Good day and Welcome to the Central Asia Metals Full Year Results Presentation. I will now hand you over to CEO, Nigel Robinson. Please go ahead.
Thank you, and good morning to everybody for a record year for Central Asia Metals for the year ending 31 December 2021. Just flicking through the slides. Standard disclaimer. Slide two is where we operate. Most of you know, I think, operations in both Kazakhstan and North Macedonia. Kazakhstan, where we produce pure cathode copper from an in-situ dump leach operation with an SXEW processing facility. Sasa, which is a more traditional underground zinc and lead mine. Some of the highlights from this morning's announcement, as I say, delighted. These are record results for Central Asia Metals.
We generated, in 2021, a record revenue of $235.2 million, and the associated EBITDA, that's earnings before interest, tax, depreciation, and amortization, was $141.5 million, up almost $46 million on the previous year, and giving a margin of 60%. That fed through to the cash flow that we generated, just south of $104 million of cash flow. That number's important because that's the basis on which we pay a dividend back to our shareholders. That dividend for the full year of 2021 will be GBP 0.20. We're announcing this morning a final dividend of GBP 0.12, which combined with the GBP 0.08 we paid back in Q4 last year, is GBP 0.20, a yield of around about 7%-8% on the current share price.
That's our highest ever annual dividend based on those strong financial numbers, which Gavin Ferrar will give more details about later. On the balance sheet, we've got a strong balance sheet. We ended the year in a net cash position, $22.7 million. We've been paying back every year, as everybody knows, the debt that we took on to acquire the Sasa operation in late 2017. That debt level is now at $33 million, and we estimate that will be fully repaid by August of this year. Just a few other highlights. Our production, robust production, very good production at Kounrad, just over 14,000 tons. Slightly below our guidance on zinc and lead at Sasa because some difficult ground conditions that we experienced.
We came in nonetheless at 22,167 tons of zinc, sorry, and 27,202 tons of lead. A creditable performance. Combined with those strong commodity prices, a very strong financial performance. Slightly disappointed with our LTIs. We had four at Sasa last year, none at Kounrad, and over the period, that's about five LTIs we've had in the past three years. There are lessons we can learn from that. The last highlight, really, but an important one is that we're announcing a 17% reduction in our greenhouse gas emissions. More of that in a minute. Just turning over to slide four now. What is our purpose? What do we do at CAML?
Our purpose is to produce base metals, which are essential for modern living, profitably and in a safe and sustainable environment for all of our stakeholders. Not just shareholders, but all the stakeholders. The three metals that we're involved in at the moment, copper, zinc, and lead, all have a good future for the way the world's going, both in terms of decarbonization, and basically using zinc on galvanizing products. Even lead itself, which is probably the least sexy of our three metals, that's something which will be used in the long term as electric vehicles take off and lead acid batteries still play a crucial role in electric vehicles. That's our purpose.
If you move over to slide five now, you'll see a diagram there which shows how our purpose feeds into how we deal with our stakeholders, how we manage the risks in the business, how we manage our success as a management team, and it also how it ties into the strategy of the company, both short-term strategy and also the longer term strategy. The short-term strategy has got three key pillars to it, a focus on sustainability, targeting on low cost and high margins, and ensuring the prudent capital allocation. We'll touch on each of those aspects of the short-term strategy as we go through the presentation. The longer term strategic objective is obviously to grow the business from the current two operations, and we'll touch on that as well towards the latter end of the presentation.
A little bit more now on focus on sustainability. That's slide six. Quickly turning over to slide seven and the five pillars that we have that support our goals towards sustainability. They are delivering value through stewardship, maintaining health and safety, focusing on our people, caring for the environments in which we operate, and unlocking value for our community. Five key pillars, and associated with that, there are the UN Sustainable Development Goals, of which we now tick the boxes for, I think, about five of those or six of those, as you can see, alongside the pillars of our sustainability framework. Turning over to emphasize a little bit more on each of those, slide eight now. Health and safety performance. I've already mentioned that disappointingly we had four LTIs last year. We've learned some lessons from those.
We have retrained the people accordingly, and we look forward to this year to improve our procedures on site. Those were all at Sasa. At Kounrad, we've now gone over 1,300 days since our last LTI, and we're very proud of that particular achievement. COVID-19 no longer a major issue for us at the site. At Kounrad, nearly 100% of the staff triple vaccinated. At Sasa, a slightly lower number, 48% of the employees have now been fully vaccinated against COVID-19. We have no cases of COVID-19 on site as we speak. Our group LTIFR, which is the frequency rate of LTIs, was 1.69, and we target ourselves to improve on that by 15% on a rolling five-year average. Management are rewarded based on their performance from health and safety.
Turning over to slide nine, which is caring for the environment. I'm very pleased this morning to announce a few specific targets on that that we've been working on over the past year. Our climate change strategy has been developed. We're initially reporting towards TCFD when we come out with our sustainability report later this year. Board approval for the Kounrad solar project. We've also got 100% renewable energy now in North Macedonia. The next steps as we move forward will be to look at scenario analysis for climate change in 2022, and we'll be reporting that in 2023, and then we'll be looking at our Scope 3 emissions and reporting those in 2024.
