Kazera Global (LSE:KZG) — Investor Presentation

0:00 Good afternoon, and welcome to the KZERA GLOBAL PLC investor presentation. Throughout this recorded meeting, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the q and a tab situated on the right hand corner of screen. Just simply type in your question 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 then published responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Dennis Evans, CEO. Good afternoon, sir. Good afternoon. Thank you. Just before we start, I I'd like to just make it clear that I'm doing this here from our mine in South Africa. So connections are are not necessarily as stable as they might be. But I thought it was important to to hold this meeting and go through the investor presentation.

0:55 And I'd just like to focus really on on some of the the important points in the presentation. I don't think going through every page would be helpful, but just to highlight the progress that we've made over the last twelve months and and what it's going to do in terms of of our future growth. I think the first useful slide for us to turn to would be slide number four. What what slide number four gives us is a a snapshot of of of the company. It focuses on the fact that over the last twelve months, KZERA has made significant process progress both across Whalehead Minerals and Deep Blue Minerals. The business is is completely different to what it was just over a year ago. We're now in production on on both projects.

1:48 At Whalehead, the key ships has been moving into active production and the first delivery of heavy mineral sands under our agreement with with Hugex marked that point. The period has also seen increased ownership of both Deep Blue and Wellhead, which increases our economic upside from both of those companies. We were completely responsible for funding them. So the greater percentage that we own, the the greater our upside is without any negatives being attached to it. The big big development on Deep Blue over the last year has been the fact that we have commissioned the plant and are now completely largely sorry. Would be more accurate. Largely independent of Alex Core in terms of producing our diamonds, which means that we have control over the majority of the production process, and we really rely on Alex Core only to do the final sorting and the sales of the diamonds, which is something that they have been doing for a long time and have been doing well and very successfully over the last couple of years.

2:58 So the company is now in a position where it's on the cusp of positive cash flow. Both of its assets are are contributing, and there's a clear operational base and a very clear way forward, which we we've got established. And I think what's really important here, and and this is certainly not to my credit, but to the credit of the team on the ground, has been the enormous amount that has been achieved over the last since this company started, know, has been in in in operation for a long time, but these assets came into KZERA just during COVID in in two thousand twenty, two thousand and twenty one. The the license for the heavy mineral sands was only granted a couple of years ago, we're now in a situation where the company is producing on in both those projects, which I think is an enormous amount of credit to the people on the ground who overcome some pretty substantial difficulties.

3:55 The next slide I think would be useful to talk to would be slide number 12, which is the optimization plan. Let me take you to that. Right. The slide outlines how the recent fundraisers intended to be applied to support the next stage of operational development. I think possibly the best place to start here is just to emphasize that this is the first fundraise undertaken by the company in a number of years. So it reflects how historically prudent the company has been, the way that it has approached operations and its very measured approach in terms of capital management.

4:54 The company has been, I would submit, very disciplined in terms of its spending to date, and that approach we intend to maintain as we go forward and as we invest the latest funds raised to strengthen and scale the business. So so looking at at at the at the actual slide, you can see that some of the investment is in physical equipment, but a key objective is also to enhance operational capacity, including staffing, systems, and operational resilience. We are in a situation with the with the heavy mineral sands where the the granting of of two a, we believe, is something to shortly be announced.

5:39 And we are building this company to be in a position where we can maximize the impact that the granting of 2A will have on our on the company as a whole, on production in particular. So the focus is on on heavy mineral sands increasing throughput, improving purity, and strengthening margins through additional plant and spirals or possibly other processing systems. For diamonds, the capital is is directed at improving the volumes that we can we can process. We currently have a very, very good processing system, but we would like to be able to handle greater volumes because as we generate greater volumes of heavy mineral sand, so we would expect to be generating greater volumes of diamond gravel.

