Gruvaktiebolaget Viscaria (VISC.ST) Q3 FY2025 Earnings Call Transcript & Summary

Warmly welcome, everybody, to Viscaria's report for the third quarter 2025. This period, July, August, September has been an extensive and intense period. But the main presentation today will actually be about what has happened after the quarter because all that work in July, August, September resulted in some significant events. First of all, on October 14, we disclosed to the market that we have signed a mandate letter with the leading mining banks, Societe Generale and ING for a debt financing -- project financing package of SEK 3.9 billion. And that project financing is aimed to be closed around Q2 next year. The signing with SocGen and ING, that was a result of a structured and extensive market sounding process throughout the whole summer, where we were impressed to see significant interest from a number of other European leading financial institutions. And SocGen and ING, they were chosen as MLAs, Mandated Lead Arrangers, due to their market-leading expertise in financing mining projects. We then followed that up on October 22 to announce that we have completed a directed issue of approximately SEK 800 million. And we are impressed with the outcome of that. Almost 86% was again Swedish investors. And we were also welcoming new institutional investors like, for example, AP3 and Unionen. And this means now in combination with other institutional investors increased their shareholding. That results that we now have institutional shareholdings of more than 20% in Viscaria, which we're very proud of. In connection with the directed issue, we also launched an intention to execute a rights issue, where all shareholders are entitled to defend their shareholding later on this year in the amount of approximately SEK 700 million. And subsequently, we sent out a notice for an EGM that will be held physically in Stockholm on November 19, where we will take the decision of the rights issue. And as many of you have seen in our press release of the notice to the EGM, you can also see that we have received undertakings from some of our largest shareholders with up to 3x their pro rata holdings today. And that, together with many other shareholders' undertakings to participate in the rights issue, among others, me myself, that entails that the rights issue is expected to be fully subscribed. On the same day, October 22, we were also proud to inaugurate our water treatment plant in a festival way that day with participations from both the Swedish and Finnish government. You know that the main supplier is the Finnish company, Atria. The plant is a result of a work that we have conducted the last year. The total investment is around SEK 500 million, and we started the construction of that plant on November 11 last year. And to complete such a complex construction in less than a year is nothing else than outstanding. Of course, this is a result of a fantastic work from all our brilliant fellow partner companies, but also our own employees and consultants. And then we have a lot of other infrastructure work ongoing at our site. We are completing the rail yard and where we will connect ourselves to the rail line on June 14 next year. And we also are doing the new tailings. We are doing the groundworks for our new processing plant. I will come back to that, and a lot of other things is happening. So a huge amount of activities at our site. So our new cap table, which you see here after this directed issue, you can see that many of our largest shareholders actually increased their shareholding, i.e., they subscribe for more than the pro rata shares. So Thomas von Koch now holds close to 14% and both Robur and AP4 increased their shareholding, so did also Jan Stahlberg and Santhe Dahl among others. And then you can see on place #7 and 8, we have Unionen and AP3, which we're again very pleased to welcome in our cap table. And we have an extremely strong cap table, as you can see. So Viscaria is one of the largest copper projects in Europe. And not only that, we're one of the few projects in Europe with copper that will have only 2 years' time to market. You know that we are aiming to ship out our first copper concentrate by the end of 2027. We have exceptional conditions to have a mine site in a city like Kiruna, with all that expertise with subcontractors here with the closeness to the railway and other infrastructure. And of course, I mean, we have the electricity power from hydropower, which means that we have a very low CO2 footprint. And we also continuously do exploration and drilling now, but I'll let Ross talk about that a bit later. So this is a render picture of our site today. But for every month, the rendered are exchanged with a reality. So we start in the top middle there, you see the water treatment plant. That is now ready and inaugurated and is under commissioning, i.e., we're not pumping out any water to the recipient yet. We're pumping around the water to make sure that all the sand filters, ion exchange filters, valves, everything works in a proper manner. And of course, when we are seeing that everything is working in a perfect way, we will start to release the water into the recipients. The parking space is basically ready. The offices that you see there is now 3x as large as that. We have 2 new wings as big as the old office. And then just recently, we received a temporary permit to Viscaria Village from the municipality Kiruna. And the Viscaria Village is a place where we can house 132 beds for our construction workers during the 2-year period. That means that we will release the municipality of Kiruna with having contractual workers taking -- lay their hands on housing and other apartments. So we maintain that for ourselves, and we're very proud of doing that. The rail yard to the right is then to be ready again by June next year. The laydown area is, of course, in place already because there's a lot of material coming in every day and going out to site. The power station that is under construction together with [ Bakterfalish ] is expected to be ready by the end of next year. And then the processing plant, the huge building, 6,800 square meters is now under construction in terms of groundworks, and we expect to start the construction of the building by February next year. Yes. So the inauguration of the water treatment plant is worth mentioning one more time. We're so proud of that. And it's a combination of sand filtration and ion exchange filter, but we're doing it on a large scale, i.e., with a capacity of pump more than 1,000 cubic meter per hour through the system. It has been a fantastic experience to see how we were able with so many workers to conclude such a complex plant in that short time frame. So it was worth celebrating in a big way on October 22, where we also had 200 subcontractors on dinner that very same evening. We are today between 230 and 250 people on site, 7 days a week. We are actually a bit less during the weekends, maybe some 100, 130 but there's a huge amount of activity. We have approximately 50 big machines, excavators, dumpers, other trucks on site. So for every month, the whole site is changing character due to all the construction work. Things are really happening fast, both in terms of tailings, the new processing plant and all other construction work. And with that, I hand over the word for Ross before I come back.

