Good morning and welcome to Central Asia Metals PLC's H1 2022 results. Firstly, before we commence, can I just pass on from the company, the CAML board, myself personally, and all the staff at Central Asia Metals PLC, a sincere condolences to King Charles III and the royal family for their loss, and express our utmost respect and gratitude for the life and times of Her Majesty Queen Elizabeth II. A loving mother, a wonderful woman, and absolutely fantastic and loyal monarch and leader. Just flicking through the slides, the standard disclaimer first of all. Against that sad and rather somber background, we have some positive results to announce for our performance in the first half of this year. We generated record EBITDA of close to $75 million, up from $64 million in the comparable period in 2021.
That's a margin of 63%, up from 61%, and that generated free cash flow for the company of $52.1 million. On the balance sheet, we ended the period with net cash of $37 million almost, and actual cash of $57 million. Post the period end, we completed the repayments of all the debt we took on board back in November 2018 to acquire the Sasa asset. That was close to $187 million of debt, and that is now fully repaid. The combination of that strong financial performance and strong balance sheet gave the board the confidence to announce a record-breaking interim dividend of 10 pence per share, and that equates to 40% of the free cash flow number.
Away from the financial performance, we created value for stakeholders and we've enhanced our sustainability and our climate change reporting. Unfortunately, we did suffer one LTI in the early part of the year, and we've learned lessons from that particular incident. We've now set new targets for our greenhouse gas emissions, for water management, for waste management, and also for governance and people management in terms of diversity and other aspects associated with the business. We just formally approved, in principle, the construction of our solar plants at Kounrad, which is expected to commence later this year and be completed next year. Over at Sasa, we got the environmental and social impact assessment approved and the permit for that post the period end in August.
That permit now allows us to start construction on site, and we're on track for delivering the backfill plants in the first half of next year. Also the design for the dry stack tailings, both the plant and the landform, is on course for construction and completion in the later half of next year. Operationally, we had strong production performance, and at Kounrad we've increased our guidance up to 13,500-14,000 tons of copper for the year. We've maintained our zinc and lead guidance of which we're on track to achieve. Just handing over now to Gavin Ferrar, our CFO, and moving over to slide 4.
Thank you, Nigel. Just to sort of set out the market conditions that we experienced in H1 and then also the outlook in H2, this slide sort of illustrates the commodity price environment that we experienced in H1 which was effectively a lot higher than here. We also benefited from reduced treatment charges. Those are the costs of converting our lead and zinc concentrates into the metals themselves. They went down 17%, half on half. We also benefited from currency tailwinds where our operating currencies are tenge and the U.S. dollar. There was inflation that was experienced in H1 around 15% for each of our operating jurisdictions. We mitigated that somewhat by placing early orders late in 2021 for reagents and certain of our capital items.
We also had our electricity prices fixed maybe too. The table below shows you the sort of overall movements in those commodity prices for that first half. I'll just point out, the decline in prices that you see on the bottom row of that table were largely experienced late May and in June, a lot higher than we got in H1 2021. The outlook for 2022, as you can imagine, is quite challenging, inflation being very thematic right now. What we've done is provide a lot of support to our staff by offering them inflation-beating pay rises in excess of 15% in the local currencies. We have experienced, it's more inflation in terms of reagents and consumables. That is gonna be around 4%.
As I mentioned earlier, energy markets, we are now exposed to spot prices in North Macedonia with our fixed rate having fallen off at the end of June. It's impossible to get fixed rate contracts now. You can see from that graph at the bottom of the page what energy prices have done over the last 6-7 months. We move on to the income statement. Again, reflecting those higher commodity prices, and as Nigel mentioned, EBITDA margin of 63% across the group as a result of those higher copper, lead, and zinc prices and also the lower TCs that I mentioned earlier. We have had some cost impact. Cost of sales, you can see, has gone up slightly there, reduced slightly by some favorable FX movements.
We've also seen increases in wages and power prices through that period as well. Just to point out that FX gain on the income statement there of $7 million, that is partly to do with the foreign exchange devaluation, but also, really the impact is on an intercompany loan where we have receivables denominated in dollars and with a local currency of denars in North Macedonia there. Admin expenses are up slightly. A lot of that is non-cash and related to share-based payments here at head office and the staff that benefit from those. There are a few extra personnel on board as well.