6:34 And because of some of the sizes of the stones that we've been recovering, which have been unexpectedly large, some of the focus needs to be on making sure those diamonds are properly recovered. Logistics and science efficiency, well, as as I'm sure everybody can imagine, once we start increasing the the volumes that we're putting through, so we have different issues in terms of how we get those volumes processed, how we get them stored, how we get them out of the door. So those those are aspects which need to be addressed as an automatic consequence of the company becoming bigger and more successful. So overall, in the summary there already, I guess, of that whole slide is that the investment is about ensuring that the business is more robust, better positioned to to capitalize on opportunities which are now either already exist in terms of the diamonds or that are about to come into existence with the granting of 2a.

7:43 The next slide is slide 13. Now slide 13 is is a bit more detailed in terms of of of how the actual optimization will work. The point is is that the scaling here is is very much focused on controlled expansion rather than speculative expansion. So the slide illustrates the intended operational impact of the optimization program. As you can see, the heavy mineral sands scale up is expected to significantly increase Manske output. And at the same time, we would hope to increase both the productivity the the the purity of the product.

8:34 And the purer the product, the more value it has. And value is particularly important when you're transporting the product over the vast areas or distances that we have to transport it over. So the higher the value of the product, the lower the transport cost is commensurate to the price and the higher the the margins are. The diamond upgrades, as I I mentioned previously, are aimed at increasing the throughput, but also to enable the recovery of the higher value stones, which which should have a a big impact in terms of the average revenue per carat. What I'm sure a lot of of our investors will already realize, but bigger stones have a much higher price per carat than than smaller than smaller stones. So if you if you're producing a thousand carats out of of very small stones, that could be worth much, much less money than producing 50 carats of much bigger stones.

9:35 So there there's a there's a big impact and a big reason for us to be making sure that any big stones are recovered. The logistics improvements, as again, I've referred to slightly, but basically to reduce downtime to enable us to get stuff through as, you know, as we're buying it, get it processed and get it out the door and to support consistent production levels. It is critically important when we're approaching an international market in terms of heavy mineral sands in particular to ensure that the product product has got a consistent level of purity and that our customers know what they're getting and knowing what they can expect from us. At a corporate level, the focus is is very much on providing capacity, increasing resilience.

10:28 We run this company very, very tightly at the moment. It would be, we believe, very important for us to be developing some resilience to strengthen the team, add in add in extra skills, and manage the growth. You know, two a is represents an enormous upside, an enormous chain change in the size of the company and its position in the world market. We need to be in a position where we have the infrastructure and the management in place to be able to handle that. So I think importantly here is is that this is an expected operational outcome based on planned upgrades. What we're looking at here is not a a guaranteed performance.

11:17 It is very much a a logical and well thought through operational development. So our focus will remain on sustainable and controlled growth and so very much on planned execution rather than speculative expansion. Right. A lot of what I'm saying in that paragraph is actually summarized very usefully, I think, in the next paragraph, which is which is which is slide 14. The slide simplifies and and and puts into into the most straightforward way that we could possibly do it.

12:07 What the difference is between where we are now and what we expect the post investment to to generate. The operational scale plus higher diamond values plus organizational capacity all lead to to increased and sustainable revenue growth. And each part of of of of the process, each part of of that restructuring plays a distinct role. The HMS obviously delivers scale and throughput. The diamonds themselves provide a a higher margin upside. And, obviously, diamonds are are important in this particular area because without being able to have the right to mine diamonds, it would be, mining every mineral sands would be extremely problematic.

13:03 And you'd be incredibly limited in what sort of mineral sands you could mine because they would have to be mined so as not to affect any diamond gravels. The diamonds themselves, the number of diamonds and the value of the diamonds being mined, foresee increasing. Then we have operational capacity, meaning that the business will be able to handle growth and and the growth we see happening pretty soon. It will be in a position to have the people and the management and the infrastructures in place to be able to handle that growth. So the fundraise that we have just done is designed to strengthen all three elements simultaneously rather than trying to deal with them as individual items.

13:53 And and it's all reflective of the fact that we see very much, you know, this is a planned expansion and planned growth of of the business. So, hopefully, I think it's clear that it's a structured and balanced approach to building long term value. I think that is it really in terms of the slides, which I hope sort of demonstrates the progress that has been made over the last twelve months, the rationale behind this carefully structured fundraise, and how the company is investing to become more robust, scalable, and and and operationally resilient. This is the first fundraise, which the company has undertaken in a number of years, and I think reflects the measured prudent approach to capital deployment, which the company has historically demonstrated and which we would certainly intend to demonstrate going forward.

