Andrada Mining (LSE:ATM) — Interim Results

0:01 Good morning, ladies and gentlemen, and welcome to the ANDRADA MINING LIMITED Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself however the company can review all questions submitted today and publish responses where it's appropriate to do so, and these will be available via your investor meet company dashboard. Before we begin, I would like to submit the following poll, and I would now like to hand you over to the executive management team from ANDRADA MINING. Anthony, good morning, Thank you Jake. Good day everyone and thank you for attending our presentation on our interim financial results for the six months ended 08/31/2023.

0:55 As indicated in the introduction, I'm Anthony Folljoen, CEO of ANDRADA MINING. We have been listed on the AIM exchange for six years now and are very proud of our achievements to date and look forward to highlighting the achievements that we've had this year. Hitan Uka, our CFO will be joining me to discuss the company's performance. ANDRADA MINING is a fully permitted multi technology metal producer with a world class resource base following a derisked path to development and an established social license to operate. We have our mining assets in Namibia in the mineral rich region of the Irongo Province in Namibia. The region is emerging as a geological jewel with extensive mineralization in base technology and precious metals hosted in swarms of pegmatites.

1:47 Our licensed area footprint encompasses a number of the historical mining areas across the region giving us a unique competitive advantage. The interim period under review has been monumental as we suggested it would be earlier this year. We have rebranded reflecting our multi mineral identity. We have enhanced our management and our board structure. We've engaged in a process with Barclays to identify a strategic partner. We have dual listed on the OTC in The US to tap the large investor base over there and we've released our 2023 sustainability report on our operations. To run through the many aspects of the company this year, my exploration team has had two notable discoveries on our adjacent license areas Spodumene Hill and Lithium Ridge.

2:42 We have increased the waste resource to 81,000,000 tons for lithium, tin and tantalum. We have remodeled the remainder of the historic resource, we've completed scout drilling at Spodumene Hill with results indicating high grade mineralization of lithium oxide in excess of 2% as well as high grade tantalum. We have completed a scout drilling program at Lithium Ridge with results indicating notable lithium also in excess of 2%. The lithium discoveries on Lithium Ridge and Spodumene Yield have proven our hypothesis of the Orongo region as a jewel in the technology metals crown. We have also commenced drilling at Brandberg West recently which was historically prolific tin tungsten and with strong indications of copper.

3:32 My production and projects team has managed to complete the continuous improvement program to enhance plant production and throughput. We have significantly improved our safety from an LTIFR of eight to just under 0.8 in the period ended August 2023. Through intensive campaigns and training, we've completed the lithium bulk pilot plant and the tantalum plant. My metallurgical team has produced an initial high purity bulk concentrate of AlI2O in excess of 4% at our off-site facility in May 2023, marking the establishment of ANDRADA as an emerging lithium producer.

4:18 We've completed our bulk testing plants for lithium and that plant testing has also recently commenced. And finally my commercial team have renewed the offtake agreements for the tin and the tantalum and secured 40,000,000 US dollars of financing to enable the rapid growth of ANDRADA into a multi mine entity across all of our mining license areas. On that note, I will hand you over to Hetten to take you through all the financial and operational results.

4:50 Thank you, Anthony. I will start off with some operational highlights before moving into the financial results. On the back of successfully commissioning the expansion in the prior year, we have seen much improvements across the entire plant and this can be seen with a 37% increase in the plant processing rate, a 10% increase in the plant utilization, 67% increase in concentrate production and almost 60% increase in the tin contained. What is clearly evident is the positive impact of the expansion on the plant and the unit cost profile. This can be seen from the trend shown in the slide. Moving on to the financial highlights. For the interim period 08/31/2023, with the exception of the TIN price, we have seen significant improvements across most of the areas of the business.

5:39 Some of the highlights was an 87% increase in revenue, a 19% decrease in cost per unit of tin produced, over 100% increase in the gross profit, as well as 3025% reduction in the operating loss and loss before taxes. One of the key things that's also not mentioned in the slide is really the successful completion of the planned capital and exploration program. Let's move on to the income statement. The 87% increase in revenue was driven mainly by the higher sales volumes, which amounted to four twenty four tons of tin contained, which was almost 60% higher than the prior comparative period. Cost of sales increased accordingly.

6:25 However, from a unit cost perspective, we have seen a 19% reduction when compared to the prior period. This was as a result of the successful completion of the expansion project last year, which focused on the front end of the plant capacity. We have since secured funding from the Development Bank of Namibia for the continuous improvement program, which will look to address bottlenecks and improve the plant stability. This project is expected to provide further cost improvements by a factor of seven to 10%. It'll also assist with reducing some of the work in progress stockpiles, which have increased through the period. A combination of these higher sales volumes and cost reduction resulted in a positive gross profit, when compared to the previous period. Even though prices remained constant, I'll provide a bit more detail onto the costs on the next slide.