Just to enhance what I said before about the 17% reduction, that's based primarily on the renewable energy that we now acquired, and we have a contract for that in North Macedonia. On a full year basis, that will equate to about 35% reduction in our greenhouse gas emissions. You can see from the water flow chart, waterfall chart, should I say, down the bottom of slide nine, how we intend to get to that target that we've set of a 50% reduction based on 2020 levels by 2030. Still a bit of work to do in a couple of areas, but a lot of it we're comfortable that we can achieve that target by 2030. Couple of other targets.
Use of water is a key issue in the mining industry, and we're committing to a 75% reduction in our surface water abstraction by 2026 from the work we're doing on site with the cut and fill project and how we're manning the processing facility there. Likewise, on tailings, again, through the cut and fill project, committing to 70% of tailings to be stored in a more environmentally friendly way, dry stack tailings and paste backfill by 2026 onwards. Last, but by no means least, a couple of aspects of caring for the environment that we've been working on over the past year. The river remediation we have now completed after the TSF4 incident in September 2020.
We're doing some work on how we'll retire the assets in 2034 and 2037 at Sasa and Kounrad. That's a long time off, I know, but as a responsible corporate citizen, we're looking at what work needs to be done, how much money needs to be set aside in provisions in the balance sheet to actually look after the assets once we've finished operating. Just turning over now to slide 10. We've put a lot of focus and attention on looking after the local communities, both at Sasa and at Kounrad. You can see the facts and figures there.
We've spent about half a million dollars last year, and there is money set up into those foundations that's been transferred from the operation into the foundation itself, which is a separate legal entity tasked with looking after various objectives and development plans for that local community. These are just a few examples shown both under Sasa and Kounrad. Turning over, the last slide I've now got on sustainability, slide 11, is focusing on our people. We employ over 1,000 people now across the group, and we've put a lot of effort into managing those people well and also the governance of the operations. Diversity is a key theme, and we've set some committees up on site to have a look at how we can improve the workplace for a more diverse workforce.
The actions coming out for those are things we'll be working on in 2022. Thereon, after that, we'll then be setting targets for female employees to be interviewed for eligible roles. After that, in 2025, we're looking for a 25% increase in female employees at the group level. We're working hard to diversify the workforce. I'm also delighted that this morning we announced that Louise Wrathall will join the Central Asia Metals Board from after the AGM on May the 26th. On training and development, we're putting effort into that to train our staff better.
I think it's an area maybe we've not put enough focus on in the past, certainly at Sasa, and that's something we intend to do, both on health and safety training, equipment training, and softer skills such as management training and how they take responsibility for what they're tasked to do during the course of any working day. We actually have 99% of our employees are from the countries of operation, and that's something we're particularly proud of. Last, but by no means least, governance. Strong governance is important to us. We've developed a social assessment procedure in 2021, which is to help with our suppliers and have a better code of conduct to make sure that we work with the appropriate suppliers, and that they work to the appropriate standards that we're comfortable with.
We've developed an online Governance and Stewardship program in 2021, which will be rolled out for the employees and suppliers during the course of this year. On that, I'll hand over now to Gavin to look at one of our other strategic objectives, which is targeting low costs and high margins.
Thank you, Nigel. If we turn to slide 13. Clearly, we were operating in a positive macro environment in 2021, a combination of sort of COVID-19 pandemic, some recovery from that, stimulus packages related to that, and vaccine rollouts contributing to sort of improvements in the economic environment. Metal prices were supported by the move towards green economies, plus against these stimuli that I talked about earlier, all led to increase in the copper price, average copper price received of just over 50% for us, zinc price over 30% increase, and the lead price just over 20% increase in the prices that we received.
If you look at those charts on that slide, you can see that the improvements were actually even more enhanced in the second half of the year. Which is encouraging, looking forward as well. Treatment charges, which are the costs that we bear to convert our concentrates produced by Sasa into metal, we enjoy the 15% decrease year on year in 2021, and the outlook for 2022 is also looking favorable for us there. We turn to page 14, we can see how that macro environment has really driven a lot of positives into that income statement.
As Nigel said earlier, record revenue of $235.2 million, up 38% year-on-year, driving down that income statement into an 83% increase in profit before tax at $109.3 million, and EBITDA of $141.5 million, which is a 48% increase over the prior period. EBITDA margins of 60% also up from 56%. Earnings per share, which again drive into that dividend which Nigel announced earlier, up almost doubling to $0.4769 per share. The segmental analysis, Kounrad obviously revenue up, enjoying those copper prices almost in line with copper price revenue up 50%, EBITDA up 62% year-on-year.
