MMG Limited (1208) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the MMG Limited Investor webcast. I would now like to hand the conference over to Mr. Jarod Esam, Head of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining the call. I'm Jarod Esam, the Head of Investor Relations. As many of you are already aware, MMG announced an equity raising plan earlier this morning. Today's presentation, our CEO and Executive Director, Cao Liang, will run through the details of this rights issue and provide an update on MMG's business. Cao Liang was appointed as MMG CEO and Executive Director on the 24 April, bringing with him nearly two decades of experience in international mining investment and strategy. Prior to this role, he served as Vice President of China Minmetals Nonferrous Metals, and Vice President and Chief of Staff at Las Bambas, where he participate in mining acquisitions and divestments and mining project construction. Also, joining us today is Executive General Manager of Finance, Song Qian; as well as our Chief Adviser, Commercial and Development, Sandra Guan; and our Head of Corporate Development, Brent Walsh. The slides for today's presentation are being webcast in both English and Chinese. They can be accessed from the Investor and Media section of the MMG website. At the end of today's webcast, we will open the line for questions. [Operator Instructions]. I will now hand over to Cao liang, who will provide an overview of the transaction.

Thank you, Jarod. Good afternoon to everyone, and welcome to this presentation. Earlier today, we announced a right issue of USD 1.16 billion, which will be used to repay existing debt and complete our funding plan for the Khoemacau acquisition. This strategic move is expected to bring our gearing level down to approximately 44%, thereby supporting our capacity for future growth initiatives. The rights issue was introduced at a 31.4% discount to the last traded price and 24.7% discount to the theoretical ex-rights price. It is structured around our provisional allotment of our 2 rights shares for every 5 shares held by investors. Our largest shareholder, Minmetals, is fully supportive of this transaction and has signed an irrevocable commitment to subscribe to their full entitlement of 67.5%. The fund raised from the rights issue will be used to repay the remaining $611 million in short-term funding for the Khoemacau acquisition, repay $200 million of our shareholder loan due this year, and repay approximately $341 million of our revolving credit facilities. The outcome of this repayment is a significant strengthening of our financial standing with a reduction in our gearing level to 44%, and our achievement of annualized interest cost savings of around USD 80 million. This will increase our financial flexibility and position MMG for future growth opportunities. The rights issue structure allows existing shareholders to fully participate and benefit from a stronger balance sheet. In conjunction with the bond from the rights issue, another integrated part of our Khoemacau funding plan, as highlighted in this slide was the recently announced joint venture. Under this transaction, a 45% stake in Khoemacau was purchased for [ USD 500 ] by our joint venture partner. This transaction also considered the USD 1.05 billion term loan from China Development Bank, which was used for the Khoemacau acquisition and is positioned at the joint venture company level. The proceeds from this transaction were used to repay USD 500 million short-term loan just for the acquisition, and reduce our gearing level by approximately 5%. The joint venture and the rights issue reflects the final components of our funding strategy for the Khoemacau acquisition. When we compare the final approval on the balance sheet to our last reported balance in December last year, we have been able to fully fund the acquisition of Khoemacau while still reducing our gearing ratio from 50% to approximately 44%. Additionally, we have maintained a net-debt-to-EBITDA ratio of around 3x. With respect to timing, the last day of dealing in shares on a cum-rights basis will be the 7th of June. We expect to dispatch the prospects on the 12th of June with the deadline for acceptance scheduled for the 5th of July. The results of our acceptance and any excess application will be announced around the 12th of July, with new rights shares expected to begin trading from the 16th of July. Now that we have announced the rights issue, it's a good opportunity to reflect on our investment highlights. First and foremost, MMG reflects a high-quality way to gain exposure to long-term growth in the copper market, with increased weighting towards the metal following our acquisition of Khoemacau and a pathway to becoming a top 10 global producer. A key differentiating [indiscernible] for us is the low-capital intensity of our significant brownfield growth pipeline across Las Bambas, Kinsevere and