Given the release of a lot of the COVID restrictions, a lot more of our travel budget is being spent nowadays when we get back to normal levels of travel. On a segmental basis, you can see both assets performing really well. Kounrad, you , EBITDA $48.2 million, up slightly from H1 2021 on a similar EBITDA margin of 79%. A pleasing performance from Sasa, where we have our EBITDA margin up to 60% from a previous 54%, again, benefiting from those enhanced lending prices. In the next slide, we look at the cost base at Kounrad. Again, you know, right at the bottom end of the cash cost curve for the copper world. We have seen on a line-by-line basis the payroll sticks out at a $1 million increase there.
That is in relation to those pay rises I mentioned earlier. You can see reagents have come down, half on half. If you recall, in H1 last year, we experienced some viscosity issues and enhanced or sort of extra consumption of what we call the organics. That issue has been resolved, and you can see that resolution coming through in that lower cost of reagents. The other thing I'd like to point out is realization costs have gone up ever so slightly there, where we are paying slightly more to divert our copper around Russia. It used to be routed through Russia to its final end user. It now has to take a more circuitous route, and that's costing us a little bit extra there.
We move on to the Sasa C1 costs and the cash costs there. The pie chart is, if we compare again year-on-year, it looks worse than it really is. I think what we really need to do is compare that against the rest of the industry, where we remain just outside the first quartile of cash cost producers there. If we look at the table, it's a little bit more informative. The total site-based operating costs, which is around two-thirds of the way down that table, you can see that they have gone up slightly by about 6.5%. Site-based unit costs up around 9.4%. That is that inflation coming through and slightly lower units produced.
Benefiting again, as we look at that realization cost about a 17% drop in those treatment charges, which actually results in the total dollar costs that we incurred for the half going down from $29.3 million to $28.4 million. Healthy EBITDA margin of 60%. You know, in spite of that sort of period-on-period increase in cost, still a very profitable operation. Moving on to the balance sheet on slide eight. I think Nigel mentioned we repaid our corporate debt facility. We had $38.9 million of net cash as of the end of the period. We actually made one extra loan repayment the day after the end of the period because of some clerical error at the banks.
Usually we have $19.2 million per half. We're at 16 for the half that we're reporting today. However, as I said, that Praxis corporate debt has now been repaid in its entirety as of the end of August. The other big delta on this balance sheet is on property, plant, and equipment. Again, that is largely due to currency movements where we book the assets in the local currencies. As I mentioned earlier, the dollar has appreciated in relation to those. CapEx on the next slide. You might think that group CapEx at $8 million for the half looks a bit low in comparison to the guidance which we retain at $28 million-$30 million for the year.
We do expect to accelerate that CapEx as we begin construction in relation to the cut-and-fill project in quarter 3 , quarter 4 this year. You can see we already have a significant cut-and-fill project payments in the first half of the year related to the backfill plant, the decline, underground reticulation, which is the pipework to transport that paste fill back underground, and also our dry stack tailings facility that we are developing as well. Sustaining CapEx, nothing out of the ordinary there. Underground development, flotation equipment, and new fleet, replacing that Sasa and some anodes replaced into the SXEW plant and additional pipework to allow the irrigation of those dumps there. As I said, retaining guidance for the year on there.
If we look at the cash flow waterfall on slide 10, just to illustrate, the differences from the end of last year to where we are at the end of the period. Clearly, you know, good cash generation from operations in relation to those commodity prices. The final dividend of $27.8 million standing out there. As I said, borrowings at $16, but the day after we paid another $3.2. Also, repayment of the overdraft facility. We were running around a sort of $9-$10 million drawn overdraft facility in North Macedonia. We've reduced that down to around half that level, by the end of the year. With cash at the end of the period of $57.7 million.
On that note, I'll hand over to Louise, who's gonna update us on sustainability updates.
Thanks, Gavin. Right. Kicking off on the sustainability update with our health and safety update. We had a better half one this year than we did compared to half one last year. We did have one LTI at Sasa. It was a relatively minor incident, but we do learn lessons from these incidents. We had one what we call a restricted work case as well. This is a new category for us. It does come into your total recordable injuries, but it's where somebody is able to come to work, but they're not able to fulfill all of their usual roles. I think we previously mentioned we hired a new very experienced group health and safety manager. He suggested that we include this category.
