Acg Metals (LSE:ACG) — H1 2026 Operations Update

0:00 Good afternoon, and welcome to the ACG METALS LIMITED H1 twenty twenty six Operations Results Investor Presentation. For this recorded presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. Before we begin, I would like to submit the following poll. I would now like to hand you over to the management team of ACG METALS LIMITED. Artem, good afternoon to you. Thank you very much, and, hello, everyone. Appreciate your tuning in to listen, to our simple, story. So just a reminder to everyone, I'm Artem. I'm Chen, CEO of ACG, and I'm joined here by Patrick, our CFO, and Graham, our vice presidents for projects.

0:54 So where we are today is essentially closing on the final days of completing our transition from production of gold into production of copper. The numbers you see in front of you, revenues and adjusted EBITDA for the last year, which was from production of gold and silver dore. And as we move into production of copper concentrate and zinc concentrate, our guidance for the year is 20 to 22,000 tons of copper equivalent, and that includes the production of gold and silver from our oxide material, which we'll talk to you in details.

1:46 Obviously, as we moved through the CapEx, the net debt has increased. But as of now, all the CapEx is spent. And as Graham will tell you, we are in the final days now starting commissioning of the project to reach first production by the end of the summer. Why are we doing all of that? Very simple. There remains a big believers in the copper upside with demand growing very strongly from new sectors of the economy, global economy, such as AI data centers, robotics, electric vehicles, but also from the old industries such as defense, which is seeing a massive new investments as of as of now.

2:42 Even if one of those sectors experience a bust, others are likely to compensate for the demand growth. And given the constraints in supply, the the expectations are for the higher copper prices going forward. We are not banking on those. All of the numbers you see in this presentation, as always, are based on consensus price forecasts, which are average of whatever 30 plus investment banking analysts globally. And for this year, this consensus is 12,000 versus 13 and a half you see on a Bloomberg screen.

3:28 And long term, that consensus is 11,000, so massively below, current, spot. No changes in our, team. We have a very strong and capable board and, outstanding management team, that, have continued to deliver, great operation results. Just to remind you of our starter assets, which is a producing mine, on the Western Side of Turkey, three hours drive from Izmir Port. It's a very high grade copper, mainly polymetallic deposit with a copper equivalent grade of 2.3%.

4:20 And as I mentioned already, we're moving from the production of gold from the oxide of deposit into production of copper from the main part of the ore body, which is sulfide. I am pleased to report on a very strong and improving, healthy, safety culture. And this is a, you know, excellent achievement, especially given a number of people current concurrently working at the site now from our own team to the EPC contractor to the contractors to the EPC contractors, many, many people. But as as as managed by Graham and our chief operating officer, Peter Carter, there's been a really steady improvement and a very good healthy record. You can see on this picture one of the regular healthy safety meetings that is happening on a daily basis.

5:25 Patrick, over to you. Yeah. Thanks, Artem. Just to give you basically an overview of the ore body that we have in Turkey here, I think, is three major areas that we all are working on right now. The oxide is the portion that was exposed to air, which we have been, you know, mining in this deposit since 2022. This has come to an end. We're basically, in the first half of twenty twenty six mined from the stockpile that we created in 2025. So purely processing that material. Then we're basically now moving into the sulfide, which is why we are building this flotation plant that we raised the funding for and are almost complete building.

6:17 That will be the future of the mine for the next, you know, ten, twenty, thirty years. And obviously, we announced in November last year that we identified the enriched or stockpile, which was currently or previously treated as waste as actually a super interesting and very economic project, which Graham and the team are also working on and actually moving forward. So if we then look at the oxide, the first part of the of the processing plant, you see the site as it currently stands. We actually see the the heap leach there, which have been, you know, processing over the last couple of years. You see the ponds in the backside on the left, which is basically the liquid solution that's very gold and silver rich that flows into the metal recovery plant, the Merocro plant, which is then creating the Dore bars.