Thank you, Jorgen, and good morning, everyone. For Viscaria's geology team, we can say that Q3 has been a period that's been all about keeping momentum with the exploration, whilst also exploring other opportunities as well. So far, in total over the year, we drilled 28,000 meters, and we currently have 3 drill rigs on site. These drill meters have been spread mostly in the Viscaria area, but also in our surrounding exploration permits, too. We plan to keep 3 rigs operating on site for the remainder of 2025, but to also keep this momentum into the next year as well. From the near-mine exploration results that we've obtained already, all this points towards future resource growth, both in the D-zone and the B-zone as well. And we'll look at both of these areas in more detail in the upcoming slides. Not only are we focusing on the near-mine though, but we're also, again, trying to realize and make our Grand Viscaria vision a reality. And as part of this strategy, we want to further consolidate our exploration rights over the most prospective parts of the Kiruna district for making further copper discoveries. And so just last week, we've applied for a new exploration permit. So I will show you some more details from that as well. And then finally, we have some really exciting news. Summer next year, 2026, we plan to carry out a reflection seismic survey in collaboration with Uppsala University and BitSimNOW. All of these topics we will cover in more detail. But first, let's have a refresher on the Q1 presentation from this year. So during Q1, this is when we came out with our feasibility study for the Viscaria project as well as an updated mineral resource estimate for the deposit. And in this resource estimate, we saw significant growth, not just in the size or scale of the deposit, but also in the average copper grades as well. And this growth was focused in 3 main areas, which we can see on the cross-section of the deposit here, highlighted in these darker orange colors. In the ABBA zone, in the B-zone Deep and the D-zone Deep as well. Within less than 1 year and with fewer than 20,000 drill meters, we managed to define an additional 28.3 million tonnes of inferred resources. And within that, over 0.25 million tonnes of contained copper as well. So a really healthy return, of course. But for us, we really believe this is just the beginning. And with the exploration, we've not taken our foot off the gas. We've continued with near-mine exploration around the D-zone Deep, which we shared results from in the Q2 presentation, but also more recently turning some of our attention to this gap in the B-zone resource between B-zone Deep and the shallower part of the deposit, which we'll be happy to share more news in the coming slides. First, though, let's take a recap on those latest results from the D-zone, which again, we presented during Q2. Here, you might recognize this image from that presentation. We show the D-zone, which is outlined by this dashed white line. And within that, we have color contours, which depict the copper grades multiplied by the true thickness of the mineralization. So here, the hotter colors, they essentially show where we have the thickest and highest grade mineralization. So of course, if you look at the D-zone Deep, you can start to understand why we're so excited about this latest discovery. You can see in this deeper portion of the D-zone, these black dots, these are the pierce points from all of the step-out drilling, which we've then -- after the release of the resource update, we've carried out the step-out drilling and each of the 6 drill holes have intercepted mineralization, both along strike and at depth, showing that the high-grade copper persists within a really thick package of massive magnetite. So again, these results really point towards future resource growth, but it's important to note that in the D-zone, this is not the only area where we see that same potential. And we're starting to see that in the B-zone as well. So this brings us to today, this is what we want to show our latest results and the latest insight from the exploration in the B-zone. So similar to the last slide, we have a longitudinal section of the B-zone, which again has been colored by the grade thickness. And in the bottom left-hand side of the image, you can see in these hot colors, the B-zone Deep, this isolated resource that has 6.6 million tonnes at over 1% copper. And you might ask, why is that isolated this B-zone Deep? Well, we discovered and defined this mineralization through extension of several of the ABBA zone drill holes from last year. So really, the isolated nature is a product of the synergy that we had with the ABBA zone drilling in the previous year. But that's then brought many questions to light as is natural, of course. Why there is this gap in the resource? Have they drilled here before? Is this maybe faulted in this area? Has an intrusive rock emplaced itself into this space? Well, of course, that's what we're hoping to begin to answer with this ongoing drilling. And that brings us to this drill hole here that we see highlighted, new intersection, VDD25013B. Now it's important to say that we're still waiting for the assay results. And in fact, it was just a week or so ago that this drill hole was on the logging tables here behind me. The geology teams