Acg Metals (LSE:ACG) — FY24 Results

0:00 Good afternoon, and welcome to the ACG METALS LIMITED Investor Presentation. That is a recorded meeting. Investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Simply type in your question and press send. The company may not be in a position to answer every question received during the meeting itself. Have the company review all questions submitted today and publish responses where it's appropriate to do so. Before we go, we'd like to submit the following poll. I would now like to hand you over to the ACG METALS LIMITED team. Good afternoon.

0:30 Thank you, Paul. Thank you, everyone, for joining. I appreciate your time and interest in our beautiful story, as president Trump would say. Let us quickly introduce ourselves. I'm Martin. I'm founder, chairman, and CEO of ACG METALS. I've been in mining for close to thirty years, mostly creating values through buying and selling mining assets and mining companies. Kind of 10 or 12 of this last thirty was spent in aluminum industry where I led all the key transactions that created United Company Roussall as the largest aluminum company in the world. So it's serious of roll up acquisitions.

1:18 When I led Roussall IPO in Hong Kong in 2010, the company was valued at $20,000,000,000 pre money. That is a strategy that we are now applying in the copper space, looking to build a significant global multi asset, multi jurisdiction

1:36 copper company listed today on the main board of the London Stock Exchange, starting with the first asset we acquired in Turkey in September. Patrick? Thanks, Artem. Hi, everyone. Yeah. I tried to cover most of the aspects of the capital structure in mining space over my career to date. So started in debt financing and unit credits, the transactions from Burkina Faso gold to Russia and fertilizers, including a lot of transactions in Turkey. That's where the relationship with Lydia, our key shareholder and partner now came from. Then I moved to private equity,

2:21 did a couple of transactions in Eastern Europe. We bought a mine for 180, sold it for 400,000,000, bought a mine for 2,000,000, which is now $2.50. So good good deals there. Then moved to corporate, joined the item in the previous company, and now we joined forces again at ACG in that interesting story here. Thank you. As you can see from this slide, number one, we've been extremely busy for the last few months. And number two, ACG METALS is a very young story, well known to the market. And frankly, we were busy putting the business case together since completion of the acquisition of the first mine and tool kit for 84,000,000 in cash and 35% of our shares.

3:14 And we have very quickly moved to set up the full team, both at the asset level, at the corporate level, signed EPC contract with a company that is building the sulfide expansion in this mine, raised $200,000,000 three months after completion of the acquisition in a a bonds via bonds, ended the last year with $85,000,000 in EBITDA. I know that this is higher than the price we paid in cash for the for the asset. And perhaps one of the key differentiation for us is at this stage relatively small and unknown company is our focus on cash.

4:06 We have moved on to doing excellent first quarter of this year, which we'll talk about reducing our costs further to generate even more cash and finished kind of putting the business case together with reducing the outstanding warrants by 70%. I originally set up ACG as a spark in London, and warrants was one of the key features of that type of structure. Now we moved to be a proper operating company. We thought we removed the warrant overhang to focus and move liquidity into shares. And with that in mind, we also changed our trading currency from dollars into pounds.

4:51 And just few weeks ago, started looking at the market and appointed the brokers. So eight busy months to create a company with $500,000,000 in value with $90,000,000 and a free cash flow fully funded for the expansion. As I mentioned, cash is a key element of our story. I challenge you to find another company of our size, so food with cash. Last year, we generated close to $90,000,000 on the free cash flow, a testimony, obviously, to the quality of the asset and the quality of the team. We raised the bonds to invest in the mine and move it from the production of gold into production of copper, essentially.

5:41 We have $190,000,000 in our balance sheet. And as we're looking to complete the expansion

5:48 and start the production of copper in the first quarter of next year, our cash generating ability increases to over 110,000,000. That is on consensus pricing. On today's market price, that will be even high. All of that give brings us to this page, which is essentially is a question why we're all here. We see a massive upside in market capitalization, massive upside in our shares in the next, you know, eight to twelve months as we execute on a base case. Our base case is fully funded. We have the full management team in place. They're executing the project construction on time and on budget. And in the meantime, we continue to generate massive amounts of cash flows from existing sales of of gold and silver Dorebars.