We had zero harm at Kounrad for the first half. All in all, CAML Group, we had one lost time injury, and we had two recordable injuries. To the 30th of June, that gives us a lost time injury frequency rate of 0.85. One of our key targets this year is to improve on our lost time injury frequency rate from last year, which was 1.69. Moving on to slide 13. Just to give you an update on our reporting activities during the first half. First half of the year in Q2, we released our annual report, our sustainability report for 2021, and also our first ever climate change report for 2021 as well.
In terms of the sustainability report, it was the third standalone report that we have published and the second that we reported to the Global Reporting Initiative, GRI standards. We were able to include another two of the UN Sustainable Development Goals as part of the work that we did last year, so we added affordable and clean energy and climate action as two of those additional goals. As I said, I'll mention the climate change efforts in a forthcoming slide, but I think all our efforts together meant we were very pleased that MSCI has upgraded us from a triple B rating to an A rating. MSCI is an independent external ESG research provider, so their views on our ESG performance are obviously very important to us.
We're very pleased about that. In terms of outlook for the rest of this year, what are we working on? Obviously to inform our efforts internally, but also for our reporting, we're working on an updated stakeholder engagement based materiality assessment piece of work. That's being done at the moment. It's good practice to redo those every couple of years anyway. One of the key reasons that we're looking at that now is because GRI is moving towards the new universal standards, and they take in this double materiality aspect of your societal and environmental impact, but also the potential economic impact on the business as well. We're redoing that stakeholder engagement. We'll also do some training internally to make sure that we understand our reporting for the universal standards.
We're doing our scenario analysis work for climate change. That's underway at the moment, and that will inform our reporting for that next year as well. Last year, we reported we had completed an asset retirement obligation piece of work for Sasa. We're doing that for Kounrad this year, and that should be completed by the end of the year. We've also made a progress towards the Global Industry Standard on Tailings Management reporting, where we've committed to align with those disclosures by the first half of 2024. We go on to slide 14. We've just laid out our key sustainability targets here, and these are aligned to and linked to executive director and senior management remuneration as well.
As a result of a lot of the work that we did on the ground last year, we've been able to set some new targets in areas which we hadn't previously had them. I think the two key areas to point out here are in terms of gender diversity. We've set ourselves a target to increase the number of female employees by 25% by the end of 2025. In particular, on the environmental areas, as Nigel said, we've set ourselves targets in greenhouse gas emissions, in water and in tailings.
We're aiming to reduce our surface water abstraction at Sasa by 75% by the end of 2026, and also by the end of 2026, 70% of our tailings will be stored in a more environmentally responsible manner at Sasa, and by that we mean either in the paste backfill underground or in dry stack tailings facilities. We've also, as I said, committed to reporting towards the industry standards for tailings as well. Moving on to slide 15, just to give you an update on climate change. We actually put disclosures in our annual report, our sustainability report, and in our new climate change report on our efforts reporting towards TCFD. There's four key areas of TCFD. There's governance, strategy, risk management, and then metrics and targets.
We did make progress in all of those key areas last year. In terms of the strategy, we really firmed up a strategy for CAML during the year, and that's a kind of five-pronged approach really to produce the right metals that contribute positively towards the energy transition, to work towards decarbonization, make sure we're operationally resilient, make sure that we're business and strategic resilient, and then finally, deliver transparent reporting. The work that we did meant we felt confident to set targets for greenhouse gas emission reductions, and we have stated that we aim to reduce our greenhouse gas emissions, Scope 1 and Scope 2, by 50% by 2030, and that's using 2020 as a base.
We've also stated we expect to be net zero by 2050, and that means that we're feeding all of this approach on climate change into our M&A and business development activities as well. Two key areas we still need to work on for climate change. That's the scenario planning. As I said, that work is underway. That will be completed towards the end of this year, and then that may well inform our risk management and adjust our strategy going forward, depending on the outcomes of that work. We've got that work well underway, and we will be able to discuss that in our reporting next year. We plan to work next year on our Scope 3 emissions, which we plan to report in 2024. That will be our key piece of work towards TCFD for next year.