have basically just logged this hole, sent it to the lab for analysis. So it will still be a couple of weeks until we get the true numbers in terms of how much metals we have here. But I can say from the visual observation, things look really good. So this whole 13B, it was designed to target basically smack bang in the middle of this gap between B-zone Deep and the upper part of the deposit, and the results are really exceptional. So we've seen in the drill core an extensive length of copper mineralization over quite a broad interval of around 200 meters. And then within that, we've seen sections with more concentrated mineralization as well. The style of mineralization we can say is very similar to some of the deep B-zone holes that we drilled last year, which you can see outlined on the long section here, like 24115, 0127B and 24116 as well. And so of course, proving that these high grades -- this high-grade mineralization that we found in the last year, proving that this extends further up towards the surface, of course, has really big implications in terms of the assessing the future mining potential in this area. But again, don't let me get too far ahead of myself. Of course, there's more drilling to be done here, and we need to wait for the assay results. But at least I can say the early signs look really promising. And since we don't have the assay data, I thought I would try and show you some of the drill core photos as well, maybe so you can start to get like a wee bit excited. Maybe not as excited as me. But on the left-hand side, you can see a really nice example of massive magnetite mineralization that's been overprinted with the copper and iron sulfides as well. And this is from around 900 meters down the drill hole. On the right-hand side, we see drill core samples from around 130 meters further down the hole. And I'd say this is a fairly representative example of how the rocks look in the B-zone at depth. You have this bedded metasediments that have been albite altered, and then you have the copper mineralization, which is mostly concordant to those bedding planes. Interesting here is that we're noticing that the rocks are slightly more deformed than on average for the Viscaria deposit. So we see slight folding and also a little bit of evidence for remobilization of the sulfides as well. All right. But let's zoom out now away from just the near-mine setting. As mentioned, we also want to realize our Grand Viscaria vision as well. And a big part of that is always looking for new opportunities to further consolidate our exploration rights. So we've outlined and applied for this new area, Viscaria #123, which you can see on the map outlined in this -- by this yellow line. And if I click again here, we get rid of the satellite image and show the total magnetic intensity of the rocks. Basically a geophysical map. And I think there, we can start to see a bit more our rationale for staking this claim. So in the southern portion of the Kiruna district, where we have already existing permits, we can see several west, northwest trending structural breaks. And one of these extends up into this new area, Viscaria #123. And along this break, we see several and sometimes quite subtle magnetic anomalies in the periphery of this structure. And for us, this is an indicator that this structure, these breaks could represent major structural controls or conduits for the hydrothermal fluids that have made their way up through the system. And it's also interesting to note that this area actually became more interesting to us after our field mapping and the drone geophysics that we carried out in this area over the summer. So it's a direct follow-up to our field campaign. And finally, last but not least, we're really excited to share that we have plans to carry out a sparse 3D reflection seismic survey next summer during 2026. With this method of geophysical investigation, we're able to penetrate with deep imaging deep into the subsurface beneath the Viscaria deposit to potentially detect extensions of the mineralization, but also to map major faults as well, which is an important part of the continuous derisking when it comes to mine planning as well. So on the right-hand side of this slide, we see a schematic, which I think quite well illustrates how this method is carried out. So we'll have a seismic source at the surface, which works its way along profiles and generates and sends down waves into the subsurface. And these waves reflect back off of certain geological formations and structures and the reflected wave can be detected both by receivers at the surface as well as receivers down our existing drill holes. As mentioned earlier, this will be a collaborative effort. So we're going to be working together with the world-class seismic group from Uppsala University as well as the team from BitSimNOW that are developing this innovative sensing technology that goes down the boreholes. We've also applied for partial funding for this project within the Swedish Metals and Minerals impact innovation program, which is an initiative from the Swedish Energy Agency, Formas and Vinnova as well. So more to come on this topic, more to come on our exploration results in general. So my leaving message would be stay tuned. There's more to come. And on that note, I will hand the word back to Jorgen.