6:46 So just to point one kind of number here, the competitive comps are trading at roughly six times free cash flow. We are trading today at 1.4. Extremely cheap,

7:00 full of cash generation, and well positioned for the further growth. Patrick, maybe you can talk about our conservative approach to the balance sheet management at the same time. Yeah, Tim. I think just on the capital structure, you know, you see we have 191,000,000 in cash versus the $200,000,000 of bonds. That is just because we are currently drawing from the bonds as we are progressing the construction of the extension of the mine. We have a 7,000,000 shareholder loan still outstanding. But in terms of liquidity, what's important is that this cash generation that we have from the operating mine is going to equal out with the bond drawdown we're going to have over the future. So we're going to maintain a very neat and tight net debt to EBITDA ratio over time.

7:53 And in addition, in case whatever could potentially happen, we don't see anything, but we have an equity backstop facility from one of our key shareholders, Argentum Creek, And we also have an unutilized revolving credit facility of EUR 15,000,000 in country. But given the cash generation, the favorable market environment, we are not seeing anything of this being utilized. Thank you. Just a summary of our shareholder base. Two largest shareholders around 30%. Lydia is a Turkish company from whom we acquired the asset. Argentum Creek, New York based fund focused on investing in emerging markets quite successfully. Glencore and Traxis came in on transactions September last year. Glencore has copper offtake from the mine. Traxis is our marketing manager for the zinc offtake, and the health is Hong Kong based family office.

8:52 Moving on to our board. You know, one conclusion you can draw from this picture is that we put together a board which is worth a multibillion dollar company. It is designed to be the board for a much larger organization, which is approved when Mike Pompeo joined us a few months ago. As you know, he was the head of state department and head of CIA under first Trump administration. Mike, extremely helpful to us in jurisdictions where we are looking to buy the assets that he can establish linked to the top levels of the governments almost anywhere in the world. Mustafa is the CEO of Lydia, the company from whom we acquired the asset.

9:39 Martin is the chief investment officer of Argentum Creek. Our independent directors include Fiona with thirty five years in commercial banking in the mining sector. Mark, who used to be chief investment officer at Global Situation Group in Arctic.

9:54 So we're in Wells fund of Abu Dhabi. So we do have access to the large pools of capital in that part of the world. And Henny used to be the head of corporate Anglo American. The BHP looking to buy Anglo American for its copper asset should say thank you to Hany who build and manage them really well. On advisory side, Robert Friedland probably does not need an introduction. The most prominent entrepreneur in the mining sector of our generation, Warren Gilman used to run money in the mining sector for mister. Now has his own investment company, Kinshrot Capital. The management team is equally impressive. And and note to say that we do not use executive search firms.

10:42 All these people were hired very quickly through our network of contacts. We've been in the sector for a long time, and they actually have a long waiting list of people who are keen to join exciting company. Just couple of highlights. Graham Ripley, our project director, built certain projects globally in the billions of dollars. He is building get a type of sulfide expansion project now. None of his project were behind a scheduler or above the budget, and that's exactly what's going to be at Gedatepe. Yaya is our head of processing, had a very strong pedigree of large companies who worked there before, and his involvement already helping us to increase recoveries from the current oxide operation, which is run by Barish, who has been with the mine for nine years. So well familiar with all 300 people we have working there as well as with the local communities.

11:45 The GediTepaMind, we acquired as a first step in execution of our strategy is in the Western Side Of Turkey. Easy proximity to European smelters. Three hours drive from three ports on Mediterranean Coast of Turkey. The closest one of them is Izmir. The mine is fully built, connected to infrastructure. The project we currently execute on is a brownfield expansion, which has been massively derisked. We are currently producing gold and silver dura from so called oxide cap. We are in the first quartile of the global cost curve in gold, which means high cash flow generation. We will start producing copper concentrate and zinc concentrate from the sulfide part of the deposit from first quarter of next year. We are on the first quartile of the copper global cost curve, which means high cash flow generation.

12:48 Patrick, over to you. Yeah. When we look at the mine itself, you see the pictures here of the current operation on the right side, the stockpile on the left side, the liquid solution and the Merrick Rowe plant for creating the dore. At At the moment, we are selling gold and silver Dora bars. Very easy cycle. We are selling it on a Thursday with a ship with a truck to Istanbul Refinery. On Tuesday to Thursday the next week, we have the money in the bank based on LBMA London market prices. So very easy cycle. And, yeah, we we have this operation now in place since 2022. It's an established operation, but still fairly new.

