Capital Metals (LSE:CMET) — Mineral Resource Upgrade

0:00 Good morning, and welcome to the CAPITAL METALS PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the q and a tab situated on the right hand corner of your screen. 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. Before we begin, I'd like to submit the following poll, and I'd like to hand you over to Greg Martius, executive chairman. Good morning,

0:30 sir. Thank you very much, Lee. Hello, everybody. Welcome again to, the CAPITAL METALS presentation on investor meet. We gave a presentation back in late September, so I'm approaching this with the view that this is just about an update, what's happened since then. I'm in London at the moment. Just had we had the one two one conference for the last two days. We had 22 meetings back to back. And as a result, those of you who've heard my voice before realize it's not quite functioning that well. I will push on, and, and, like, it's a it's a shortened presentation.

1:11 Just a quick overview of where we're at. You know, the the big resource of 17,200,000 tons at 17.6%, as if some of you saw the release we put out on Monday, it's got a lot bigger, and I think we're showing the potential that we've been talking about for a long time for this thing to be a multigenerational deposit. We are we have been traveling quite well on on our share price. I think last time we spoke, we're about 3.7 p, and we're now over five and a half, and we've just been ticking up. It hasn't been going crazy. I just think as we deliver on our milestones, we that's being reflected in the share price.

1:56 Still a long way to go, but I think there's a slide that'll show you where we're at on our share price and and our milestones to go.

2:05 So, this is, we put this one up because we're just focusing on that initial mining area, which is about the middle of the project. It's on on government land, and that's where the focus of that last drilling campaign was. And that's where we've had that nearly 15 times increase in the in the resource tons. And that initial mining area only covers about 5% of the deposit. So the deposit, as you may will recall, the resource calculated 2016 only goes to 1.6 meters because it went down to the water table, and it was drilled with a hand auger, which can't go below the water table. So we did a 170 holes throughout 1,500 meters earlier this year. We released a lot of the results as they came out in three stages.

2:53 And then on Monday, finally, over the weekend, we completed the resource upgrade. I'll I'll touch on that again a bit more right now, actually. So if you can see on the on the picture on the right hand side, the the pink area was the boundary of the old resource, and now we've increased that about 3.2 times to the to the west and to at depth as well. So the holes got down to about 15 meters. On average, it was about eight meters. And then, you know, what would now drop is nearly it was 14.6 times the tons. We got 4.8 times, so nearly five times the increase in the contained heavy heavy minerals at a 5% cutoff, but at a 2% cutoff, that's where it goes up that that incremental amount.

3:47 And then, you know, the implication is we're we're gonna keep drilling, and we really wanna drill the whole deposit at depth. And so, you know, if we if we can replicate this and, you know, at the at the moment, there's no reason to suggest why we wouldn't because we have found another strand line that's deeper. We don't know where it actually surfaces. It'll probably surface, you know, somewhere inland, could be kilometers from us. We're not gonna chase that, because we've got enough to play with at the moment, but this could well be over on this basis, over a 200,000,000 ton deposit. So as I've said a few times, multigeneration.

4:27 So this is always the slide that we put up showing that, you know, how our grade is compares to the rest of the listed companies. And so, clearly, that bubble, as we've been saying, is gonna get a lot bigger. The average grade is going to come down, but we we still have that very high grade first two meters that at this stage, we're assuming that we would continue to high grade that. We'd probably truck and shovel, and then, we would, bring in dredges a dredge to to do the deeper and wider material, which is lower grade. And a dredge is about one third of the operating cost of of truck and shovel, so much greater economies of scale. Now we we've been working with the stakeholders on getting approval to use a dredge. At the moment, technically, we can't go below the water table, but there's very good conversations where we are encouraged that we will get that approval in time.

5:26 So in terms of what's happening in the government, so, you know, what we've been saying for a while is is there's some very encouraging signals coming out. Because, basically, Sri Lanka, you know, went bankrupt during the during COVID and and had to renegotiate with the IMF and and all its creditors. And they've they've done that, and they've got deferrals till 2028. And, so the new government came in last year. They came in on the platform of anti corruption, and they're very serious about it. And, you know, they put quite a few previous ministers and their teams in jail. And, even just this week, the bribery commission has charged a former, chairman of the minor department of the GSMB.

6:12 So, you know, everybody's got the message that they are serious about it. But, you know, from business perspective, what we're saying is that they are focusing on a number of industries that they they want to drive, and and luckily mining and and mineral deposits is is a big focus for them. And just about three weeks ago, we had heard this was happening, and we've been suggesting that it should happen for quite some time. They'd moved the mines department or the GSMB from the Ministry of Environment to the Ministry of Industry. And this is a huge move if you think about it. You know, under under environment, we we saw it. You know, some people in the mines department thought their job was to stop mining.