Thank you very much, Ross. So unfortunately, we don't have Frida today, but of course, she will be back on next quarter, but she was busy occupied with other important duties today. So I will take her part. And of course, I mean, to report the financials in a project like this, then it's important to highlight that you have control of your costs and that you're always well-funded. And we can see here cash flow for the period only negative SEK 24 million, but that is, of course, due to the fact that we draw some of the shareholder loans during that period closer to SEK 300 million. So the cash flow actually was SEK 300 million negative, which shows the high activity that we are conducting now. The same goes for the Q2 2025, where we also draw a portion of the shareholder loan. So there, we had a negative cash flow of approximately SEK 180 million, but you can really see the high intensity of the ongoing works that we are conducting. And we always have been proud to have a solid cash position and the cash and cash equivalents was on end of September, SEK 317 million before the directed issue. However, in the SEK 317 million, part of that is deposited for the reclamation to the court. But we have always been well funded. And we always talk also how much of our expenses we can capitalize. And on the top-hand chart, you see capitalization of our intangible assets like drilling and other preparation work. They are going down now because now we are starting the investments of tangibles, different type of plants, tailings, power capacity, roads and parking spaces, a rail yard. So the capitalization expenses in intangibles are going up quite rapidly now, and we'll continue to do that, as you can understand, for the next 2 upcoming years. So with this, I would like to summarize our Q3 presentation. And of course, I want to stress that we are a well-funded project and our continued financing is well advanced with the upcoming rights issue and also the project financing of SEK 3.9 billion. We have all permits in full legal force. We have presented a solid feasibility study, which is, of course, the basis for the attractiveness of the banks bidding to become a lead arranger here. So we're proud of that as well. And there is a significant upside potential in our project. We can see that not at least with the drilling exploration results that we have released the last quarters. A lot of infrastructure is already underway. We are semi-pregnant, having invested some SEK 2.2 billion already at our site. And that also means that we can ensure this short time to market, so produce some copper concentrate in just a bit more than in 2 years. And we have our site in a leading mining jurisdiction, Sweden. And also with the hydropower, we can produce copper with one of the world's lowest CO2 emission footprint. And we will also have a good and significant socioeconomic impact up here in Kiruna, where we will make sure that we will have more than 500 new employment positions. So with that, I welcome Charlotte Stjerngren up to stage that will be in charge of our Q&A session here. Hi, Charlotte.