For Sasa, again, 25% increase in revenue and a 36% increase in EBITDA from $42.3 million in 2020 to $57.5 million in 2021. We turn to page 15. You can see the development of that EBITDA year-on-year. Again, the left-hand side, very strong commodity price performance, driving increases in copper, lead and zinc revenue. Treatment charges, we see that benefit I spoke about earlier there. Then on the other side of the equation, we are seeing some increases in our cost of sales, which I can talk about a little bit. Plus also, royalties, which have gone up as a result of those increased commodity prices. Hedge losses, big number in there. We hedged at the beginning of the year.
No plans to hedge for 2022 at all, but primarily because we ended up outperforming vs our expectations at the end of 2020 when we decided to put those hedges in place. Just dwelling on the cost of sales a little bit there. What we are seeing coming through there are some adverse FX movements, the royalties I mentioned before, plus we are seeing some consumables and reagents inflation as well. If we turn to page 16, please. Kounrad C1 copper cash cost, again, right at the low end of the industry range here, $0.57 per pound, up from $0.51. As I said earlier, you can see the reagent costs have gone up a little bit. That was slightly due to increased costs of reagents themselves, but also increased reagent consumption.
As we moved onto the Western dumps in isolation in the winter of 2021, we ended up using a little bit more of the what we call organic slicks and SK than we expected. The metallurgists have understood that issue and have mitigated against it now, so we don't expect that increase again. That's stabilized. Salaries and electricity, again, common theme across the industry, really. Energy costs going up, plus, increase in salaries, in relation to those inflationary pressures. Still 80% EBITDA margin from Kounrad, a fantastic result, and also outperforming, as you'll recall, from our production announcement on guidance. We produced just over 14,000 tons of copper there. Slide 17, Sasa.
This, I was drawing attention to a couple of things here because the waters get slightly muddied by the conversion from lead into zinc equivalents. Costs have gone up $0.13. If we pick apart that $0.13 per pound increase, $0.08 of that is that relative lead and zinc price movements. We did have some production issues, which we spoke about at the production announcement, that has resulted in a $0.05 increase in unit costs. Cost inflation, again, we're looking at increased electricity costs, some of the reagent costs, plus also wages going up there in response to sort of global pressures there, $0.03 a pound. That's offset by those lower treatment charges at $0.03.
If we look at the unit cost per production on the table itself, you can see that you've got $39.2 per ton in 2020, going up to $44.1 per ton run of mine at Sasa. 27% o f that increase is actually due to adverse currency movements. Overall cost control was pretty good on-site. Realization cost, you can see those coming down, and then the total dollar costs, we're only $200,000 up in terms of overall dollar costs for the thing. Yes, that is against the background of a slightly lower production. Moving on to the CapEx on slide 18. You see group CapEx came in just below the original guidance of $15 million-$17 million at $14.7 million.
We've got clearly it's gonna be higher compared to 2020 because we have undertaken a lot of expenditure in that cut and fill project. We've spent $5.9 million allocated against the cut and fill project, which Nigel will talk about in more detail later. Just to draw your attention that $4.3 million of prepayments have been made in terms of CapEx. $2.4 million Is related to that cut and fill project, $1.5 million at Sasa and $0.4 million at Kounrad. These are largely in response to anticipated cost increases, so we're putting down a lot of deposits on items of equipment, plus also bringing forward some of that CapEx into 2021 to mitigate against cost inflation in 2022.
The cut and fill project payments, those include three main elements. The Central Decline, which is underway. That's we spent $3.6 million on it, $2.4 million of which was equipment. Capital Development, $1.2 million. Paste Backfill plant, $3.2 million has been spent there. Some detail in there that's generally pumps, thickeners, some of the pipes that we're gonna put underground to move the paste backfill into the voids. Then the dry stack tailings, we've spent $1.5 million on that, and that is a key part, as Nigel mentioned, of our ESG thrust as well. We'll be converting from surface wet tailings into largely dry stack tailings in future. Sustaining CapEx, usual items in there.
Underground development and some new items of equipment at Sasa, and then anode replacement program at Kounrad, plus dripper pipes. As you know, we feed those dripper pipes over the dumps. That was the large expenditure there, $1.2 million because we also instituted what we call an intermediate leach solution process which effectively recycles the solutions across the dumps. Moving on to slide 19. As Nigel mentioned earlier, balance sheet in really good shape now that we're net cash. Cash balance at the end of the year, $59.2 million. You can see the assets have increased, but also depreciation has increased because we're now including the full allocation of TSF4 in there. The gross debt, as Nigel said, $33 million.
$23.4 million of that is the Traxys corporate debt which we expect to have paid off in early H2 this year. The rest being overdraft facilities which we have with North Macedonia banks locally there. We did accelerate the debt repayments through 2021. We usually pay $38.4 million per year. We paid an extra $10 million because we're in a decent cash position there to accelerate that debt service. The eagle-eyed among you might notice that there's an increase in provisions on the balance sheet, and that relates to what Nigel mentioned earlier in terms of the asset retirement obligations. We've now done updated and refreshed studies for Sasa.
