -- I think the results in South Africa has been driven by a lot of improvement efforts from management side trying to realign costs in terms of the current supply of material we get. In South Africa, we've got three main suppliers. One is surface sources that normally comes from historical mining activities, that's contaminated either soil or left some waste rock dams or other types of dams that soil contains value, but that need specific processes that you normally find a bigger mine sites to recover the value. We also received wood chips from underground that comes from pillar support being used in industry. Underground as well as the byproducts, which predominantly is fine carbons, but it can also be anything else that ends up being contaminated in the current mining industry in their plants and operations. So over the period, we have seen a decline on the wood chip side and the by-product side. And that's mainly just because we're seeing a lot of underground shafts being closed by our clients, focus being placed on reprocessing some surface sources material that's available. And we are looking at ways of realigning the business to make sure we cover maximum value from the surface sources we still get as well as from the wood chips and byproducts that we're currently getting. And that will require some refocus, realignment on our side. I think then, obviously, the elephant in the room and has probably been for a couple of years remains the processing of our tailing facility. As you're aware, the good news is that, I mean, over the last year, we have not been depositing on this facility. We've moved to our new facility adjacent meaning that this facility is now a resource that can be reprocessed. Now although there has not changed a lot from the previous quarter in terms of where we are, there's been a lot of activity. There's been a lot of energy around actually moving this forward. We've engaged with some DoD on a regular basis. There's a lot more synergy and alignment in terms of what needs to be achieved and done. The big outstanding remains approvals around the pipeline. So the pipeline is basically 5-kilometers plus/minus due to the nearest facility where we can join up with current infrastructure. And that in the past, there has been surface like permits and things in place. However, this has run through some areas that is sensitive. And for that reason, we needed to change the route. That means we will require some servitude to be put in place, as well as then getting a general once -- it's basically just one water use license for the pipeline for the 5-kilometer pipeline. And we're working closely with DRD in terms of establishing all of that. I think in terms of the tailings facility, obviously, we want to aim to get to a point where we've got commercial secured with DRD, we've got clarity around the pipeline, and that will make it a lot easier for us to provide numbers and details in terms of what they expect the recovery is. Until then, until we don't have commercials, the figure can vary quite significantly in terms -- until we've embedded that now. But we'll talk about that slightly later on answering one of the questions as well. Before we maybe talk about the key data, I think what we also need to look at is the impact of some of these changes and on some other areas that we need to consider on behalf of shareholders. I mean, obviously, the company has been doing well, but there has been factors that's also impacting on our cash flow, on our cash flow forecast at the end of the day, we've got the GBP 900,000. We need to invest into Ghana. We also have the working capital lockup due to the change in processes and business model in Ghana as well. And then we also have South Africa going through an interim step of change in terms of the type of feed and how we process and realign there. This is impacted management in terms of their ability to look at deterioration of dividends in the short term. We hope that most of -- well, I think we believe that we'll see that, that will be released over the next 4 months and we can start looking at an allocation of money to shareholders in whichever way it fall. I think I can make a statement in terms of the Board, in terms of management that the nature of the business, the fact that it fluctuates based on supply and is very much supply focused, rather than processing focus means that as we do generate and find free cash flow, we need to look at sharing that with investors. And that has been the plan for the last 18 months. And hopefully, we can find a period. I think -- I mean to say in terms of that, if we look at the changes in Ghana because we're moving to a place where we can process the material ourselves when more of what needs to happen is inside of our control, that will increase visibility tremendously. And in time, we'll make it a lot easier for us to see cash flows coming through to plan and to enable us to share cash going forward with shareholders. For those that's new to the call in terms of Goldplat, just to give you a perspective, we are current share price is just over 6p trading at a market cap over just over GBP 10 million. That obviously gives the last quarter some perspective in terms of how well we have done. I think the next step around that is that we can't say we've done well in terms -- until we have shared value to shareholders and whether that's an increase in share price or whether that is through sharing some value through dividends or share buybacks or whatever means. And that's the main end. And I think that's become the key focus to the Executive Board is that we need to make sure that the shareholders see value, not just the bottom line. And if we