13:34 So we are utilizing this operation on the oxide, and we're building the sulfide operation in the other part of the license area so we could potentially and most likely operate both in in parallel. If you look at the numbers, we have talked about these before. Last year, we produced 57,000 ounces of gold equivalent. This year, we're going to produce a bit less. But given the gold price increases, we are thinking about the same financial metrics.

14:02 The most important thing is the grade. So if we look going forward, that's a 2.33% copper equivalent grade in this deposit, and it's an open pit mine, which means that it's a lower cost than underground mining operations. And in mining, they say grade is king, and that is for a reason because grade gives us enough power to circle or to actually avoid any potential obstacles on the cost or on the environmental side or whatever it is was great. You always have enough buffer in your margin. And if you look at the comparison in the market versus good peers in our in our industry, the grade that we have in our open pit operation is significantly higher than other open pits.

14:48 If we actually look into Portugal or Spain, others where underground mines have similar grade at significantly higher cost. So great on the one side, but then also the cost on the other side and extremely proud of the team and what the team has achieved in q one because in an environment like in Turkey where you have a higher inflation rate to achieve a reduction in the AISC is a big achievement. So thanks very much to the team on-site making this happening. On the other side, we were also very blessed with some additional findings in Q4 in the ore body. So that made a significant increase in the stockpile. And hence, we could also produce more ounces than actually expected in Q1.

15:36 So on the one side, we produced more than we shown to investors. On the other side, we could reduce the cost, what we've shown to investors. And that leads also that we are really in the first quartile of the cost curve globally that we could even improve. And if you think about the next step, the copper operation starting from '26 with the full capacity in '27, we will still be on the first quartile of the cost curve versus our copper peers at the time. So just one slide. Yes. The next slide on the upside potential for the existing operation. We are as we said, we are having around one to two years of mine life left in the oxide.

16:22 What we are trying to do is obviously to extend this because it's a fairly new plant, and we want to run both in parallel. So this is absolutely not in the base case that we've shown in the base data and the numbers that Artem presented in the beginning. But we see we have a near term exploration potential in the in the license area that we own as well as outside of the license area. We also have some stockpile that's called a transition material, which is currently stockpiled, but not really considered in the studies we've done. So we are working through some test work to actually make this most economically attractive to us, and that alone can extend the oxide mine life quite a bit.

17:04 In addition, we're talking to other companies in the region. We see also potential for there to increase the oxide mine life further.

17:17 The key, obviously, to the future of is the start of production of copper concentrate and zinc concentrate. For that, we're executing on a brownfield expansion project. We have a fixed price EPC contract for 146,000,000, so we are not going to pay more. We raised more money. We raised 200,000,000, so we have a quite a bit of buffer. But also, have alignment of interest with the EPC contractor because it's also owned by Calik Holdings. Calik Holdings is a large Turkish conglomerate, which is active in a various number of sectors from construction to energy and to mining.

18:03 We have acquired Gethetepa Mining from their mining subsidiary, Lydia. And the EPC contractor, GAP Intussat, is the one that is building our sulfide extension. It is the same contractor that build an oxide plant to begin with, so they're well familiar with the mine. And for that reason and also because they're a subsidiary of our major shareholder, we have full confidence of getting the project done on time and on budget as it's currently happening. Patrick and I were at the site beginning of this week, and I can confirm that we are working on a project to be executed on time and on budget with commissioning in q one next year.

18:52 On top of that, given the fact that this is a brownfield expansion and given the low value of this contract, the project is extremely competitive on the capital intensity. So we build and get a type of sulfide project at 7,000 per ton of copper equivalent production. Typically, if you go anywhere in the world, the new copper production facilities are being built at 15 to $20,000 per ton of capacity. So we are extremely competitive, and that obviously drives the the high IRS of this project. We have derisked it as much as as is possible.

19:37 The offtake is already committed on the copper side to Glencore, on a zinc side to TruXis. So we are fully confident not only of completing the project on time, but generating sales as soon as it comes in comes in as soon as we start getting product out of the gate. The upside on the sulfide part of the mine will come from extension of the mine life. The previous owner, Lydia, they stopped drilling after they had ten years of initial mine life. But already, we see that 35 to 40% of the resource they have on our balance is outside of the eventual pit shell. So in about seven years from now, we will do a study and decide whether we go underground to access those resources or whether we expand the pit.

20:30 The strike deposit is open along the strike. And actually, as you go further down, the grades increases further. So all in all, we expect this mine to be producing for twenty five to thirty years eventually. Patrick?