The main aim is by 2024, we've really covered most of the key aspects of TCFD reporting. Moving on to the final slide for me, which is on slide 16, unlocking value for our communities. We do enjoy very strong community relationships at both Sasa and Kounrad, and it's not something that we take for granted at either sites. We have charitable foundations at both of those sites, and we fund those with 0.25% of our gross revenue each year into both of those separate foundations. We have also committed to increasing that number towards 0.5% of our gross revenue in the longer term. Key projects that we've worked on in the first half at Kounrad, we've worked on some infrastructure projects.
We've provided financial support for a new children's rehabilitation center and hospital in the local town, Balkhash. In Kounrad, we've also worked on installing some bus shelters and also work on a automated railway crossing as well in the Kounrad village. At Sasa, we've been working on a new piece of work with the local municipality, and consultants called PrimePoint, and we're really trying to get very long-term vision for economic and environmental planning. The idea of this is that we'll be able to help generate jobs there for the long term that are sustainable and unrelated largely to the mine. As we've maybe mentioned before, the mine, we employ around about 700 people in a town of maybe just under 7,000 people.
It is very dependent on the mine and we think it's part of what we should be doing to try to generate jobs that are external to the mine. I think it's also important to note it's not just community donations that we work on. We've got local employment of 100% at Kounrad and of 99% at Sasa, and we also spend a lot purposefully with local suppliers as well. I'll hand back to Nigel to run through the operational figures.
Okay. Thanks very much, Louise, and thanks to Gavin both for detailed updates on finances and also our efforts on improving our sustainability reporting and the targets that we have. Operationally, if we look at slide 18 now, many of you will have seen this picture several times, I should imagine. We've now been operating Kounrad for just over 10 years, and that's the aerial view. We estimate at the moment that we've got remaining recoverable resources in the east of around about 7,000 tons. We've almost exhausted theoretically the east, although we will be operating there for several more years. The western dumps around about 112,000 tons of recoverable copper. That makes just shy of 120,000 tons.
Turning over the page to slide 19, again, a well-trodden slide in many ways, just showing the seasonality of our production and how we've grown that production over the years. At our 10-year anniversary early this year, we did around about 130,000 tons of recoverable copper or produced copper. That level, which if you add it to what we estimate remaining at the moment, is about 250,000 tons of copper over the life of the project. Just to give you back some figures about the difference there between the eastern dumps and the western dumps, as many people know, we do get higher recoveries on the eastern dumps than the western dumps. That's all factored into the recoverability. Turning over to slide 20.
Again, a table of some of the statistics over the last 10 years. You can see pretty consistent levels of outputs only over the five, six years as we've grown the project to an output close to 14,000 tons. As just a reminder, I said before, we have increased our guidance this year to 13,500-14,000 tons of pure cathode copper. You can see the quality on the bottom line there on the table, very close to 100% throughout the years. The main things that have changed over the years will have been the PLS flow rates and the area under irrigation at any one stage. That also is starting to stabilize 10 years into the life.
The intermediate leach system itself is an improvement that the team have designed such that we can effectively will enable us to operate older blocks where maybe previously we would have thought they're exhausted. We can operate them for longer and maintain the PLS grade at a reasonable level for the plant when it's producing the SXEW copper cathode. We've completed ILS phase 1 . That was done last year. That was the water transfer pipeline from the SXEW plant all the way around to the western dumps, a distance of around about 12 km . This year we've been completing phase 2, and by the end of this year, that will all be complete, ready for actual commissioning next year.
Turning over again to the last slide on Kounrad, which is slide 21, something slightly different, which is our solar power plant that we have had approved by the board to construct. We've now gone from the scoping study into detailed engineering. The board has approved this on the costings of this, and we'll start construction with earthworks before winter sets in at Kounrad before sometime in either this month or next month once we get the final permits for it. The project is expected to be completed next year and then come online. It's a 4.77 MW unit.
It will provide around about 16%-18% of Kounrad's electrical power, and the cost of it is around about the $5 million mark, with only under $1 million to be committed this year in terms of earthworks and prepayments on any orders for materials for it. That's something positive on our goals for sustainability and reducing our greenhouse gas emissions in Kazakhstan. Turning over to slide 22 and moving on to the Sasa zinc and lead mine in North Macedonia. As many of you know, again, this is a mechanized underground mine that we purchased for just over $400 million almost five years ago now. It's a sublevel caving operation currently. They are 100% sublevel caving, and we are transitioning that to cut and fill over the next couple of years.