7:16 Operating costs for the period have improved in line with expectations. The unit cost of production for C1, C2 and all in sustaining translated to 18,021 thousand and 25,000 US dollars per ton of tin contained. These costs will increase in H2 with the introduction of the royalty from Orion Mine Finance. However, we are still expecting to be within our communicated guidance. Administrative costs have increased by 58% when compared to the comparative period. However, a better comparison would be to view these against the costs incurred in the second half of the prior year. These include additional headcounts as a result of the expansion which was completed. Included in these costs are also once off professional fees for legal, tax and technical accounting, and these related to the various streams of finance that we've recently concluded.

8:06 Last point I would like to mention on the admin costs is that we have increased capacity of key areas of the group to ensure that we have the right resources upfront to support the delivery of our Lithium and ESG strategies. Definance costs have also increased, and that's really on the back of the fully drawn facilities with Standard Bank, and the interest charges thereof. The net loss for the business prior to exchange translation remained flat against the H1 twenty twenty three. However, has improved by almost 47% when compared to the H2 of 2023. I will now move on to the Balance Sheet. Due to the cumulative nature of the balance sheet, I will focus on the movements of the interim period versus the twelve month financial year end balances. The total of the the total assets of the business increased by 7% and that is net of the effects of the Exchange translation.

8:59 The functional currency of the majority of our Assets are Namibian Dollar, which has weakened by 6% against the Pound Sterling since our last financial reports. The non current assets increased as a result of the construction of the pilot facility, as well as the tantalum separation circuit. We have also purchased some long lead items, which are part of the continuous improvement program that I mentioned earlier. The group also continued its drilling and exploration program for lithium regions Bodrum Hill. Even though these programs are recognized at cost value, the exceptional results of these programs provide a deeper understanding of the economic value of these licenses, and validates the huge potential of this group and its assets.

9:40 Inventory increased by 19%, and this was mainly due to the expansion which was completed. We have also introduced the continuous improvement project, which will look to reduce these inventory levels, as mentioned earlier. The closing cash balance for the interim period was £6,700,000 However, subsequent to the interim period, the Group has closed multiple ongoing finance streams, which increased our cash balance to £23,000,000 as at 11/27/2023. Equity remained flat, even though we recognized a portion of the recently announced convertible loan amount of 7,700,000 Pounds. This was as a result of the net loss recognized for the period, as well as the impact of the foreign currency translation reserve.

10:28 The total Liabilities increased by 7%, with the key movements being the Convertible Loan Note mentioned earlier. Part of the Convertible Loan Note was recognized as Equity, and the Balance was recognized as Debt as part of the IFRS and IAS 32 Accounting Standard treatment. The accounts payable also increased, and this increase was largely driven by the working capital impact of the expansion and the hiring strip ratio that we've seen recently. Over and above that, it also includes costs associated with the capital and exploration programs that I mentioned a bit earlier. Moving on to the cash flow. The cash flows were impacted by the net operating loss, as well as the movements in the financial position that I've spoken about.

11:16 With some of the key items being the capital and exploration costs that were offset by the incoming funds on the convertible loan loans.

11:25 From a funding perspective, some of the key milestones were achieved post the interim period, with the conclusion of the Development Bank of Namibia financing of $5,300,000, of which 50% was drawn down. As well as the completion of the Orion Mine Finance package of $25,000,000. These funds provide the required resources to continue our strategic priorities over the next twelve to eighteen months. I will now hand over back to Anthony to provide further details on these priorities. Thank you, Hitton. We anticipate the next twelve to eighteen months to be a bumpy year, as the pace of growth accelerates. Specifically, our objectives and the news flow for the year will include concluding the strategic process that aims to enhance our presence in the entire battery metal value chain, completion of a continuous improvement two program at the Wiese mine, increase our tin production and revenue targets,

12:27 continue our cost reduction exercises, conclude lithium offtake agreements in both the ceramic and the battery market, expansion of our metallurgical test work to include downstream beneficiation of lithium in Namibia, integrating lithium revenues into our production, expansion of our exploration and resource drilling across all license areas, expediting a path to production for Lithium Ridge and Spodumene Hill and enhancing our safety and long term sustainability of our operations and presence within Namibia. Anthony Hinton, if I may just jump back in there. Thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that situates on the right hand corner of your screen.