look at our Board, we've got extremely experienced Board and with a lot of experience in mining, a lot of experience in Africa. And we also have our main shareholder owning 29% who is part of the Board and obviously driving the interest of shareholders as well. I've spoken a bit of what Goldplat does a little bit earlier in the call, I think this slide probably breaks it down quite well. Our clients is mainly Blue Chip listed Mining Entities and Groups from where we receive byproducts, our Ghana operation is only focused on current mining industry. And in South Africa, we also focus on elements of the historical mining industry as well as the current mining industry supply. And that specifically in South Africa is where we're seeing the decline is on the current mining industry supply of byproducts. The types of material we get is fine carbons, it's mid liners and woodchips, grease. It's really anything that's being contaminated in the industry. We have done a lot of cleanups at old mine sites. We're actually doing -- busy with some in South America as well. So we really look at extracting value from anything that ended up being contaminated and containing gold. Our process is extremely diverse to be able to deal with a diverse set of material that comes to us, that includes normal milling, gravity leaching circuits. But we also have abnormal plant in our circuits that you won't find in normal gold mining industry like a jig that helps an assist with moving the amount of carbons that's in the material that's being supplied to us. We've got wash plants to treat the material we do receive. Rotary kilns we also deal with some of the carbons and some of the contaminants. And then we've got various other circuit shot blasts, some other incineration units as well as elution plant. And in the end, we generate doré bars as well as concentrates. Obviously, in Ghana, the focus is now on generating as much as possible doré as what we can. As indicated, we see ourselves as a green gold producer. We also -- because of the nature of our industry is quite focused on making sure our sourcing is responsible. We follow the LBMA guidelines as far as possible, and we're also getting audited on a regular basis by them and the auditing firm to make sure we align with those guidelines. And although we're not a member of the LBMA per se. If we then look at gold recovery. I think these slides we've already dealt with indicating to you what performance for the last quarter was and but I like the heading saying that our gold production is definitely different than what you'll see any place else. If we then look at where the main focus for the two operations is in South Africa, the focus, same as Ghana is on supply. Our supply is extremely important in terms of maximizing our recovery at the end of the day, when walking through our plant the other day in South Africa, I just noticed the beginning. And we only have a very good kit. We have good people and staff, we've got the ability to recover. The focus is really on maximizing the supply and ensuring we process it through the right circuits to optimize recovery. In South Africa. Obviously, as indicated, the main focus remains on monetizing the tailings, and I've already discussed that. We're still looking at ways of diversifying into other commodities. Although we haven't spent any capital on that in the last 2 quarters per se. In Ghana. The focus as in North Africa is in supply of material. But in the recent quarter, obviously, that has also been towards upgrading and changing our plan to make sure we can deal with concentrates and upgrade that to doré for exports. And we have actually progressed quite well in terms of that. We also, again, utilizing some unique processes that we want to optimize to a point that we potentially can extract further value from that, whether taking it to areas where we can't currently source material from. And maybe there's a way of treating some of those material closer to source and to maximize the value we can provide for clients. International sourcing. As indicated, we're putting a lot of effort in it, has made a lot of good progress in South America. And as a result, we're still aiming to see if we can and we'll do on a measured basis, increase our footprint and our operating capacity in Ghana going forward. So I think in conclusion, the focus for the next quarter will remain on sourcing, as I've indicated. It will remain on marketing efforts in West Africa and South America. The two key ones for me is the local beneficiation in Ghana. I'm making sure we can extract as quickly as possible the value of material we do receive -- it's obviously also on the tailings facility that we've discussed and then return of surplus cash flow to shareholders. It's become a talking point in our Board meetings and it's definitely the aim and actually sort of the key indicator if we're achieving what we're setting out to achieve. Profit is one thing. If we can't share cash, then obviously, we're just making things turn in circles and not adding value. Okay, James. I think that's sort of a quick summary of where we are and about Goldplat and where our focus is. I'm happy to move to questions.

[Operator Instructions]. Werner, we obviously received a number of presubmitted questions ahead of today's event. And as you can see there in the Q&A, we've also received a number of questions throughout your presentation this afternoon as well. So firstly, thank you to all of those on the call for taking the time to submit their questions. And Werner, if I may point and back to you to read out those questions and give your responses where it's appropriate to do so, and then I'll pick up from you at the end.