Khoemacau, which has a capital intensity of less than $10,000 per tonne of annual capacity. This significant growth in near-term copper production volumes [ comes at a ] operating costs in the bottom half of the cost curve for each operation. We also have a highly prospective exploration portfolio, which includes a tenement package of the more than 4,000 square kilometers across the Kalahari Copper Belt that we acquired with Khoemacau, and extensive opportunities at each of our existing operations. Our portfolio is also well diversified with our entry into Botswana, a world-class mining jurisdiction, that complements existing operations across Peru, DRC and Australia. With the Minmetals as a highly supportive major shareholder, we have a strong funding capacity, which means that we are well pleased to capitalize on inorganic growth opportunity in the future. Our unique approach brings together the best practice from international mining operations demonstrated by our commitment to the International Council on Mining and Metals, with the competitive advantage of having the support of China, making us a partner of choice in our favorite jurisdictions. Overall, we also remain committed to maintaining a strong balance sheet, and we have continued to reduce our gearing level over a number of years. I'll now share some updates on our asset portfolio. Our assets have been operating well throughout this year, and we remain on track to deliver in line with our previously set guidance, included in the incorporation of Khoemacau. For the entirety of 2024, we aim for a total of 350,000 tonnes to 405,000 tonnes of copper production. Regarding zinc production, we expect to reach a total of 225,000 tonnes to 250,000 tonnes. I'd also like to provide an update on our community engagement initiatives and the transport logistics at Las Bambas. Since March last year, however, to enhance partnerships with the communities and the government support have helped ensure stable and consistent logistics for the concentrate transportation. Our discussions with the [ Huancuire ] community [indiscernible] with the signing of 5 contracts with community companies, which have been extended until the end of the year. The Las Bambas team is now working with Huancuire community towards enduring the agreement for the development of the Chalcobamba deposit. Since early February, MMG machinery and personnel have been working on outside community companies on development activities at the Chalcobamba pit. At Kinsevere Mine, the expansion project remains on track with the first copper production from [ sulphide ] expected to be boosted this year. Lastly, the integration of the Khoemacau Mine is progressing as well. Khoemacau is a scarce, high-grade, low-cost producing assets with a greater than 20 years mine life based on [indiscernible] group deposit alone. With potential for further increase in [ scale ] and lives from other resources. Expansion project at Khoemacau will deliver production around 130,000 tonnes of copper per annum. Expansion is a cost-efficient pathway to achieve production at a scale with a low capital intensity. As I mentioned, MMG is committed to debt reduction. In 2023, MMG achieved an increase in net cash flow from operations totaling around USD 1.85 billion. Due to this strong cash flow, the company reduced overall net debt levels by around USD 784 million, reducing the gearing ratio by 5% to 50% at the end 2023. The lowest the company's gearing has been since 2013. Also importantly, we maintained strong relationships with our funding partners and our major shareholder. These partners are very solid and flexible in their approach to fund the MMG and helping us to grow. As discussed, the funding plan for Khoemacau will allow us to further decrease the gearing ratio to around 44%. The chart on the right-hand slide sets out our update in terms of debt repayment profile, including the 7 year, USD 1.05 billion China Development Bank loan used to complete our acquisition of Khoemacau in March. Repayments due on the Las Bambas project facility were reduced in 2024. Before further reducing in 2025 and [indiscernible]. The CMN shareholder loan due this year is being partially paid as part of the right issue, although we have some significant debt repayment due on the loan from our major shareholders over the next 3 years, this will be reviewed with our major shareholders as required to optimize the company's funding cash flows. In closing, on behalf of the MMG management team, I want to express my deepest gratitude to our investors. Your support is vital to our success. Thank you for your time today. I will now hand back to the moderator who will open the line to questions. Thank you.

[Operator Instructions] Thank you. There are no questions at this time. I'll now hand back to management for closing remarks.

Thank you, everyone, for joining today's presentation. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.