13:16 But just while the team take a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Hinton, Anthony, as you can see there in the Q and A tab we have received a number of questions throughout your presentation this morning and thank you to all of those on the call for taking the time to submit their questions. But guys perhaps if we just jump straight into it, the first question that I can see here reads as follows. Please can you provide more information on the strategic progress?

13:51 Great, thanks Jake and thanks for everybody once again for joining us this morning. Yeah, the strategic process is obviously getting a lot of interest. The one disadvantage that we did do is put a schedule on discussions that would always be commercially sensitive. But all those discussions are progressing really well. What we are because of the number of different discussions happening at any one time, we have had to extend some of the deadlines, but everything remains very positive.

14:30 Perfect. Thank you very much for that. The next question that we have here asks, what are the pricing mechanisms between petalite and spodumene, and how do you hedge against price movements? So it is actually quite an intricate market, the lithium market. It's not as widely understood as most other markets. There are a number of different applications for lithium. And what we are seeing specifically is that we've got access to the full spectrum of the lithium market in that we've got pet light as well as a spodumene concentrate that we're looking to market. And what we what has traditionally happened before the advent of electric vehicles is that Petzlite always used to sell at a premium to spodumene because it's a lot purer form of lithium in that it doesn't have as many deleterious elements as a spodumene concentrate would have, which lends itself towards the specialty glass and ceramics market.

15:36 And what we are seeing now with the volatility in demand for electric vehicles, we're seeing that the petrolite market has remained very robust. And in fact, I think we've got some indications that already that the petalite market is trading once again at a premium to the spodumene market. So it gives us a lot of optionality on that front. We will be able to provide, as I said, into both markets and we are looking to produce product for both the battery and the ceramics market and cover the full spectrum of demand in the lithium market. Excellent, thank you. The next question that we have here, are actually a number of questions relating to this, but perhaps this one speaks to them all. Do you have off takers for lithium?

16:32 The short answer is yes. Quite a number of different potential, as I said, across the spectrum. But once again, unfortunately we can't disclose commercial discussions until they are completed.

16:55 Perfect, thank you. The next question that we have here asks what differentiates ANDRADA from other lithium explorers and miners? Well, the key differentiator is that we're already in production. You know We've gone through and understood what execution risk of building large scale mines is all about. We've ourselves through the hardest part of building a mine, which is construction. And we've managed to complete not only building the mine, but expanding the mine and adding on modular units within time and budget. And we now have a team capable of executing large scale projects.

17:41 Not only that, but we've also got probably one of the biggest lithium resources in Africa at the moment.

17:49 And our key advantage of that is speed in which we can start selling lithium into the global market, which gives us a massive head start over all of our peers. Perfect, thank you. And perhaps just changing tack here a question which is talking to your funding plans going forward. The question asks, how long will the £23,000,000 cash last and what are your funding plans going forwards? So, maybe I'll take this one. Yeah. With regards to the funding, you know, the £23,000,000 gives us sufficient runway to execute on the strategic sort of milestones that Anthony mentioned in the last slide of the presentation. We have also since, you know, secured additional lines with Standard Bank for hedging potential.

18:41 So we look to sort of, you know, cover our cash lines with prices when they do improve.

18:48 With regards to future funding also, you know, we've now got Orion Development Bank of Namibia and Standard Bank on board. And all of them have a, you know, expressed an interest in future funding subject to feasibility studies. So it's nice to have this blend of funders available for us. Each of them have a different risk appetite. And for us as a business, you know, that just provides multiple options. Perfect. Thank you, Hinton. The next question that we have asks, what do you think of the low commodity prices for your products?

19:22 Look, if you're dealing in the commodity game, you know, prices are gonna go up and come down. Our best way of countering that is by producing our commodities, lithium, tin and tantalum just cheaper than the next person and making sure that we manage the cash and income throughout the life cycle of the commodities. So I'm still very bullish on all of the commodities. I think that the green energy transition is here to stay and we will see fluctuations but we as a management team will be able to manage through that very easily. Perfect, thank you Anthony.

20:07 What potential do you see with your other license areas?

20:14 We've got an express sort of ambition or target in terms of becoming a multi mine producer of battery metals. What we are seeing with all of the fantastic exploration and development results that we're getting from other licenses that we are not a one trick pony and we have the ability to bring a number of mines on stream in the shortest time possible. So we wanted to rapidly expedite the development of those other licenses. We've got the financial backing now in order to develop them and so it's game on for all of those other licenses as well. Very exciting I must say.

20:59 Excellent, thank you.