Yes. Thank you, James. I think I want to start in just saying that some again, I've just realized the value of these investor meet company engagements. I think from the questions, that's been submitted before the event. And even the questions that's noted afterwards, it's clear where the market is. It's clear where the uncertainty is. It's clear what the market are looking for. And I think there's been a lot of detailed questions that has been submitted and beforehand. I think some of them probably we will not be able to deal with in detail tonight. But I have had a discussion, and I think it's -- a lot of those are things that we need to find a way, and we'll find a way of making sure we address those questions. And so if we can start getting to a point where your views and our understandings are aligned, a lot closer. I'm going to go through the questions. I'm going to try and sort of summarize the general themes that is coming out of these questions. And then if there's anything that we haven't addressed. I apologize for that, but we're definitely going to make some effort to try and get more clarity to you. If not tonight, in the near future. I think starting, obviously, the focus again is on the tailing facility that we've discussed. And I think that all from a lot of you is to try to get more clarity in terms of well, what is the detailed financial plan? What are we looking in terms of recovery from those? And I think the question is more around, well, can we make any commitments. There's obviously a lot of text book that's been done. There is a lot we know, a lot we understand. I think Obviously, those are only possible if we have pipelines in place if we have commercial finalized. And the only reason for the delays in the commercials is because if we don't have all of these others in place in perspective of those that's going to process the material finalizing the commercials is less important in their lives. We do have a good view in terms of what we're looking at. And we will engage and see if there's a way we can share that with you because all of this will need to be caveated to the fact that it depends on what the final arrangement is and what we do have in place. I appreciate the concern, and it's definitely something we need to look at giving you some more detail on. I think, I mean, on the dividend side, I've already discussed where the position is. And I think it's important for management to get to a point where we can add value to shareholders, not just to the bottom line. Obviously, if you look at the quarterly announcement, you see the GBP 3.8 million cash you see the good numbers out of Ghana. There's a feeling that some of that can be shared, but with the changes in Ghana with the requirements around inventory and the investment in inventory at the moment, this is unfortunately sort of a period we are looking at making sure we deal with this interim requirements. And once we're there, we probably will have a lot more clearer and solid place from where we can look at dividends and dividend situation. So, I think there's been questions around, well, what is the new norm or is this the new norm in Ghana in terms of results? For the quarter, I think I've already indicated that some of it might not repeat. But we do have a steady supply in Ghana of material. And we -- and I think, I mean, for me, the main focus is to get to a point where we have a stable base that on which investors can actually start making some future assumptions and make the assessment of the current performance a little bit easier. I'll move on to further questions. There's been questions around exchange losses. I think what is important to understand is that we mainly deal in dollars, specifically in Ghana. So supplies in dollars, sales is in dollars. It's gold-related and that a lot of the foreign exchange losses that you are seeing is actually trading related. And if you look at the numbers, you actually need to combine the two. We actually have the use of saying where we should potentially put it in the future, meaning that a loss has probably been -- also has additional benefits on your operating margin on top. So you probably need to set them off against each other to get actually the right margin at the end of the day. Because you should not be seeing impact on margin because both supply and the cost side is basically based in dollars. Okay. Let me look here. There's more questions around dividends. Some -- there's a question, and I guess this is probably going to be a bit more subjective to answer around. Well, is there any risk of mining companies could decide to duplicate? I've always said that probably our greatest competition will either be mining companies, but we've never seen that really happened. We've seen some people trying stuff. But you need scale, you need focus and else is probably not worth it. So I don't see that is an aspect in the near future. There's a question around constraints in Ghana. I think I've already mentioned that as part of the presentation. You've probably all seen in the historical presentations that we say that Ghana has the ability to handle what we source. And that is true to the point of how we actually did business before now that we need to convert to doré, there's a bit more extra investment that will be required. We've mentioned the GBP 900,000. And that's something that we will be looking at in terms of getting done. There's questions that aren't -- whether we should replicate what we're currently doing in Ghana and Benoni. Again, I've indicated that the processes in South Africa looks totally different than in Ghana. And there might be some advantages in terms of what we're doing. That being said, the volume of byproducts getting received in South Africa is a lot lower. So the benefit in terms of doing that will need to be evaluated, but it's definitely something we keep on considering. Just making sure I got the missing stuff here. Okay. There is a question around the pipeline and whether the new tailings facility can also be processed through that facility. There is options of looking at doing that. There is some metallurgical questions around for what the recoveries will be. And I mean