14:56 So taken together, the operational scale, the higher value diamonds, the increase in heavier mineral sands production, strengthened organizational capacity, we believe provide a foundation for sustainable revenue growth and position the company for future expansion, particularly with the granting of of two a as and when that permit is granted. And that kind of brings me to the end of of the slide presentation, it would now be appropriate to turn to questions. Dennis, thank you very much indeed for updating investors today. As Dennis says, ladies and gentlemen, do please continue to submit your questions just using the Q and A tab situated on the right hand corner of your screen. Just while Dennis takes a few moments to review those questions submitted today, I'd like to remind you the recording of the presentation, a copy of the slides will be available on the Investor Meet company platform.

15:49 Dennis, as you can see, we've had a number of questions both pre submitted and throughout today's presentation. If I may just ask you to click on that q and a tab where appropriate to do so. Just read out the question, give your response, and I'll pick up from you at the end. Sure. Thank you, Paul. Right. The first question is, does KZERA see a positive impact from the ongoing upgrades to South African sovereign debt from The US credit ratings agencies on our attractiveness to existing and potential commercial partners and relative ease with which we can expand KZERA's footprint across Africa? That's an incredibly interesting question and probably something which we could discuss for some time. Look. Obviously, I think any any improvement in South Africa standing will will be helpful in terms of sales of products.

16:39 South Africa enjoys a fairly fairly positive overall standing in any case. But we're quite lucky in that we aren't too dependent on the country, in that we have a product which is universally worldwide, needed by by different, countries worldwide. And so to a certain extent, it doesn't really matter. But I think, obviously, being in an a a jurisdiction, which is which is positive, and the more positive that is, the better it is for us. And so I think, if anything, it's it's it's definitely the answer would be that's gotta be good for for South Africa, it's gotta be good for KZERA.

17:27 The next question, are we submitting further mining rights applications to other beach areas in addition to 2A since things are going so well at the moment and to maintain our momentum of expanding the business? I don't want to go into too much detail there because obviously there are a few sensitivities around our plans and what we're doing. I guess I can probably answer that best by saying that we are always very conscious of where we are and what we're doing. Our focus is and and always has been on not biting off more than we can chew. But at the same time, the question is is put very fairly. We are very confident in where we're going.

18:14 We're very happy with where we've got to. We are very happy with the way things are going. And so we are very much looking at other opportunities. The next question. Your slide says you were looking to raise circa $1,500,000 You raised $1,300,000 Is that disappointing and can you still do what you plan to do with that amount? No, $1,300,000 actually is is very reflective of of the support we have from our two biggest shareholders. So that's Capitalize, Richard Jennings and Jakarta and John Wardle. They have been very supportive of this fundraise.

19:02 They they were major supporters of it. And so from that perspective, it's been an incredibly encouraging process. Can we manage on 1,300,000? Absolutely. As as the the slides make clear, what we're looking at doing is is a lot of the equipment we'll be buying will be secondhand. There are various ways of of acquiring equipment that are or does it all have to be a way of an outright purchase. It can be done on lease or hire purchase. And so we are absolutely confident that on the basis of the $1,300,000 can get to where we need to get, which is critically important for us. Next question.

19:48 Why have you not announced how much you have made from the recent diamond sales? That's a fair question and quite an easy one to answer. And the reason that we haven't done that is because we mine diamonds under contract from Alex RMC JV, which is a a joint venture operation between Alex Core, a state owned company, and the Mining Company, which is a community representative, a mining company designed to represent the local community. And part of the contract we have with them has a number of exclusivity clauses, and the joint venture see that the price that they've obtained at auctions is something which is commercially sensitive and which individual contractors are not allowed to specifically publicize.