That method of mining will start next year, in 2023. We have reserves and resources out to 2037. Just a few statistics there of the EBITDA that it has generated since we acquired it. As I said previously, we have now paid off all the debt that we took on to acquire that asset in November 2018, around about $187 million. Turning over the page to slide 23. Again, just a few facts and figures on production. In the first half of this year, we mined close to 402,000 tons, and the feed into the plant was just slightly more than that at 404,000 tons. The zinc recoveries and lead recoveries were good. Slightly down on 2021, but nothing major to worry about.
The zinc produced and the lead produced from the plant was 10,465 tons of zinc and 13,827 tons of lead, leaving us on track for the guidance. Just to reiterate that guidance for this year, it is 20,000-22,000 tons of zinc and 27,000-29,000 tons of lead. Just a quick update if we move over to slide 24. On our cut-and-fill project, which we've been undertaking now for the past 18 months or so. If you look at the bottom picture, that's an aerial view of the mine. From left to right, the left-hand side is where we access the underground ore body.
You've got the infrastructure, then you move over to the old tailings facilities that have been used since the mine started way back in 1960. There's a triangle there calling that dry stack tailings, which is where we'll be placing the dry stack. That's the old tailings facilities one and two, and then going downstream to TSF 3.1, 3.2, and our current facility, TSF 4, which you can see that small pond there about two-thirds of the way down the picture. In terms of the project itself, there's a number of aspects to the project. First of all, on the new decline, new access into the ore body, which is a far wider tunnel, 4.5 meters by 4.5 meters. Development continues on that.
We've developed it both from the surface and at 9-10 level, and we've now done about 1.1 km of tunneling there. We expect to join the two aspects sometime in the first half of next year. The total decline itself, when completed in 2024, will be about just shy of 4 km in length and give far more easier access into the ore body, improved ventilation and have many advantages, potentially for moving for electrical vehicles, for actually operating the loading and the dumping side. On the paste backfill plant, the location has clearly been confirmed. We start construction on-site now that we've got the ESIA approved.
We expect to start construction this month and certainly into Q4 of this year, with completion of the construction phase by H1 2023, and then moving into the commissioning phase. Most of the equipment has been ordered, is on-site, and the teams are ready, and the contracts are signed, ready for construction of the paste backfill plant. Dry stack tailings, which is the other aspect of how we'll manage waste to reach that target that Louise mentioned before of 70% by 2026 being in an environmentally friendly manner. The dry stack tailings plant has been designed by Metso Outotec. By the end of the year, we'll have finished and hopefully got local approvals for both the plant and the landform, which has gone through design by Knight Piésold.
The construction of that particular facility will be commenced next year and completed at the back end of next year, is the plan. We're on track for all those plans. Just turning over to slide 25. That's just a diagram effectively showing the three ore bodies that we have at Sasa. On the left-hand side is the ore body that we're currently mining, Svinja Reka, and we are looking at drilling opportunities for potentially in the future, looking at Golema Reka and Kozja Reka.
The key point of that diagram is to show where the actual new decline, the blue line you can see there, is the decline going from the process plant or just to the close to the process plant, down to the ore body and actually through Kozja Reka, into the ore body and down to the lower levels. Just moving over now away from operations, just to discuss our capital allocation priorities, and I'm talking to slide 27 here. Just to reiterate the very positive message this morning of announcing a record interim dividend of 10 pence, that represents 40% of our free cash flow of $52 million for the period. Our policy remains at the moment 30%-50% of free cash flow.
We will be taking soundings from investors as we go around the roadshow now that we've fully paid down the debt as to their views on how we should use a growing cash balance, depending on metal prices, obviously, and how we should potentially use that. As a company, we are keen to use quite a bit of that both for developing our operations as we are doing at Macedonia at Sasa and investing in the cut-and-fill project, but also for growth opportunities, which we'll touch on in a minute. That latest dividend takes us to a total of GBP 1.42 that we've paid back since we started paying dividends back in December 2012 or $277 million.