the one advantage is where you've got a little bit of all the -- is that through certain oxidation, and you probably will find that recoveries does improve over time. But it is something that we will evaluate, but it's not something to consider in the short term. Okay. There's some further questions around dividends and maybe trying to do smaller dividends on a regular basis. And I appreciate that comment on early it's something we do consider. And then there's a question around evaluation of financial plan in terms of what the capital expenditure and working capital investments are needed for the next 3 years? We have been trying to sort of give a sense of the market in terms of what will be required. The focus at the moment is really to ensure that we invest into Spain business capital as much as possible. Obviously, the requirements in Ghana is unique and ad hoc. And once we've got that in place, and we would be in a position to actually give a bit of a clearer view. I think the -- I can say that the focus is really on trying to maximize what we've got at this point in time. And we haven't spent a lot of additional capital on trying on growth at this point in time. It's more about making sure that in maximizing cash flow and starting to ensure that we return value to shareholders in the near term. Okay. I apologize. There's a lot of questions. Some of them are repetitive and just stated in a different way. And there's questions around PGMs and how similar that is to gold, I think. The easiest way to answer is the PGM metallurgy is totally different than gold, meaning the byproducts being generated is totally different. And the ways of processing it will also be different and there's a lot of evaluations that needs to be done. Most of the byproducts being generated in the PGM industry is lower grade and is more volume. Meaning you'll actually need a new facility closer to source to deal with it. We're more focused on smaller volumes, higher grade that we can handle, and that's what we've been doing and over the recent past. Okay. There's questions around share buyback. I think in the past, I've also always indicated the first focus is to make sure we've got free cash to be able to share with shareholders. Once we get to that point, at that point in time, we'll focus on saying what is the best value for the shareholders. Is it to return in dividends? Or do we think at that point in time, the share prices of such a nature that buying back shares might be of more value. And there might be also other terms we evaluated at that point in time. So unfortunately, that is only a question that can be answered at the point in time that we decide to allocate capital back to shareholders. With your production improvements, do you return or reprocess material and give it a second pause? Thank you for this question. I guess as a rule, well -- it differs from material to material. And we've indicated that we have implemented the float plant in Ghana. And last year, that's actually doing extremely well, where we're trying to increase the value from lower-grade material that remains from clients to maximize recoveries. So there is instances where we try and improve and try and maximize value from clients. In terms of the split between gold and PGMs, I think at this point in time, the assumption should be that most of the revenues coming from gold in South Africa. Just to answer that question, what is the lead time to make investment changes in Ghana? As indicated, some of those changes has already happened, and some of it probably will take closer to 6 months. And depending on one or two lead times, there's some approvals that we also need from government just to get their blessing in terms of what we're busy with that might impact some of these changes, but a large portion of it we already making use of our current facility to turn around material in country. Sorry, I'm just going up quickly to make sure I haven't missed, there's been so many questions. I think most of the questions has carried the same line, a lot of them is around TSF, A lot of them is around dividends. And I think I've probably also addressed some of these during the presentation itself. There is some detail of questions that I think is important to handle and treat. And I think the best is going to probably be to prepare some sort of a response and make sure we share with all shareholders just for everybody's comfort and certainty. As indicated at the beginning, I really, really appreciate these interactions. And sometimes the focus on our side as management is trying to deal with certain operational matters. And we forget that you probably have some questions that you're not going to know of. And we might say stuff in the RMS that maybe needs some more clarity. So I really appreciate your questions, and we definitely will look at and giving you a bit more detail and comfort and certainty around some of these.

Perfect. Ben, if I may just jump back in there. Thank you very much indeed for addressing all of those questions that you can for investors. And of course, it will be able to give you back the questions that were submitted today just for you to review, to then add any additional responses, of course, where it's appropriate to do so, and we'll publish all those responses out on the platform. But Werner perhaps before really just looking to redirect those on the call to provide you depth feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments to wrap up with. That would be great.

Yes. Thank you, James. I think, I mean, I probably mentioned it at the end of my presentation is that the focus -- I think that the main areas for us at this point in time, TSF, local beneficiation, maximizing feed and putting all of that together to get to a point where we can start adding value to shareholders because until we've done that, any profits any good quarter is actually not of any value. And that's really the focus from our side.

Perfect. Werner, that's great. And thank you once again for updating investors this afternoon. [Operator Instructions]. On behalf of the management team of Goldplat PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good evening to you all.