20:49 Yeah. I don't wanna spend too much time on the 24 results. We are focusing on the future, not on the past. But I think what's really important to to to see here is that since the beginning of the operation, there was zero lost time injury. We're very proud of the safety record, and that continued into q one and also to date. So it just keeps adding to the record of having no incident on-site. I think what you see here is a is a lot of year over year changes that are positive, and that also indicates that the mine since 2022 to date, there was a good learning effect and always improvements. And that is obviously something that was the transition to ACG. We encourage and also foresee.

21:36 So we're seeing further improvements since the the the transition to to ACG. If we look at the the key highlights that we had in the last year, I think we talked about it before in the beginning, but obviously very happy that we have raised a $200,000,000 bond in the end of the year just to ensure we have the funding in place to fully have the construction bid, have a clean balance sheet, and that is also shown in our current position. So since we had the bond, we paid down the initial acquisition loan of $37,500,000 completely, meaning that it was really just one item next to the small shareholder loan we have.

22:23 And since then, we have actually drawn, you can see it here, roughly 62,000,000 from the bond for the sulfide expansion project. But on the other side, we also generated significant cash, which means that our cash position is almost equal to the bond size at the moment,

22:40 leaving a net debt position that's very, very healthy. And we are seeing that with the cash generation coming, we have coupon payments to do, but we obviously are also adding NPV to the project because we are further derisking the construction with every month we are constructing. We are also proving to the market that we are delivering on what we are saying, which we've done so far really well. And you can see that even if the bond is then fully capitalized, we still have a NAV roughly of $05,000,000,000 which is significantly higher than our current EUR 120,000,000 market cap. The last point maybe on this slide, we also did a hedging on the gold. We hedged 50% of the gold production only, which means we have 50% gold open and the 100% on the silver still open. But also that 50% hedge position has significant upside because we did it in the color structure, which means we protect the downside,

23:42 but we are also maintaining the upside with only a $100 in the gold price as a as a cost to it, so to say. But that's obviously ensuring that we have the cash flow from 25 for the coupon payments for the bond coverage. We have enough buffer in the system at all times. It is just a conservative approach that doesn't protect us from any upside that we're seeing right now in the gold price. Martin? The story is really simple, and it's been proven in the mining sector many times over. When you have a number of assets on the one platform, the platform trades at a higher multiple and you have a smoother cash flow profile, and you diversify risk among the jurisdictions.

24:34 So we started with the first assets in Turkey. We are looking to become relatively Turkey

24:42 in July, as I say, in Turkey, a second largest copper producer on the London Stock Exchange. We are focused on copper because we like the sector, one of these few mining sectors that is not controlled by China, unlike nickel, cobalt, lithium, etcetera. And there is very few pure play copper companies, and those that exist trade at significant premium to diversified. And hence, we believe they will be rewards for continue to be a pure play copper. In in in summary, our vision is to get to two to 300,000 tons of copper production in the next two to three years.

25:30 Thanks for president Trump. The copper prices is not running too high at the moment, which gives us a window of opportunity to acquire for the asset. So the base case

25:42 upside is very simple as we shown on the on on in the beginning of this presentation. There is a four to five times upside in equity just from existing very high cash flow generating business. We're looking to acquire cash producing assets. Our focus on cash, as I said, is extremely important. We can think of ACG as all cash global. We are going to have additional cash generated assets in other jurisdictions. But essentially, if you're in copper, you have to be in one of the copper producing regions. We are currently on a Tessian copper belt in Turkey that extends into Eastern Europe. We have targets there. We're looking at targets in African copper belt and South American copper belt.

26:30 So a significant upside from existing mine and existing base case scenario, further m and a can double and triple that that upside.

26:44 Let me pause here and see if we have any questions. Fantastic. Thank you very much indeed, Arthur and Patrick. Ladies and gentlemen, do please continue to submit your questions just using the Q and A tab situated in the right hand corner of the screen. We just want the team to take a moment to look at those questions we received so far today. Just to remind you, the recording of the presentation along with the published Q and A can be accessed via your investor dashboard. As you can see, guys, we have had several questions come through throughout today's presentation. So perhaps if I may, let's start with the first one. I think you have actually covered on this, Artem, but I'll read it out for you. How do you evaluate potential targets? And will they be all production assets, I think you've alluded to, or greenfield? Thank you. In the next two to three years, we're only gonna be looking to acquire producing or near producing assets that will help us to grow the platform quickly and the production profile quickly.