On the right-hand side, you can see a waterfall chart there of how we've paid back the $187 million. Effectively, as Gavin said, each year, paying back the $38 million on a fairly religious basis to now have zero corporate debt on the books. Moving over to the next slide 28. Very important too is obviously how we deliver growth. We've got two great assets. We've already been through those, Kounrad and Sasa, both cash generative, low cost, good metals, good jurisdictions that we operate in, and we've been ramping up as a consequence of paying the debt fully down our business development activities. We're constantly looking for opportunities. It is very much opportunistic, as many of you know, in the mining industry.
Some of the sustainability aspects that Louise mentioned before, it does inform our thinking as we look for opportunities in the market. We look at governance issues and the country risk, energy usage, water usage, and all those things you can see bulleted there that are additional points that we need to take into consideration when we look for these opportunities. We have had discussions, long and useful discussions at the board level to try and home in on the strategy. As I said before, it still remains opportunistic, but we're focusing in on the geography a little bit, trying to have a preference for European time zones, obviously Europe and parts of Africa and also Kazakhstan. Obviously, we operate successfully in Kazakhstan, and we feel that is a good jurisdiction still for us to potentially invest in.
The stage of development, I believe now really with our debt having been fully paid down, that broadens it up for broader investment maybe into development opportunities. Again, the stage of development could be anything from early stage exploration through to assets that are currently producing assets, and we look at different assets all the time. In terms of commodity exposure, our strap line is to be in the base metals which are useful for modern-day living, and copper and zinc are clearly metals that are our priority, and we're looking at those metals. Other base metals we do look at them from time to time in terms of the opportunities that are out in the marketplace to grow the business. We have a strong balance sheet, as already mentioned.
We now have material debt capacity from the banks we've worked with over the past five years and the relationships we've established in terms of on a pro forma basis, looking at opportunities and how much debt could we potentially take on the books to acquire those opportunities. I'm just turning over finally to the last slide before I hand it back to the audience for any questions they may have. Summary and outlook. I think we've emphasized here that we do have a strong, sustainable business both operationally and financially. I've already mentioned we're producing the metals that are essential for modern living, safely and sustainably. We've had a record first half of the year both in terms of EBITDA and cash generation. I think it's worth emphasizing, as Gavin, I think, touched on before, we aren't immune to inflationary pressures.
We are experiencing, we will experience and expect to experience, certainly in electricity prices in North Macedonia, a few headwinds in the second half of the year. I think that informed us very much in terms of our capital allocation regarding the dividend, GBP 0.10, which is in the middle range of our 30%-50% policy. We're on track to deliver our cut and fill project. We're looking for growth opportunities, as I've already mentioned, and the debt facility is fully repaid now. If we look at the outlook, we are looking for the opportunities, as I mentioned. We do experience cost inflation as everybody across the world has experienced at the moment. It is challenging. We accept that, but I think we have a strong balance sheet to weather those storms, looking out into the future.
Finally, the last point, construction of our solar power plant will commence in Q4 of this year. That completes the presentation from myself, Gavin, and Louise, so I'll hand it back for any questions that there may be.
If you would like to ask a question, please signal by pressing star one on your telephone keypad. Using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will now take our first question from Alexander Pearce from BMO. Please go ahead.
Great. Thanks. Morning, all. Nigel, you've highlighted a number of M&A opportunities that you've been evaluating through the period. I just wondered whether you could just comment on if you've seen more attractive opportunities present themselves following the softening of commodity prices, so later in the period. Then given your focus on ESG within the M&A strategy, has this made finding the right opportunity significantly harder?
Thanks for the question. The question is, softening of prices, does it make it easier to find assets to acquire? The challenge of ESG, does that make it harder to find assets to acquire? It's a very good question. As I said before, I emphasize the word opportunistic. I think the softening of the metal prices doesn't necessarily influence it, 'cause I think if we're looking at copper assets, as Gavin's always said, really, people are always looking at a longer term copper price because that's the future of metal to change the world really into a green economy and renewable energy. I don't think that necessarily changes it.