6:58 And and so there was a lot of conflict internally. So getting getting things done, we we managed to do it. Obviously, we we did get mining licenses, and we are the most advanced project, but it was hard work. And we know this minister, we know this team, and we know how serious he is. And so we're very happy that that this move has taken place. Actually, the Lanka mineral sands, which is the government owned mineral sands project, is under the Ministry of Industry already, so it made more sense, for them to have to consolidate it in that department. And he he made a speech when he took over. He went down to the GSMB and, made a very long speech. And, we we put some snippets of that speech out on, on our socials.

7:47 And here's just a little quote here just just showing how serious he is about opening up the the mining industry. And the the first thing that's gonna come out now, and we understand it's imminent, we had heard that they had final submissions on it on the new national minerals policy on November 6. So we're we're anxiously waiting to see that come out. It's a it's a responsible document. It's it's a fairly high level about, know, sustainable, environmentally friendly mining practices. But one of the key the the the first objective of the policy, a very clear objective, is that, Haendenetti and and his team, that they want to know what resources they have in country.

8:33 They they know that they are a mineral sands player, but they don't know the extent of it. And so, you know, a great example, and and this is going to empower Haendeneti because, you know, we'll we'll we'll show him. He said, you let us drill. Look at look what's happened in just that that little area. We are now 15 times the resource because you've let us go down to the basement. So I think that's gonna really, really support his vision for the industry, and and we'll work very closely with him to just keep that practice going. Another thing we've been pushing for is is that often the stakeholders would just make the decisions on their own, and they wouldn't consult industry. And so we said so they they actually had this policy back in 2023, and they nearly got it right. But, somebody poked their nose in and put some silly words that made the whole thing conflicted, and basically, you know, disabled any future investment or development in mineral sands.

9:32 So they've listened to us, and they've invited us on a number of occasions to sessions with the relevant stakeholders. So that that we haven't seen that in the time that we've been involved in, literally. And what we're expecting now after the minerals policy comes down is that we get that clarity on their their requirements for value addition. And, we've been logging hard with them. We've been explaining to them what the rest of the world does. And and so, you know, we're very hopeful that they don't put something silly in there like they did last time and and just give us time to grow together and then and understand what value addition is, proper value addition in in an economic sense as well over time.

10:21 Other signs that they're open for business, they have put out expressions of interest on for joint ventures from foreign or local parties, industry players, for the government owned graphite and phosphate mines. So, that they came out over the last two months. We know that they're gonna come out with the same invitation for the the mineral sands the Lincoln Mineral Sands project probably early in the in the new year, and we're positioning ourselves with our partner, Ambien, to to participate in that because it's a very interesting project. It's been very poorly run and got a bad reputation, but, you know, we know what we can what needs to happen. So as we've said at the bottom there, the new Sri Lankan government is clearly sending the strong signal that it's open for business for mining.

11:12 So the road to production, you know, the history hasn't changed, but the really important things is that step seven and eight. And, and given what I've just said about what's happening in in with our the stakeholders and their direction, that just gives us more confidence, in in our statement. We're saying that we want to start construction by the end of q one. We have been saying, yes, that, we'd get to FID by the end of December and that, construction would start by end of q one. We we are not you know, I've been pushing hard. I always try to push hard on the timelines, And, technically, I, you know, I don't think we will make FID by the end of the year, but we we the way we are managing it, if if FID actually happened in March, that doesn't defer construction. We can still start construction until the end of q one. So pushing hard for for that date, and then it'll be nine months, and we're we're allowing up to twelve months construction period. So we should be in production in early twenty twenty seven.

12:19 And as I mentioned before, you know, our share price has just, I think, reflected the fact that we've been ticking the boxes. We've been doing the the things that we said we would do And, into that's in terms of getting that drilling done, advancing conversations with the stakeholders, just getting more confidence in country, getting the local partner in place earlier in the year, building the team out, working very hard with Mineral Technologies on all the studies throughout sort of PFS, it's an internal PFS that we need before we start that construction. So, you know, we have an either we have an overshot. Sometimes we get a bit disappointed when we put out particularly news like we did on Monday when you've got sort of an up to 15 times increase in resource.