20:46 Then next question. Can you talk a bit more about the r and s today re Aftan? Is getting the 11,000,000 plus that is owed following the successful arbitration realistically possible? Again, this is an ongoing situation. There are a lot of sensitivities. There are obviously quite a lot of fairly complex strategies at place. I don't wanna go into too much detail. But what I can say is that what we announced today, we believe, is incredibly positive. We are looking at three in fact, it's four really, but three front running companies, all of whom are are offering very viable alternatives as ways forward.

21:39 And that gives us a lot of of confidence that we can come to an arrangement of one sort or another, or end up in a result, of one sort or another, which will be beneficial to KZERA. So that's really the best I can I can say? I I don't really wanna go into any more detail than the RNS itself, but I think that the RNS itself is actually incredibly positive in terms of of the level of interest that we have. And and the nice thing about it is that it's not just us playing sort of two offers off against each other. Firstly, it's three offers. But secondly, it's because they're all slightly different and they all offer different things. It puts us in a really, really good position to to ultimately achieve a result which is gonna work for us.

22:29 The next question, what do expect the uplift from the revised revenue share having on cash generation? I think that's kind of answered in in in the slides to the extent that we can we can answer. The the big the big point will be a 50% increase in the diamond production, possibly greater increase in terms of diamond revenues because, again, just going back to the fact that we'll be recovering a higher percentage of bigger diamonds. And that's something I should mention is that with the diamonds oh, actually, this is the next question I'm leaping into. I won't answer that right now. But in terms of revenue projection, yeah, so it's going to should be a 50% increase in projected diamond revenue.

23:22 And in terms of heavy mineral sands, it takes us to the critical 10,000 tons a month of processed heavy mineral sands. In other words, mineral sands which are capable of being productively, profitably exported overseas in volumes which are big enough for buyers to be interested in them. The next question, which is the question I was about to answer, is re diamonds. Given that we may have missed the quantity of larger stones recently, is it planned to reprocess recent tailings to look for the stones that we may have missed? A very good question, and it reflects, I think, on the quality of our management and their enormous background in diamond mining, these guys have a very good idea of what's involved in the diamond gravels. They felt that we were missing a number of of of bigger stones.

24:16 And so all gravels that have been processed have been to one side and will be reprocessed once we have the capacity to to pick up the bigger diamonds. So nothing has been lost. It's all a question of pushing stuff through and and maximizing the returns. Right then, two questions which probably go together. When did Hebe apply to the Supreme Court re our order of payment? And the next one is, do you have any idea when the Namibian Supreme Court may schedule in the appeal from Hebe? I don't really wanna go into too much detail again because there's there's sensitivity around around the litigation, and their sensitivity around the discussions we're currently having.

25:20 But we so we were we were successful in the arbitration. The argument at the moment is around whether the arbitration should be made in order of court of the Supreme Court of Namibia, and that is not an argument which has ever been seen by our lawyers either in South Africa or Namibia or indeed my background is as a lawyer. It's never been seen by me either. So we it's clearly a question of of of playing for time. The the actual hearing should take place at the beginning of next year, but we would hope that with the various developments that are taking place with the people who are looking at coming into the operation in Namibia that we would be able to negotiate some sort of a solution before that.

26:23 Why haven't you told the market what monthly volumes of HMS have been shipped? Well, partly because of the fact that our focus has not been on on shipping. We can't it doesn't make sense for us to be shipping volumes, any volumes of HMS unless those volumes are of a sufficiently high purity to make it to make it profitable. So whilst we can produce vast tonnages, we now need to be focusing on increasing, and that's what I think the slides made very clear, is increasing the purity. And when you increase purity, obviously what happens is that if you put through a ton of product and you are taking out a percentage of silica and whatever else we might be able to remove from it, that ton is becoming much less than one ton.

27:13 And that isn't taking into account either, which ought to be taken into account, the fact that putting it through that process slows down what you're able to produce. So we need to be in a situation where we can increase the throughput and also increase the purity, and that is exactly what this fundraiser is designed to do. On granting the two a permit, what are the limiting factors and time scales to getting to 34 times? Well, part of part of what we're doing now is is to get this operation set up that it is it is simply really a question of if you wanna increase it by 10 times, you need to have 10 times the equipment. If you wanna increase it by 30 times, you need 30 times the size of the equipment in in very broad terms.