27:41 Also, the existing cash flows enable us to use debt funding for the acquisition. We already got our first bond issue done. We can do second bond issue, etcetera.

27:54 So we have access to both debt and equity funding, but using the debt in any transaction, obviously, magnifies the return for equity investors, and that's what we are looking to do. I wanna think perhaps more for Patrick. And, I think you may have touched on this. Do you have any hedging in place? And what's the plan with the cash generation and free cash from the business? Yeah. Thank you. Yeah. I touched on the hedging. You know, we have 50% on the gold only, but this is a color structure, which means that we have a we have basically secured 15% above the budget that we set ourselves for '50 for 2025 on those 50%. But then we also enabled in the structure that we are still participating from the gold increases.

28:43 So right now, above 3,065, we are again participating, which means in the current gold price environment, we are again, you know, benefiting from the upside. If we look at the cash generation in the business and what do we want to do with it, I think, you know, we obviously want to keep the flexibility with the bond we are generating cash. You know, there's a potential that we repay this as we shown in the bond presentation to the investors in December. The cash generation from the business could be absolutely sufficient to to to pay back the 200,000,000 by the end of twenty nine. But in all honesty, if we're looking at the track record of the business and once we have one year of operation under the sulfide project, there's nothing holding us back to refinance this bond for a cheaper rate. And we are then a repetitive issuer.

29:38 We then have potentially a credit rating from an leading institution, and then our capital costs will decrease further, which is to the benefit of all stakeholders. But, yeah, the cash generation of the business, we will also use going forward after everything is done well on the sulfide for for other projects. Fantastic. Thank you. Perhaps another one for you here, actually, Patrick. Question reads as follows. Is it correct that you're trading at close to one times twenty twenty four cash flow? I think that's the that's one way to look at it. Yes. But, no, we've been extremely pleased with with the the asset we we we managed to buy. The partner we actually managed to get with our Turkish partner in place now and also our shareholder.

30:28 And I think also with the team that we inquired, we're really happy. But yes, if you think about the pure numbers with $89,000,000 of operating free cash flow in '24, and we're currently trading at a 120. And going forward, we only have a 110,000,000 free cash flow, and that's actually on conservative consensus return prices. That is a correct answer. Yeah. So, yes, the stock is dirt cheap. Thanks. Thanks. Gold and silver production, as we come through into 2025? What's the expected EBITDA from that? So guidance, Patrick, on 2025 production.

31:14 And Yeah. I mean, we gave a guidance on the production between, yeah, I think, 30 to 35,000 ounces equivalent. What we're seeing currently also with the the learning effects, the efficiency effects since we we came in bringing on Yaya who really helped on the recoveries. I think there's good reason to believe we can go above this, but we are not revising our guidance because, you know, we rather show results and we rather surprise positively in the market than saying something that we can't hold. Thank you. Another question here. I guess you you've covered some of this as well on the charts that you've shown. You know, why are you different to any other gold and copper producer? What what you know? I I guess one one for you, I guess, Artem. Thank you. Yeah.

32:09 If you look at the companies of similar size, junior companies have been in existence for eight months. I doubt that you will find another so well capitalized company generating $90,000,000 in the free cash flow fully funded for the expansion led by totally experienced management team with world class board of directors. You know, one conclusion can anyone draw from that that this company is not gonna stay small for a long time. Thank you indeed. And that's covered all those questions received. Of course, any further questions that do come through, the team will be able to review those. And we'll publish responses where appropriate to do so on the platform. Asim, I was gonna ask you for a few closing comments. I don't know. It's quite difficult to follow what you've just said, but if you have got a few closing comments, that'd be fantastic, please. No. Thank you very much. I think the simple story here that we're a new company. We've been busy building the base case. It's now done. It shows four to five times upside from just execution on the base case, generating massive amounts of cash flows, and a promise in a blue sky of further m and a could further enhance those returns.

33:26 So we just started explaining our story to the investor public. We have hired brokers only a few weeks ago, so don't wait. Fantastic. Thank you very much indeed, Arthur and Patrick. Can I please ask investors not to close the session? It should be automatically redirected to provide your feedback in order the team can better understand your views and expectations. This will only take a few moments to complete and is greatly valued by the company. On behalf of the management team of ACG METALS LIMITED, we'd like to thank you for attending today's presentation. That concludes today's session, and good afternoon to you all. Thank you. Thanks, everyone.