In terms of the closure plan there, that has increased that provision on the balance sheet. Last but not least, the cash flow statement on cash flow on page 20. Cash generated from operations, clearly enjoying those commodity prices that I mentioned earlier. Income tax $21.6 million, and CapEx of $14.7 million. Dividends of $38.9 million paid through the year. Of course, as I mentioned earlier, that repayment of borrowings, leading to a closing cash balance of $59.2 million. Key figure there is that $103.8 million of free cash flow that we generated, and that's defined as net operating cash flow less sustaining CapEx. We haven't actually included the current full CapEx in that calculation.
The dividend that Nigel announced earlier is about 45%, which is slightly up on all of our previous dividend payments within that policy. On that note, I'll hand back to Nigel to talk you through the operations.
Thanks, Gavin. Just a quick canter through the operational performance for 2021. If you turn to slide 21 now, many of you will have seen this picture before, undoubtedly. The aerial photograph of our open pit and the dumps to the east and the west. We estimate now that we have about 126,000 tons remaining of recoverable copper, and you can see it laid out there, most of it now in the western dumps. In fact, last year, the %s were 85% production from the west and 15% from the east. Turning over to slide 22. Again, standard slide we've used many years. You can see on the top right-hand corner there our annual copper production.
We've been pretty stable now since 2016, so a run there of six years around about the 30,500 ton mark. Last year, as I said already, 14,041 tons of copper were produced, and our guidance for this year is 12,500-13,500 tons. Standard leach curve on the bottom, we are performing on each of the cells that we monitor in line with those leach curves. Obviously, longer leach period in the west than the east, so out around 400-500 days out in the western dumps, which is where we're primarily operating now. Higher dump height and an average copper recovery in the west of 35%-42%.
All this has been factored into that 126,000 tons of recoverable copper that I mentioned just before. Turning over again, last slide on Kounrad. Just the scale of the leaching really, which shows on the table on the right-hand side. You can see how over the years we've increased the numbers or the kilometers of dripper pipes that we've got installed on the dumps. We've increased the average area under leach, and we've increased the total material under leach to the point where by last year we had 64 hectares under leach at any one time. That was about 37 in the west and about 27 in the east, and we've laid just over 7,300 km of this dripper pipe that we put down to actually irrigate the dumps. Just a few statistics there.
A pretty standard and, you know, performance in terms of output production, which has now been optimized out to 2034, which is the life of mine. Sasa, very different operation. Underground zinc and lead mine, but a profitable operation. We acquired it in November 2017. And since that point, it has generated EBITDA for us now to the end of last year of $245 million. And as Gavin's already mentioned, we will repay the debt in August of this year that we took on to acquire that particular asset. The reserves and resources are out to 2037. That was slide 24, sorry. Moving over to slide 25, just a few numbers for its performance last year. As I said before, we did have quite a difficult year at Sasa last year, it's fair to say.
We met some challenging ground conditions on 990 and 910 levels, the two areas that we're operating in, which led to fewer headings being available and higher dilution from the mix between mining in the stopes and the development areas. That came through our production, which was slightly disappointing in being under the guidance. We've reflected that in this year's guidance to actually accommodate some of those poor ground conditions. I think what it does do is it justifies our move to the cut and fill method of mining over the next few years. The output last year was 22,167 tons of zinc in concentrate and 27,202 tons of lead in concentrate.
The table on the right-hand side shows you the head grade, slightly lower on both head grades, both the zinc and lead, which fed through to the actual recoveries, which were also slightly lower than we'd anticipated in the previous year. You can see our guidance there at the bottom for this year is 20,000-22,000 tons of zinc in concentrate and 27,000-29,000 tons of lead in concentrate. The ore mined will be between 790,000-810,000 tons. That's a quick run-through of the operations. Just on our final leg of strategic objectives or our immediate strategic objectives, one of them was prudent capital allocations. Four aspects to our capital allocation, which coming back to Sasa, that is a key part of capital allocation.
What are we investing at Sasa to improve that mine and take its life out to 2037, both in terms of a safer mining operation, more environmentally friendly management of the waste itself, a more efficient method of actually recovering the metal within the ore body. We've got three components to that particular project, the cut and fill project. There's the Central Decline, and the purpose of the Central Decline is to make far more efficient access to the ore body as we go below 910 level down to 830 level. It'll be used for the reticulation piping in the future. It'll give better ventilation. It will ultimately, depending on a cost-benefit analysis, maybe allow us to move over to electric vehicles to access the ore body. It is a slightly larger tunnel.
It's 4.5 by 4.5, which will accommodate those electric vehicles. As I say, it will make the access into the main ore body a lot more efficient in the future and save us transport kilometers in terms of getting the ore back up to the surface. That's part of it. The paste backfill was the initial part of the cut and fill Project, so that's the plan to do the paste backfill as well as the piping, what's known as reticulation. That was always in our original plans, and that's well advanced at the moment. Then there's the dry stack tailings aspect. Again, the plant, we've been fairly comfortable how that's gonna be engineered for quite some time.