27:59 But once 2a is granted, the first step would be certainly to be getting a proper competent person's report done so that the asset is properly defined so that we know exactly where we wish to start mining. And then it's a question of also working with off takers in order to define what sort of volumes and what sort of purities we need to be going for to to obtain the best results for the company. So it's it's it's a bit of a combination of things. And, also, we would anticipate that the funding for the the expansion would largely come from off takers, and it's a question of what they particularly would like to see. Whatever happens, though, it's going to be it's going to be an absolute difference in terms of order of magnitude in terms of the future to the company.

28:55 The retail offer is still open. Sorry. The question was, is the retail offer still open? To what extent will applications be scaled back? I think that there is very much a question which time will tell, but the offer is definitely still open. So shareholders who wanna participate, obviously, welcome to do so. The reason for making it open to shareholders is that the one thing that we didn't want to do was to disenfranchise our shareholders. And so we felt that it was only fair that shareholders should be offered the opportunity to participate on the same terms as those people who have already participated have done. The next question is regarding AFTAN. If you were to go with one of the three interested parties, does this then let the original purchaser walk away and no need to go after outstanding funds?

29:46 Do you retain any funds already held? Answering that question backwards, we retain the money we've already been paid, which is around $5,000,000, and the rest of it would be subject to whatever deal it was that we ended up doing. We might well end up in a situation where we had a a further claim against Hebe for for the balance of the money's outstanding. There's this there are a number of potential ways to go. Again, I don't wanna be too specific. I certainly don't want to be compromising any negotiating position that we currently have. Right. And then have Hebe made any offer to settle? The answer to that is no.

30:38 If you do a deal with another party, would you renegotiate with Hebe? I think I've sort of answered that. We would not disregard any opportunity to resolve what we're doing and to and to get the best results for the company. And if that means working with Hebe, we'd obviously work with Hebe. There's no personal animosity. But it is equally possible that our solution would not involve Hebe. So, yeah, it it it it's a question of of where we get to. Yeah. I think, you know, just a a general question regarding financials and and and the futures. You know, until we're in proper production and we're producing sand of the right quality, and we are producing it to and and selling it to international markets, it really doesn't make a lot of sense for us to be to be making any kind of financial projections.

31:45 We have given a pretty good indication, I think, in the presentation of what this fundraise means in terms of production and potential for the company. And I don't think that that's going any further than that probably at this stage is something that I or the company would feel comfortable with. But that's that is, I think, all the questions at the moment. So thank you everybody very much for for participating and and for submitting your questions. Dennis, look, thank you very much indeed for covering those all off. And of course, any further questions do come through, you have the ability to review those, and we can publish the responses on the Investor Me company platform. And just before redirecting investors to provide you with their feedback, and it's particularly important to you and the team, can I just ask you for a few closing comments, please?

32:33 I think I think where we are is is an incredibly good place. I think we've come an enormously long way as a in a in a when you look back on it, an incredibly short period of time from going from from a concept into into production in the period which we've done it, I think, has been impressive. It's this isn't something where we followed we followed a whole bunch of other mining companies. This has been done in in what best to of everybody's knowledge is is a unique product of diamonds and heavy mineral sands. And we are now in production. We know exactly what we need to do to get to the the levels of purity and to increase the the recoveries from diamonds. And it's just a question of doing that and onto the next step.

33:21 And, of course, you know, waiting for the next couple of weeks, couple of months, whatever it might be, for the granting of two a. So, yeah, I think it's it's it's a really exciting time for us. Dennis, thanks indeed for updating investors there and taking all those questions. Please ask investors not to close the session. It's now being automatically redirected to provide your feedback in order the team can better understand your views and expectations. It's going to take a few moments to complete, and it's greatly valued by the company. On behalf of the management team at KZERA GLOBAL PLC, we'd like to thank you for attending today's presentation. That concludes today's session, and good afternoon to you all.