13:07 But, look, I'm I'm happy with where it's heading. We've still got a long way to go. This is not the scale that I thought we would show

13:15 where we're at and where so the so Hanneman Partners research report, got that target of 18 p. And, you know, so that's more than three times where we're at now. And, our base case NPV, 27 p, and then the upside case of 44 p, so it's sort of eight or nine times where we're at at the moment. So, my view is we keep ticking the boxes, and, we will start to get closer to those targets. And I know I had them on on the back of the release that we put out last week. We've had a good chat with them, and then they put out a flash note on Tuesday. And, you know, we we'll be working with them on how we remodel, that combination of high grade high grade in truck and shovel and dredging, over the coming weeks.

14:03 So, last time we would we put this up, I think we're about $27,000,000 an ounce. It's 35,000,000, but CAPITAL still was a long way off that base case NPV. So just in summary, our grade is still king, and now our size is going to get bigger, but it'll just give us, I think, more options, more alternatives, more flexibility as to how we actually extract value from from this deposit. We are well funded. There's over $4,000,000 in the bank, and we're forecast to have well over about 2,500,000 by the end of March. And at that time when we start construction, there are good conversations going on on the debt and equity and off takers and prepayment.

14:51 So confident that that that won't hold us up. Naturally, they are waiting for the we wait we've got two one more mining license we need. They're waiting for that approval before any of that will drop, but, obviously, we're working that in parallel. So I think that wraps up the presentation. We'll open it up to q and a, and I will just bear with me on a little distance from the screen and as I read this. So I've got a question for Michael. With the project scale now potentially far larger than originally planned, what additional resources do you anticipate to fund expanding drilling, development, and construction?

15:49 Yeah. It's a good question. The we we don't expect it to be that materially different to to what we've got and what what's in the current plan. In fact, our costs have come down quite a lot since we we initially put out that 80,000,000 CapEx, and, the costs are actually, pleasingly coming down even further. So we we put out the the first stage is 20,900,000 CapEx a while ago, and we are we're we're not ready to put a number out on it, but we're actually below that. So we've got a bit up our sleeve. The size of the dredges that we'd be contemplating, are not huge, and and they're not, not that expensive. So I don't think the overall CAPITAL is gonna change. It's just about how the how we're gonna schedule this. We've got the budget to to keep doing the drilling over the whole project, so we don't need a huge amount more for funding. But we will be, you know, right, taking what we can. We're looking to raise 25,000,000 to that'll include a bit more drilling budget and a contingency and and overhead funding when we when we go for that stage one funding that that we're in advanced discussions on now.

17:06 How do we how do we plan to balance near term cash generation with long term expansion. I think I've sort of touched on that. It's we need to do we need to sit down and do more work with the model. We've got a very sophisticated model, and and the reason that we actually made it quite sophisticated in that last cut was exactly for this. So what it's it is it gives us the flexibility to accelerate or slow down capacity expansion to bring in the MSPs in three phases as well. So, yeah, it's something that, you know, we need to we're we're very much focusing on getting to to that construction point based on the just the the plan that we have, which is just a 175 ton per hour wet concentrator plant.

17:57 And in the background, we'll working on exactly what that that question is addressing. Oliver Port, is it a dead duck? Well, you know, today, in in our stage one plan, we're assuming that it is, but, given that given that this project, we're proving that this project is a lot bigger than than what it is in, based on the the resource that we had today, well, before this weekend, you know, it could well come into consideration. So the issue is we've heard figures of up to $15,000,000 to dredge it because it's it's full of sand. So, you know, if we've got this longer life project, that becomes less of a less of a hurdle. We don't want to fund that all ourselves, but, you know, we'll definitely be spending more time on it.

18:55 Can we quantify the differential between dry mining and dredging and how that affects the optimal mining strategy? Again, good, you know, good question. We need to do more work, but so rule of thumb is, as I mentioned, that dredging is about a third of the cost of of truck and shovel. So the economies of scale are pretty impressive. So, I mean, we don't we've looked at sort of 5% cut off and 2% cut off. We need to we need to actually get some pit optimization work done to understand where the optimal cut off is. And we, you know, we haven't done that yet. This is it's obviously fresh off the press from the weekend, so watch this space. Greg, thank you for answering all those questions you can for investors. And, of course, the company can review your questions submitted today, and we'll publish those responses on the Investor Meet company platform.

19:46 Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, could I please just ask you for a few closing comments? Yeah. So, look, as I said, we're we're continuing to tick the boxes. We we are now getting some pretty interesting questions that we need to ask ourselves and and what planning we need to do. We need to stay very focused on getting to that construction point, and, you know, I I continue to see that upside, and I'm I'm looking forward to coming back again and seeing that share price even higher.