I think what we may find as we are heading into recession and, you know, people are experiencing some difficulties is that companies that haven't got a strong balance sheet and are really operating at the margins as metal prices do come down. If you've got a high cost base of cash costs significantly higher than, say, what we've got, there may be some more distressed opportunities and maybe we'll see that. As I can't particularly say what we're looking at at the moment, obviously for confidential reasons, but I think that might open up the window to more opportunities potentially. I think that that's fairly, you know, a reasonable assumption we can make. The ESG angle I think is gonna inform everybody's acquisition of assets, to be honest with you.
I think as long as you have a plan as to how you can change the footprint of that particular asset or how you're gonna manage the water or how you're gonna manage the waste management, whatever it may be, I think you can still acquire assets that maybe at the moment aren't operating to the best standards, and you can change those standards by your track record and you know, your credibility in the marketplace to do that. If it's absolutely impossible, then that might become a fatal flaw for us investing in an asset. I think if it's something we could invest in, we could engineer, we could spend capital to improve the footprint, I think that could be an opportunity still, that we could take.
Great. Thank you.
That answers your question. Thanks.
We'll now take our next question from Marina Calero from RBC Capital Markets. Please go ahead.
Good morning. Thanks for the call. I have a couple of questions on your M&A strategy as well. The first one, can you maybe tell us in which commodities in particular you're seeing more opportunities at the moment? The second one, what sort of levels will you be comfortable with considering the current macro environment?
I'll take the second question first. I think we've always been sort of comfortable at a maximum sort of net debt EBITDA around 2x .
Yeah.
We sort of model on that basis. I think, you know, we'd possibly consider going above that for a very short term if we could see some rapid de-leveraging. But I don't think we wanna stretch the balance sheet too high, particularly in the cost environment that we think we're gonna be facing. On the first question, I don't think there's been a swing to any sort of preferable metals given the current environment either. I think we just continue, as Nigel said earlier, with copper as a sort of preference. You know, anything that's essential to modern living fits with that strap line is relevant to us and relevant to the globe really. You know, very happy looking at the base metals that fit in the definition.
Okay. Great. Thank you.
As a reminder, to ask a telephone question, please signal by pressing star one. We will now take our next question from Richard Hatch from Berenberg. Please go ahead.
Yep, thanks. Thanks, guys, and congrats on a great set of numbers. Well done. Well done indeed.
Mm-hmm.
I've got a few questions. Gavin, perhaps I can just ask you to help us out a bit on Sasa costs.
Mm-hmm.
Processing costs are about 20% of your cash costs. Your power costs have just increased by sort of fivefold, if I'm looking at the slide on page 4. You know, what are you kinda thinking in terms of an H2 steer for Sasa cash costs if we're kinda looking at this? Are we kind of expecting this to push up to more nearer, you know, $0.80-$0.90 a pound, or is that too aggressive?
Obviously we don't give sort of specific cost guidance, Richard, but I think, you know, you can sort of start figuring it out what, you know, where the costs are going to increase over the second half. I think we've guided on the, certainly on the payroll inflation. You know, if you think we're using about 3.5 million kWh a month at Sasa, and we're looking at a potential, you know, fourfold increase there, you can then sort of get the math out there, where we're looking at around, $6.5 million for the second half in terms of power costs. You know, that is probably a little less than what we're seeing across mainland Europe. You know, we are priced off that Hungarian Power Exchange. It's hourly.
There's some spikes in that hourly rate that sort of make your eyes widen a little bit. I think on average, you know, that's the kind of, you know, forecast that we're looking at right now.
Okay. Thanks. Okay. Understood. Just as I look into sort of 2023 with CapEx, I mean, it's great to see the solar plant sort of pushing ahead. I f consensus is roughly sitting at about $20 million for CapEx next year, is that gonna come up a little bit just to reflect the spend that you're gonna put into Kounrad for the power plant, do you think?
Yeah, I think it will, Richard. I think we've been, as Nigel said, we've moved that project along from the initial scoping study through to a feasibility analysis to the detailed engineering. So we've got a really good handle on costs now on that. You know, when we put the guidance out for next year, we'll include that in it. I think previously we've sort of said in terms of the cut and fill project at CapEx, etc., at Sasa, the CapEx will be around $10 million next year, in addition to the usual sort of sustaining CapEx run rates there. Yeah.