Thank you, Jorgen. So I have prepared a lot of questions for you, but also for you in the audience, please write in the chat, and I'll keep track of that here, so you can pose your questions. A lot has happened, Jorgen. Let's start with the debt financing. You've mandated these banks, but what about the process going forward? What does this mean, the mandate?

So it's a quite standardized process, a project financing process. So that means that on the basis of the feasibility study, you are able to gain interest from leading project financing banks. And after the mandate letter, a number of due diligence processes will then be conducted throughout the winter. Some of the due diligence processes will be conducted by the bank and their organizations themselves. And they've been, of course, already visiting Kiruna. But many of the process will be conducted by external technical expertise companies and geology companies and processing companies and so on to make sure to give the banks comfort that all aspects of this project is solid and bankable.

Solid and bankable. So you aim to get the money in, in Q2 2026.

Correct.

There's a process before that. Are you worried that this deal will fail in some way?

No, I'm not worried at all. I have the highest respect for a project like this with all the complexity and challenges. But we know that we have a very solid project. We know that the feasibility supports a debt service coverage ratio, even at way more lower copper prices than the 9,500 that were in the feasibility study. So I don't foresee any problem with concluding the debt financing package. One should also remember that we have spent basically the entire summer with market sounding processes and the market sounding process is not a call out and say, hi, how are you doing? Or you need to look at our project. It's an extensive discussions, review of the FS, sending our financial models, proof testing. So a lot of the analysis work have been conducted and confirmed. So I'm confident in our continued plans.

So you mentioned that the financing you've been able to do now, it's dependent on the FS, the strong FS and also the copper price. What can you say about the copper price in the market right now?

I mean we -- the FS that is based on a copper price of 9,500, the debt financing package will be based on a lower copper price, conservative copper price scenario. But still, we can easily serve our debt at a way more lower copper price. Today, we have a copper price of approximately USD 10,500, USD 10,600. And we know that there is a scarcity of supply going forward for many years ahead, and the demand is growing. So we are not alone of having a positive outlook on the copper price.

And after this debt financing, you also managed to do the directed share issue. And now you have over 21% institutional owners. What does that mean?

I mean, 5 years ago, when we kicked this project off, it's a lot of risk. It's hard time at that time to find institutional money. They have a huge responsibility for all their stakeholders. So it's basically family offices, and you know me, myself and many business friends and participated in this initially. But the more we have been able to show solid substance in this project, we have then been able to attract institutional funding. And again, to have now institutional investors, AP3, AP4, Robur, Skandia, SEB-Stiftelsen, Handelsbanken Fonder, [ Ålandsbanken ] and Unionen, et cetera, et cetera, it gives us a great stability. You need big shareholders in a company like this. And so it means a lot for the continued stability.

Some would say that it is unfair that only some owners got to participate. What do you say to that?

This is a big project. It requires a huge amount of funding. It's important to get in institutional investors that have the capacity to support the company going forward. We have the upcoming rights issue, and we will have another rights issue to the spring when we complete the debt financing package. To have institutional investors means that you can see that they have the financial capacity to continue to support the company to defend their positions. And we also -- when you do conduct a directed issue, you have to defend that in a careful way, which you can see in the press release, the Board's considerations for executing the directed issue.

And you will need more capital. Can you summarize how much you -- because you're still not fully funded?

No. So again, after the summer when we have had this extensive discussions with potential project financing banks, an even more granular exercise have been done with our financial models. Where we now also could include financial cost, i.e., interest cost, financial fees to lending banks and so on. So the funding need before this directed issue was in total SEK 6.7 billion. And of that SEK 6.7 billion, we now intend to take in SEK 3.9 billion in debt financing and SEK 2.7 billion then in new equity. And of that SEK 2.7 billion, we now secured SEK 1.5 billion because, as you know, the upcoming rights issue is basically already underwritten. So SEK 2.7 billion, minus SEK 1.5 billion, that means that another SEK 1.2 billion then in connection with the debt financing closure in Q2 next year.

Another SEK 1.2 billion. And in all this financing, the feasibility study has been very important. I know that there are people in the market sitting there waiting for another feasibility study. What can you say to that?

There will not be another feasibility study. For those of you who have followed us, you know that I already, by the end of 2024, said that we will not release our feasibility study until we have proof tested it, got a second opinion, third opinion, a fourth opinion, because to release a feasibility study or definitive feasibility study or a bankable feasibility study, everything is a feasibility study. To release such and have to update it, then you lose credibility. And we are, of course, extremely proud that our feasibility study holds the fort and has proven to be an attractive basis for then, again, project financing banks to bid to become a lead arranger for this debt financing.

One thing that isn't clear from the feasibility study is who will buy your copper?

I mean we have said before, I mean, there's a huge demand for -- in Europe for copper. Europe imports almost 50% of all copper that we consume. We have 3 large copper smelters in Europe. They buy some of them 60% of the copper concentrate from Latin America, transporting that by ship, 12,000 kilometers with a huge CO2 footprint. So there's a huge demand in Europe for European copper concentrate.