I think the landform is something over the course of the past year we've moved ahead on quite significantly, both in terms of working with the authorities as to what they require, as well as our understanding of what's required from the civil engineering aspects of managing the water on it, the lining of it, and where we're actually gonna place that dry stack tailings, which again, at the outset, was not specifically known. I think we've moved that forward quite significantly during the course of the last year. The construction of the paste backfill and the dry stack tailings plants, they'll be completed now in 2023. We'll complete the construction in Q1 2023 of the Paste Backfill plant.
We'll then go on to construct the dry stack tailings plant, and both of those operations will be completed during the course of 2023. We will start transitioning, as we've always said, into cut-and-fill mining from next year at the 830 level. We're also announcing that on the cut and fill Project beyond this year and into 2023, we estimate around another $10 million of CapEx. That's really a mix of sustaining CapEx on the process plant expansion, the dry stack tailings landform I just mentioned, which we have a better understanding of what's required now, and also the capitalized work in the Central Decline, this new decline that we're building, which will offset some of the costs we would have incurred on the other capital development required in the actual ore body. A little bit more, slide 28, cut and fill Project.
Just a few diagrams there that show you what we're doing. The Paste Backfill plant itself, all the major plant components have now been ordered. All the civils and structural steels have been ordered. We have a contractor in place. The thickener and the flocculant plant's been ordered, the continuous mixer, the displacement pumps, and we've ordered most of the reticulation pipework that we need to actually go into the actual voids and the mining itself. The completion of the paste Backfill plant construction, as I said before, will be at the end of Q1 2023. We'll go into commissioning in Q2 2023. Dry stack tailings, Knight Piésold have completed their design, and we've completed the plant design with Metso Outotec.
We now have construction drawings for the stacking of the tailings, which will be in the old tailings facility, TSF 1 and 2, just outside where most of the buildings are for the plant itself. Quite a constricted area, but we now have detailed designs and plans on how we're gonna manage that. Up to about 4 million tons of tailings will be placed in that area over the coming years out to 2037. Just moving away from Sasa now and capital allocation on slide 29. Obviously something we've got a good track record on is dividends and also debt repayments now effectively. The dividends, we've already mentioned it, GBP 0.20 for 2021, a final dividend of GBP 0.12 , and that's 45% of the free cash flow.
That takes the total dividends paid since we started paying dividends as a company 10 years ago in 2012 to just shy of $257 million or £1.32. We've already touched on the deleveraging, and we're now at a position on the corporate debt facility of a balance of $23.4 million at the year-end, together with $9 million overdraft, makes $33 million of debt at the year-end, which will be paid off partway through this year. Last one on capital allocation, which is probably the hardest one to address in many ways and the biggest challenge we have as a management team, is how we deliver growth.
How do we build on the success of Kounrad and the success we've had at Sasa to actually make sure that the next opportunity that we acquire is as a similar success? We're putting a lot more effort and energy into that as we come through the period of paying the debt down. We will have more debt capacity. We'll be growing the cash balance as we pay back dividends in line with our policy, but the surplus cash will be held in treasury and maintaining a strong stock price to be able to go out and find the next opportunity. Size on liquidity remains a consideration that we're conscious of. Clearly, the world's become slightly more volatile. Political risk is out there, ESG risk. But I think we have got a strong platform from which to grow. We've got a strong balance sheet.
Where we're looking to grow the business is in the areas that we currently operate in. Ideally copper, but we're also open-minded to other metals that are essential for modern living. We will be looking across the patch from both early stage exploration right through to production. Quite a broad topic in many ways, but something we do look at on a case-by-case basis, and we feel we've got a good window now to make the next move. Finally, but by no means least, the outlook. I think we've demonstrated that we do have a strong, sustainable business. We're in the business of producing metals that are essential for modern living, safely and sustainably. We just reported some excellent results for 2021, both in terms of EBITDA and free cash flow.
We've used that cash flow to announce a record dividend for ourselves of GBP 0.20 . We're in a net cash position at the year-end, and we are now looking for growth opportunities, as I've just mentioned. The outlook, we expect a strong metal outlook or should I say strong metal price environment, should I say, throughout the rest of this year. There is a lot of, as we all know, global macroeconomic uncertainty, and we just have to work around that effectively. The world has become certainly a riskier place. We will repay our corporate debt, and we're advancing in our climate change scenario analysis, and we'll finish off with our ARO work at Kounrad. We've already done the work at Sasa.
Those are things that we're working on, and that's the outlook for the Central Asia Metals business. On that note, I will hand back to the operator and open the floor to any questions.
Thank you. If you would like to ask a telephone question, please signal by pressing star one on your telephone keypad. Please ensure that your mute function is turned off to allow your signal to reach our equipment. Again, that is star one to pose a telephone question. We will take our first question today from Peter Mallin-Jones of Peel Hunt. Please go ahead.
Morning, gentlemen. Many congratulations on yet more records across the board and another dividend beat.