Thanks. Cool, while I've got you, that $3.2 million increase in restricted cash that went through the cash flow statement first half, is that should that flow back in? What's that relating to? Is that the debt or-
The debt and the debt repayment, yeah.
Therefore should that flow back in H2?
Exactly. Yeah.
Okay.
There should be no restricted cash on our next balance sheet.
We get it back, right?
Yeah. Yeah.
Okay. We get it back, right? Okay, cool.
What we used to do, I mean, just for everyone's sake, is you would fund a collection account with the next month's debt service. So that would always be reflected as restricted cash on the balance sheet. Now that we've repaid the debt, that doesn't really exist anymore. Yeah.
Okay. Right. Understood. Then last one, just on Kounrad. I mean, you, congrats again for raising your guidance. By memory, that's at least the second year in a row you've done it.
Yeah.
My memory's going in my old age. You know, if we look medium term, sort of, I guess, the market sitting 12,500-13,000 tons you're pushing ahead of this. You've talked about the ability, Nigel, to increase production from areas where you previously would have, or mineralization, which you previously would have thought was non-recoverable.
Yeah.
You know, is it sensible to rebase Kounrad to more like 13,000 tons into the medium to longer term, or is that a bit too aggressive?
It's a good question actually, Richard, to be fair. Yeah, we, you know, Nick Clarke would have always said, "We're not cutting cheese here. It's not an exact science." We have this kind of magical 250,000 tons that we're working towards, and we've had that for many, many years, and how it works off that basis in terms of how we plan the leaching and how we work around the whole dumps, Richard. I have to say, as the years go by, the guys are becoming more creative, both with ILS and also on the eastern dumps, how we squeeze more copper. For example, you know, we're looking at 45%-50% recovery on the eastern dumps.
We've actually exceeded that, and we've actually had, if you look in the detailed RNS statement, you'll see that we've moved some material to put it onto dump nine and 10, about 300,000 tons. We reckon we can
Get extra copper through doing things like that. That's all marginal, it's all around the edges. I don't think we're, you know, we'll be going gung-ho to say it's much more than what we've currently guided in the past few years. Every year, you know, we try and improve on that as best we can. W e know we've got a life out to 2034. We know in theory what the recoverable copper is, but we'll do our best throughout the years to maintain that at the current levels. I think you'll probably find that in the latter years, so that's your longer term if you like, it will tail off.
I think in the medium term we'd like to feel we can stick around what we've currently done over the past three or four years, for the next, in the short to medium term.
Okay.
Thanks for the question.
All right, brilliant. Thanks a lot. Yeah, yeah, that's good, that's good as gold. Brilliant. Thanks, Nigel. Thanks for your time.
Thank you.
We'll now take our next question from Nick Chalmers from ARC. Please go ahead.
Morning, all. Hope you're well, and congrats on another excellent set of results. Richard actually just beat me to it on his question on operating costs at Sasa. Just sticking with inflation themes, is there any risk that sort of industry inflation is gonna flow through to capital items at Sasa in terms of the cut and fill? Or have you managed to sort of lock in your budget for that over the next 6- 12 months?
Nick, that's a good question. Morning to you as well. Look, as I said earlier, we did place a lot of early orders for a lot of the materials. You know, we've got a warehouse full of pipes. We've got the displacement pump and various other things on site already. We have just recently signed a contract to begin construction of the paste backfill plant. I think a lot of those costs are fairly well locked in. The one area that there's potentially some risk is on the dry stack plant and the landform there. We're in the process of finalizing the design. We think we've got a reasonable handle on it now.
We've been watching that budget fairly closely and, you know, no reason to change the guidance that we've given you earlier. Yeah.
That's great. Thanks.
There appears to be no further questions at this time. I would like to turn the conference back to the host for any additional or closing remarks.
No, I'd like to. I think it's been fairly thorough. We've had some good questions there. Thank you very much. I'd just like to really finish off by saying we're delighted by these results. They're a strong set of results, and delighted with announcing a record dividend. Just as I say, we are wary of headwinds we're going into, so we're not trying to be overly bullish, but I think we can afford the dividend we've paid. And I think it shows confidence in what we're doing, and we'll look for opportunities to grow the business from here, really, there. Hopefully, that message has come across to the listeners on this particular call. Thank you to everybody for listening and yeah.