21:02 Another question here asks why did you choose a stepwise de risking approach to building the company and how do you think this approach has benefited the shareholders? We get asked that question quite a lot, You know the traditional way would have been to drill out a resource and put a feasibility study. I think that a lot of people these days don't understand how their ore body operates and a key component of us is de risking that by getting a better understanding of ore body. So drill, pilot, develop. So we've done that successfully and what it also does is prevents unfortunate capital blowouts in the future, which unfortunately does happen.

21:47 But for us, it just gives us ourselves and our financiers a lot more comfort in terms of the ability to develop and bring minds to the market within parameters that we set ourselves and that we communicate to the market.

22:07 Excellent, thank you. Just segueing on to the next question, are you producing tantalum and is the circuit functioning as expected? Yes, are producing tantalum. There are some optimizations, we are getting an excess of moisture but there are some optimizations that we are looking to do in terms of drying that material but we have got our first production runs of tantalum and we've also got an off taker at the moment to take that. So we will hopefully be bringing that revenue stream into the mix as quickly as possible. Excellent perhaps just returning to your license areas which I know you've briefly touched on already but perhaps if there's anything further to add here. The question asks which license area will you prioritize between Spodumene Hill and Lithium Ridge and why?

23:07 So think that the extent of the mineralization at Lithium Ridge is a lot bigger than at Spodumene Hill and Spodumene Hill would probably lend itself towards blending with our existing ore at the waste operations given that its distance is a lot closer. So what we do want to do and given the amount of spodumene and pit light that we have seen in Lithium Ridge, it will be quite beneficial to drill that up into a resource as quickly as possible. And then Spodumene Hill will, as I said, look to blend that with the existing operations. Perfect, thank you. The next question that we have here asks, the reduced unit costs and improved profitability is impressive.

23:59 However, how sustainable are these lower costs considering the royalty and stripping impact?

24:06 Yeah, so with regards to the stripping impact, know that has come off back to sort of the normal guidance rates that we originally applied. As well as, you know, the royalty itself included within the guidance numbers that we provided. So we expect that, you know, those costs would sort of stabilize. However, the continuous improvement program too that we have with the Development Bank of Namibia would increase our tin production. And a lot of that tin production comes with a huge dilution on our fixed costs. As we've seen, you know, in one of the slides where we show the impact of the initial expansion. Now, even though we come with the royalty payment, you know, the royalty funds themselves will translate into a capital expansion program for our production.

24:56 And that in itself will sort of, you know, result in further cost dilutions. So we do expect that to actually maintain and reduce going forward. Excellent, thank you. Can you clearly explain to shareholders the scope and expected timelines of the Wiese MINES Stage two continuous improvement project? Yeah. So, you know, we recently published ARNS, particularly sort of, you know, divulging into the details of the continuous improvement project. Part of it's, know, it's a bit of dewatering that we're doing. We're doing upgrades to the pumps in certain areas. We're increasing the size of our shaking tables. All of those which will, you know, some reduce the cost, some increase the production capacity.

25:44 And with regards to the timeline, you know, we are looking at completing the project towards, you know, H2 calendar year next year. Perfect. Thank you. And perhaps if we just take this final question here. What revenue mix do you expect in the long term? So in the long term, you know, we do see tin being primary until the lithium stream comes online. And then lithium basically, you know, overtakes the tin. However, we do see them as co products rather than a byproduct. The tantalum is technically then the byproduct of the mix. So that will be pushed to OpEx, whereas the other two, I would say 60 to 70% would be the lithium and 30% the tin. Perfect. Thank you, Hitton. Hitton, Anthony, that actually concludes all of the questions that came in from investors. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended just for you to review to then add any additional responses, of course, where it's appropriate to do so, and we'll publish all those responses out on the investor meet company platform.

26:49 But, Anthony, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that would be great. Yes, thank you, Jake. And look, it always is a privilege for us to have a supportive group of shareholders and we thank them for their patience and their understanding in terms of what it takes to build a company. We are on a massive growth trajectory at the moment. I think then as we said, the next six months are going to carry on with this growth trajectory and in terms of specifically the lithium development. And I think that in the next sort of eighteen to twenty four months, you're going to see a very, very different, much bigger company.

27:40 And London needs a billion dollar lithium company, and I think there's race out there. And I don't want to say who's in the pole position. But good luck to everybody out there. Thanks again everybody for joining. That's great. Anthony Hinton, thank you once again for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of ANDRADA MINING LIMITED, we would like to thank you for attending today's presentation. That now concludes today's session, so good morning to you all.