Thank you, Peter.
Relative to certainly street expectations. I just wanted to push you a little bit on sort of capital allocation, if I might be so rude. Really, obviously, you know, the debt facility, certainly the Sasa facility, will wind down later this year. You've got quite a significant cash position already.
Mm-hmm.
I was just wondering what the balance is with the management's mind, potentially the board's mind, as to how much of a sort of cash build you would look to do to enable you to take advantage of opportunities that arise vs paying out a bigger chunk of the sort of surplus cash that you'll be generating?
Mm-hmm
Over time. Just trying to see how that balance is at the minute and how that may evolve over the next year or two, just to get a sense of, you know, how rapidly that cash pile might actually start accumulating.
Yeah. Okay. Maybe I'll have a go at that first, and then I'll hand over to Gavin to give you the CFO answer. Thanks for your kind words, first of all, Peter. Yes, it is a nice problem to have, I think it's fair to say. We haven't formally as a board, I don't think, agreed on this, and we have got a strategy session coming up because we are in that enviable position of paying the debt down. The way I certainly view it is that there's no real need, and we've taken feedback on this, to actually change our dividend policy. I think the range of 30%-50% gives us some flexibility. It gives a healthy dividend, as we've seen this morning.
The balance, the other 50%, we will intend to keep within the business until we need to use it for an acquisition or some, you know, kind of acquisition, an asset or M&A work. I think a combination of having that strengthening treasury, and I certainly couldn't give you an answer as to a cap, when will we say, let's pay back because we've got to the balance we want. I don't think that's the case. I think we're in a window now that we need to use that benefit and that platform to actually acquire the next asset. I don't see us using the extra generated cash. Obviously, that will be purely dependent on how we control costs and what the commodity prices are.
I don't see us using that to extend above and beyond the 50% payback, because I don't think that's what investors would necessarily want us to do. I think the combination of being able to pay a healthy dividend and also grow the business is attractive. You know, we have to be honest with ourselves. At the moment, we haven't got the growth element, and we need that growth element as well. So we have to use the money wisely. I think we have to, at the same time as using it wisely, which is assessing opportunities on a case-by-case basis, we can be very much, on the front foot in that we're not gonna put the dividend at risk.
You know, we have secured the dividend in that sense by the two operations, keeping them running. We can pay a healthy dividend and use the balance really to grow the business. Is my viewpoint on that. Does that answer your question, Peter? Is it?
Yeah. No, it's just trying to get an idea of assess the balance between how much the cash builds vs how much you'd be prepared to pay a higher dividend, and then maybe borrow more because, you know, the cash wasn't on the balance sheet at that particular point in time of doing the transaction. That was more trying to just get some color.
Mm-hmm.
Thank you.
That was it from my questions. Thank you.
Well, thanks, Peter. Yeah.
We'll take our next question from Richard Hatch of Berenberg. Please go ahead.
Yeah, thanks very much. Yeah, morning, Nigel and team, and congrats on a very good set of numbers. Got a few questions. Just firstly on the timing of the cut and fill Project at Sasa.
Yeah.
Have you now got all the permits you need to progress that project, or are you still going through the permitting process? I just know you kinda talked a couple of delays.
Yeah
In the release. Just wanna clarify.
Yeah
Where we are with that.
No, no, the answer to that, Richard, is no, we haven't at the moment. I think we know what we do need, and we know how to get them. The one that's the linchpin to all of it is the environmental and social impact assessment. We now have a clear way forward with the ministry on how we're gonna do that and deliver that. I think it's fair to say that's caused a three-month delay. Whereas we were looking ideally to have public hearings and everything else you need by end of April, May, that's probably gonna look like July, August time, what we're planning on at the moment. We have certain commitment from the ministry that they'll work with us very closely to help us deliver on that.
They're conscious that time is money and that we need to get on with this. That is effectively a three-month delay. Everything then falls on from that. A lot of the other permits that we need, like a construction permit, are local authorities, and we've got a good relationship with the local authorities to get that done in a very, you know, very quick fashion, effectively. The plan now is to get the EIA, as I say, which'll be July time, end of July time, and then we'll do as much preparation works on site as we can before going into getting the constructor to start pouring concrete and getting the building up and running before, you know, say, winter sets in December.
We have a fairly clear view on how we'll do that and how we move the permitting forward to achieve that. Hence, you then get the completion of construction the end of Q1 next year, and then a commissioning period, and then we're into cut and fill mining. The key one from a, you know, the profile that we've got for transitioning over to cut and fill mining is the Paste Backfill plant, and therefore the dry stack tailings plant is less important in some ways 'cause we plan to do that in next year, but it has no impact on the transition over to cut and fill because we've got the flexibility of where we place our waste, which is either TSF4, the dry stack eventually from the end of 2023 or Paste Backfill.