7:16 And we were very pleased to see that in H1 twenty twenty six, we basically exceeded already the guidance that we put out on the oxide side for the full year, mainly due to recovery improvements. But most importantly, we also see that there will be further gold and silver produced from that part of the project, which means that we're going to exceed the guidance even further by the end of the year. That is just additional revenue that we didn't account for and is obviously very beneficial in the ramp up for the sulfide operation. How did we achieve this? I think, obviously, the team has done a great job. A lot of operational efficiencies we could create in the last one years, point actually more than one years point since we actually bought Gedictepe.

8:09 But most importantly, recovery always takes a bit of time, and we could see the benefits of that improvements in the recoveries really in the last half year, much more than before. That was also due to a technology that we put in place, and we announced to the market, technologies that basically reduces the consumption of cyanide, which is more environmentally friendly, but also, cheaper. And also, it basically is now a patented application that we have in, Turkey, we are now in the process of actually patenting this in 35 other countries, which will be beneficial for our growth story as well because we see a lot of other opportunities where this technology could be applied.

8:58 Graham, maybe over to you on the sulfide and then on the enriched ore project. Yes. Okay. Thank you very much, Patrick. Good afternoon, everybody. As Patrick and Artem have both said that we are moving very quickly now and heading into our commissioning phase. We have, got all of our mills in. We have just finished installing the, isomills, which were a very, large portion of what we've been trying to achieve over the last few months. We have got all the jaw crushers in. We've got all the conveyors in. As of this slide, when it was written, were 87% complete on construction. We're a little bit higher than that now and proceeding at very rapid pace to achieve our first production.

9:52 As of this morning, 09:00 this morning Turkish time, we actually started the commissioning, which is the first phase of our commissioning, punch listing, which we are working on the primary crusher building and all the equipment through to the conveyors, through to the fine organ and then finally through to the SAG mill and the ball mill. On that, the punch listing will take approximately two days on that one. Just to explain what punch listing is a little bit, what we do is we go through, we check all the terminations, electrical terminations, we check for safety, handrails, steps, etcetera, right through the whole plant, tightness of bolts, etcetera, just to make sure that everything is ready to go into the second phase, which is our coal commissioning, which is actually running everything, making sure that it's all running in the right direction and running as it should be.

10:47 As I said, we started commissioning as of 09:00 this morning, punch listing, and we're heading for the end of August for our first production. As you can see in the next slide that just come up, we've got a couple of very attractive gentlemen sitting in the middle of photograph between the flotation cells. You can actually see the 25 cubic meter flotation cells running right down the middle. We have got three rows on either side, which is the zinc line and the copper line itself running down. So we've got the 25s, we've got a set of five cubic meter flotation cells, and then we've got 40 cubic meter flotation cells running down the middle.

11:37 You can see that the ponds, have got just on the right hand side of the screen, we've just got the top end of the contact water pond, which is water that comes back from the tailings dam. And then we've got the process water pond, which hasn't been lined yet in this photograph. But as of today, we completed lining it. That is the water that we use for process right through the whole plant. The plant's running on a closed loop system, which means that we do not discharge anything through to the environment. It comes back from the Tails Dam, goes through a water treatment plant, we clean it up and then water just goes round and round in circles. And we've got to add about 12% water on it every day during the summertime for evaporation.

12:26 We have also a photograph down on the bottom side. We've got eight finger bins, which in our product, we have got eight different ore types. That far apart, we cannot put them all together and send them through the plant at any one time. I will be doing a lot of blending there. The eight fingers are for the each type of ore that we've got. And then we've got two blending bins, which as the load is feeding the crushing plant, we'll be blending it as per what the geos and the metal oil just tell us how to blend it down. On that and then on the bottom corner, you have got our main electrical room. Again, that's a lot further advanced in this photograph. This photograph was taken, Sunday of two weeks ago.

13:16 As of the twenty third of this month, we will be switching on the mains power. We have been building and construction on generation power, then we should look to a temporary line for mains power. But the twenty third, we have got the electrical authority coming in to inspect everything from the main substation right through to our main substation and all of our associated electrical things that we've got. They will be inspecting. If they're happy with it, they will allow us then to turn on the full power from the mains. That happens on the twenty third of this month. Okay. I'll hand it back over to Patrick. On the enriched, Graham, maybe you can say a few words on the enriched ore project.