You were actually in London a couple of weeks ago at London Metal Exchange Week. What do you bring with you from that?

It's the first time that we are presenting there. And it's quite obvious that we have flown under the radar for many international parties that has not understood how much we have invested in infrastructure, that we have all permits in full legal force. And again, that we are semi-pregnant with all the site constructions. So we have received a -- yes, we did receive a huge interest from many different players. And in this short time period, we have quite a few international investors -- sorry, industrial players visiting us here in Kiruna. So that has been quite fun.

Fantastic. So you're very proud of the water treatment plant, but you are also discussing amendments to the water treatment permit, so to speak, to the environmental permit. And we have some questions here on the web as well. Can you tell us about what's happening now that you've found higher grades of stuff in the water?

Yes. No. So the thing is that we applied in the environmental permit process. We applied at that time to drill deeper because you need to have a big hole, not just a diamond drill hole, drill deeper to do some dewatering to test the deeper water, but we were not allowed to do that. So we could only test the water in the existing shafts, old shafts on the old mine, and they just went down to approximately 50 meters. When we now have drilled our pump holes down to 320 meters. And as you know, we have started the pumps already on October 1. We found higher levels of uranium, zinc and sulfide. But none of those items are hard to clean or to treat. It's just that there are other levels than before. So in discussions with our county administration, [ Norrbotten ], they then proposed us or asked us, please send in an application to the court to make sure that everything is transparent that you need to show that you can treat this in a proper and appropriate way as well. And we don't foresee any problem to treat them. And of course, we will not release any water to the recipient that exceeds the value in our environmental permit. So again, we will do some more tests, and we do everything now in a transparent way, but we don't foresee any problem with that at all.

Good. It's at the court now and...

Yes.

Yes. So we have a question here. Ross, he had an interesting presentation. And now Christian Kopfer, at Handelsbanken, he seems to hope that is the resource target still 140 million to 160 million tonnes?

We are biased. We are -- of course, you're allowed to be biased when you are in the company and not at least me that is a big founder and CEO of the company as well. But we basically don't have any drill hole with any negative outcome. And the deep exploration drilling, just like Ross pointed out now in the old 13B with a lot of numbers before. It's all drilling results, and they're just confirming all the drilling exploration results from last winter. So as Ross said, stay tuned. When we get assets back, we will, of course, come back to the market, but...

And what timing did you have for this 140 million...

I mean we wrote midterm, so 3 to 5 years.

And then you hear something else that is the case or...

No, no, no. We will, on a regular basis, come out with, of course, exploration updates. Yes.

So you will now focus on the clearing of the mine and a lot of other things happening as you showed on the site. Which are the most important milestones going forward?

Yes. There are so many, so I need to think a bit. But of course, I mean, to conclude the commissioning of the water treatment plant, so we can start to release the water and walk into the mine and do the rehabilitation is important. The completion of the rail yard so we can connect ourselves to the rail line in June next year is important. The starting of the construction of the processing plant, the 6,800 meter dig plant, our largest capital expenditure. It's important that, that goes well according to plan. But all projects are well underway. We have a huge amount of people that work for us, as you know. And we -- I don't see any red flags in our project.

So just wait for the next update. We have another question here from the web. Can we assume that the deeper you go, the more uranium there is in the water?

No. No, there's no such indications. It's just an old -- on the contrary. So -- because when you have dewater the mine, you get fresh groundwater. So you get actually cleaner water. The reason why you have higher content of metals today is, of course, that the water has been still, lay still with a lot of exposure to broken out rock. So when the mine is dewatered and clean, so to say, you have fresh groundwater in. We will always treat that, however, in the water treatment plant. But for every drop of groundwater coming into the mine, there's fresh water.

Okay. We don't seem to have any more questions from the web. And we have been talking awhile, and I leave it to you to summarize this, Jorgen. Thank you.

Thank you, Charlotte. So with these latest financing exercises completed, it's really full steam ahead now. So a huge amount of activities will happen every quarter. And as you know, we build and construct 7 days a week throughout the whole year, skilled people up here in Kiruna. And despite that we have what you can see on the screen, snow and icy conditions, that does not stop us to do construction around the clock. So it will be thrilling times ahead, and I look forward to come back to you in a quarter and present our quarter results in February 10.