I think we have a clear idea what we need, and it has caused a three-month delay in terms of the understanding in country, and to be fair, our own understanding of what was required on how to do the dry stack tailings in many ways. The whole EIA covers both paste backfill and dry stack tailings, and it's never been done before in North Macedonia. As a consequence, there has been quite a bit of backwards and forwards between the ministry and ourselves, quite a lot of working meetings to actually understand and agree, and get a compromise as to how we actually manage that facility.
What we proposed in the first instance against what they were thinking, and we've now reached that compromise in terms of this geosynthetic clay liner which will line the d ry stack tailings, and that's been designed and that's caused a slight delay. We do at least now have clarity on what's required.
Okay. Thanks, Nigel. Is it the case that if you don't get the EIA by July, then we might be facing further kind of delays, or is that? Am I reading that incorrectly?
You're being very pessimistic, Richard.
Just in terms of.
I mean, clearly we are.
Well, no, I'm an optimist, but my analysis is too long. Just interested in the critical path.
Yeah. That is the critical path and always has been. Even a three-month delay is never good, is it? Let's be honest with you. But as CEO here, I'm reasonably pleased because we now have good working relationships, and we have a clear direction, so I'm more confident now. It may end up being four months. I mean, I can't guarantee obviously because I'm dependent upon the ministry, and they're a law unto themselves at times. You know, we have a clear path now to what is actually needed for the dry stack tailings, which makes me more confident in the timelines I'm talking to you about.
Yeah. Understood. Thank you. Just what we're saying on Sasa, can you just give us an update on how the mine's kind of performing, year to date, just in terms of the ground conditions? I appreciate something that you guys have been wrestling with over the last year, but it seems like you've been kind of proactively trying to manage it. I'd just be interested to hear kind of where you are with it, sort of quarter to date. Are you managing to sort of at least address some of the challenges that caused some headwinds last year?
Yeah, I do, I do think Scott's doing a good job. We've got a good team on site. I think they're managing it well. I think you'll see in the guidance we've given this year, it's just a recognition that there is more development work. These poor ground conditions, where there's, you know, collapsing grounds or whatever, and we need to do more development and more reinforcing of the ceiling, so to speak, we've allowed and factored into this year's guidance. So we know now what's required. We're progressing well in the first quarter. I mean, obviously I'm not announcing Q1 results, but we're progressing well to meet our, you know, production guidance in Q1 of this year.
I'm confident that we've got the, you know, the skills on site and the people on site, the geotechnical engineers now to manage that. Yeah. As I said before, I think it is justification that from next year we'll start transitioning over to cut and fill. The problems we've encountered we'll, you know, we'll mitigate because the cut-and-fill will allow us to do that by supporting the ground as opposed to allowing it to cave, which causes us a few problems as we go lower in the mine. Yeah, I think we're addressing that quite well.
Yeah. Understood. Thank you. Last one is just on cost and CapEx. Gavin, appreciate you talked a bit about inflation. What levers have you got to try and address inflation at the mine? Are you able to give us any kind of steer as to what on absolute basis cost-wise, just what we should be thinking about in our numbers into 2022? Just on that, the slight changing of the schedule for Sasa. What kind of steer can you give us for 2023 CapEx?
There are a lot of questions in there, Richard. I think, look, in terms of the inflationary pressures, yes, as I said earlier, we've seen them in terms of reagent costs. Now, you know, for example, we use some copper sulfate in the plant, and the copper price has gone up. We use steel in the mills. We all know steel prices have gone up. You know, the key one really is energy. That's the tough one to sort of pick, particularly in a geopolitical environment. We've got a price locked in at Sasa until midyear. We started renegotiations on that already. As you know, that is now all renewables as well. There's a benefit to that discussion.
The wage inflation is generally in line with inflation in the country. You know, I guess 8%-10% Kazakhstan, 4%-5% in North Macedonia is what we're sort of budgeting. In terms of the CapEx. Well, I think I've got it in the slide here. 2022, we're looking at $28 million-$30 million. That's about 11-13 of that is sustaining. The rest is the cut and fill project. 2023, we're not guiding yet on those numbers. But I think we should have mostly completed all of the cut and fill expenditure this year and next year. That will be guiding that.
All right. Much appreciated. Thanks.
I think the way the year mentioned is when.
Yeah. All good. Sorry.
Sorry. The initial guidance we had was $18 million-$19 million on the cut and fill Project for capital. I think what is fairly clear is we never, at that stage, knew exactly how we're gonna manage to dry stack tailings landform. I think it's fair to say. We have a better handle on that, so we'll be working on those costs and, you know, how much the cost of the liner is and the dry stack tailings landform, which will be incurred next year. That's the slight increase we've got next year. Then there's all the capital development costs which we're incurring on the Central Decline. In many ways, a lot of that is offset for what you would have incurred on sustaining capital in any mine.
In any year, we would announce sustaining CapEx, say, of $10 million-$12 million at Sasa. Now, probably about $3 million or $4 million of that in any one year will be capital development costs. That will be offset and superseded by the money we're gonna spend on the Central Decline as that becomes the primary access into the ore body.