14:02 Yes. The enriched ore project, we're moving ahead with that. We are twenty four hours away from finishing the main earthworks, which was 450,000 cubic meters of earthworks, which we achieved in three weeks, which was a major task force. We have also started geotechnical drilling to make sure that the ground is good enough to set everything on, which it is. And then we can hand all those results over to the designers who are a Turkish company for them to do the designs for the foundations of the jaw crusher, the ball mill and the sag mill. You can see a few photographs in the background. We have actually purchased all of our major pieces of equipment.

14:52 This was equipment that had been ordered and deposits paid by another company who went out of business very early on, and we managed to get all this equipment at a very, very reduced price, which really has helped with the financial side of things on our build, which is great. Though we've got the SAG mill, that is complete. The SAG mill is in two sections only because of transportation. The ball mill that you can see in the top left hand corner, that's in one piece, that's a lot smaller and we can send it to the side as it sits now. That was just ready for painting the day I took the photograph. The next day, it was a very nice red color. But unfortunately, I haven't got a photograph of that one done. We've got the jaw crusher and then we've got all the bearing shells for the SAG mills and the ball mills.

15:42 We've purchased all of the gearboxes and electric motors. The SAG mill is a 1,500 horsepower electric motor. The ball mill was a 800 horsepower electric motor. You can see the girth gear sitting down the bottom. That is the ball mill. The SAG METALS gear was actually still being fabricated on that. And then we've got the cone crusher and you've got associated bearings, etcetera, on that one. Patrick? Yeah. Thanks so much, Graham. Yeah. And I I think it's important to note that usually the mills are the longest lead items, and those are basically purchased. So we're pretty good on the equipment side. So overall, just looking at the production profile of this mine site, and I would even call it a complex because we have now you know, after the implementation of the sulfide and with the enriched ore project coming, is really, like, we can treat any ore, you know, of any kind in the region, but also obviously coming out of our deposit.

16:44 So you see that over the next couple of years, we were able we are we will be able to ramp up to a production capacity that's very similar with peers like Atalaya, etcetera, who are trading much, much higher than ACG is today. And obviously, you know, this has been built, the oxide, just two and a half years ago. The enriched will be built next year, and we will have the sulfide plant fully commissioned now very soon. But that equipment, you need to utilize going forward, and that's why we see a lot of opportunities how we can actually utilize all three of these items going forward. And that's basically the potential third party or we're referring here in order to utilize the capacity over a longer period.

17:32 Going to the financials, just a quick update on the financials. I think we already mentioned that the production guidance, at least on the oxide, we already over fulfilled. I'm very, very happy to report that. But also on the cost side, we continue to really have a a tight handle on costs. Literally, the only reason why the c one and the ICG are higher than last year is, first of all, you have less production than last year. Right? We are phasing out on the oxide. So denominator goes down. That's why the c one cost goes a bit up. On the ISIC side, it's also the benefit of the higher gold prices lead to higher royalty payments to the government, which is a key, you know, component of the ACG.

18:19 But that's literally the only reason we see not much wage or any other increases. They are mostly offset by the Turkish lira devaluation. So we are really keeping a tight handle on costs as of now. Just a quick update on the bonds because we're getting more and more closer to the first call date in January 2027. You can see that our bonds are still trading very, very, nicely, upwards. Our coupon rate at the moment is about eight and a half percent. This is actually a bit outdated here, but, we see that it's more closely getting to the first call date, you know, implied, rate, which is close to eight and a half and 9%.

19:05 So still good perception in the market for how ACG will probably refinance that bond. In terms of the financials, as Artem mentioned in the beginning, we have obviously a higher net debt right now. Unsurprisingly, you know, the bond is drawn in escrow stages. Graham and I have been, you know, working towards actually utilizing the bond, as we progress the project pretty conservatively, actually utilizing it, less quickly than we thought initially. But still, we are coming to the end of the construction, which means the, you know, cash balance reduces and net debt increases. But also, as soon as we hit production on the copper and the zinc concentrates, we will be very cash generative per month.

19:50 And actually, that will improve the liquidity and the net debt position very, very quickly. Artem, maybe over to you. Thank you. So in terms of the key catalysts for the next six, nine months or so, obviously, the number one is the first production from our flotation facility. As you heard today, we are looking to achieve that by the end of the summer. Second, as Patrick already mentioned, and I see a follow-up question on that, he will address immediately after the end of the presentation. We do plan to refinance high coupon bonds given the fact that our yield to maturity, as Patrick mentioned, is significantly below that.

20:42 And then as we move forward and become larger, we expect to get into the further indexes including passive indexes, and that should ensure the passive inflow in the stock, increase in liquidity, and that, shall enable us to trade, I'm not saying at premium. Over time, I do believe it'll be trading at premium. But, even if we trade, at par with peers, the upside we've seen, is two to three times over the next, six to twelve months. Any m and a is a cherry on the cake. On top of that, the key is operational delivery, and I trust you see that, we're doing quite okay on this front.

21:34 Let us perhaps move into the questions. I see, Patrick, why don't you deal with the first and the fourth? And I will do with two in the middle. Yeah. Sure. So the first question is related to, know, basically, the CapEx is now incurred. How do you expect the leverage to reduce? And how do we actually balance debt repayments with further opportunities on the acquisition side? So obviously, even if we look at the current debt that we have in place, which is 200,000,000 bond, let's assume, you know, for now, there's no cash and you have an EBITDA projection of a 125,000,000 conservatively. Even in this scenario, you have 200 over a 125,000,000, so a very, very healthy debt to EBITDA ratio. Right? It's far significantly below other companies, especially on the bond market, and therefore, a very healthy position to start from.

22:35 Obviously, the asset will produce even at spot prices much higher cash flows than what I currently just mentioned. Hence, there is good opportunities that we can consider, you know, raising smaller bond if we basically have a bit of cash already at hand, or we could also increase a bond if we do another acquisition. It really depends on the business date at the time. But I would say from that healthy net debt to EBITDA position, it's really a good way to start, and we have multiple opportunities how to reduce, refinance or actually redistribute this. In terms of further acquisition opportunities, I mean, as Artem mentioned in a in a lot of meetings we're having, you know, every opportunity needs to stand on its own feet. We will not do a deal that is not able to attract funding for itself.

23:28 And hence, that really doesn't impact any cash generation from Gettyppe per se. But obviously, at some point, we will have facilities or a bond that is covering multiple assets just for diversification and actually reduction in capital cost for ACG. I addressed the fourth one directly as well, and that is what sustaining CapEx should we expect in 2024. Very simply, the the mine site is run very efficiently in a way that the mining is actually outsourced. Right? So we have a mining contractor, which, you know, there's in Turkey probably one of the leading mining contractor industries globally. So there is really big competitiveness.

24:15 There is very good efficiency. So hence, a mining contractor rate is much easier to handle than actually running it ourselves, maintaining the fleet, you know, having the sustaining CapEx, etcetera. Therefore, the sustaining CapEx on the mining side is basically zero for us. It's implied in the mining rate, obviously. But on the processing side, employ the people, plant is newly built. So even there is not much sustaining CapEx in the beginning. It will obviously increase over time, but it's a couple of million dollars versus a $250,000,000 to $300,000,000 revenue business is very negligible at the moment. Artem? Thank you, Patrick. Two further questions. When do you expect the sulfide plant to be fully ramped up by the end of the year, the answer is?

25:06 Can you talk about the commercialization opportunities for the our recovery patent process? Yes. We have already received the inbound inquiries for in following our press release a few weeks ago. So we are in discussions. We'll update the market if and when anything comes out of those. But, certainly, I personally believe it's a very interesting and simple technology that has a massive recovery improvements. Therefore, there will be and as we already seen other parties who will be keen to deploy these technologies. And finally, just finishing up on what Patrick said on our shareholder returns versus organic growth and m and a, yes, we will be looking at things we can do near our side, but those will not cost much at all.

26:06 And m and a, each transaction has to stand on its own. This means that as soon as we are able to refinance our bonds with the restrictive covenants, we will be in a position to start paying dividends from Geditepe cash flows. I think we answered all the questions. If there is no further ones, very much, thank you for your attention. Thank you very much. That's great. Artem, Patrick, Graham, thank you very much indeed for updating investors today. Could you please ask investors not to close this session as you now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the Micron team, we would like to thank you for attending today's presentation, and good afternoon to you all.