Yeah. Very good. All good. Congrats again, and well done on a tremendous dividend. Thanks a lot.
Okay. Thanks, Richard.
We will take our next question from Alexander Pearce of BMO. Please go ahead.
Great. Good morning, all. Just sticking to Sasa there and obviously costs, maybe you could provide a little bit more detail on how your power costs have changed year to date and how you think this will change going forward. Have you had any impacts from kind of power costs to your customers as well?
In terms of the power costs, Alex, I think we've certainly seen increases. You know, I think we paid $0.064 per kWh in 2020, and they've gone up to $0.104 per kWh in 2021. That's a quite large increase. You know, that increase is also off a very low base. We sort of rebased the effectively the period of negotiation. Instead of negotiating in the middle of the winter when costs are high, we moved it into the sort of, you know, spring/summer time, when costs are slightly lower. That's the sort of driver behind that increase. I don't know what it's going to be next year.
As I said, negotiation is underway, but there, you know, there clearly is pressure on those prices. In terms of how it's affecting our customers, it's a good question. We have seen some zinc smelters in Europe in particular closing down in response to higher energy prices. Both of our European-based customers on the zinc side are pretty robust and are continuing to take material with absolutely no problems and are paying on time. We've got no worries with them. Then the third customer on the lead side, again, you know, this is a customer with a very strong balance sheet. We don't expect any issues from them at all. No worries on that front.
Okay, great. Thank you.
As a reminder, if you wish to ask a telephone question, please signal by pressing star one. We will take our next question from Oliver O'Donnell of VSA Capital. Please go ahead.
Morning, Nigel, Gavin. Thanks very much for the presentation. Two questions if I might, please. Could you give us any color on treatment charges? They've been quite volatile through the year and are sort of coming back up, I think, to where they were perhaps this time last year and whether that's having any impact on your negotiations. Secondly, at Kounrad, there's some discussion in the notes about opening up a scenario about 2,000 tons of copper-
Mm-hmm.
Going back over old areas that have been leached.
Yeah.
Are they improving recoveries within the 126,000 ton figure, or should we look at a slightly different number over the long term? Thanks.
I'll answer the second part of the question and let Gavin answer the treatment charges, Oliver, if you don't mind. Yeah, Kounrad, we're just trying to be creative there, Oliver. What the 2,000 tons refers to is if you were to look on your pack and you look at the slides in the aerial view of Kounrad. Now I'm just trying to quickly found out which slide that is. It's slide 21.
There's an area where it says nine to 10 on the eastern dumps, and it was quite constrained by the railway line that comes by Mynaral around there. We're moving some ore and putting it onto nine to 10. Just by moving it and mixing it up, we can, you know, then leach that area and get some extra material for pretty low cost, to be honest. I think it's about $300,000 to actually move the ore itself. Obviously, with the price of copper at the moment and the costs that we incur, it seems a sensible thing to do. Likewise, we've done it on some of the slopes. We've moved some of the slopes on some of the dumps to see if we can improve the recoveries.
We've always worked with, you know, in terms of what the authorities, what we report to the authorities. What we internally manage from is anywhere between, like, 45%, I think, and 50%, 52% in the eastern dumps. We are experiencing slightly higher recoveries beyond that level in, you know, some of the areas of what we've been leaching for nearly 10 years now with this rest and rinse, is how we would call it. You know, it can get a bit. You know, we shouldn't read too much into it, as Nick would always say, we're not cutting cheese here or whatever he used to say, something like that. It's not an exact science.
What we try and do is just be creative and see can we leach for a bit longer on a dump that may have reached 50% recovery, but we might squeeze out 52%, 53% without, you know, minimal incremental cost to do that. Certainly no CapEx costs generally, apart from, you know, the incremental cost that we might incur. We look at that on a case-by-case basis. It doesn't mean that the eastern dumps are gonna generate another 100,000 tons of copper or anything like that. It's marginal improvements on the copper that we've already recovered. We'll do that, as, you know, so it says on that slide, eastern dumps, 8,000 tons. We may recover 12,000 tons because we're being creative, but it'd be of that magnitude, Ollie, really.
We'll do the same when we get over to the western dumps. At the moment, we have a plan. We follow that plan. Where we can squeeze a bit more copper out, we'll just try and look at it and see can we move some of the ore and try and leach it a bit more. We tried that on another area, and it didn't work. It's not always a success, but it's worth doing it for the cost involved.
Great. Thanks.
On the treatment charges, Ollie, you know, the contract periods that we run are from first of April to 31st of March every year. We've actually locked in our treatment charges for the period now, first of April 2022 through to March 2023. We don't see any volatility really in our treatment charge pricing until that point. Now, you have seen spot treatment charges responding to a whole bunch of different elements out there. We have seen an increase in China certainly on the zinc side of the equation. I don't think again, that doesn't affect us 'cause we've allocated all of our zinc material. In previous years, we had kept back some material and allocated it to the spot market on the lead concentrates.
Again, we fully allocated on lead until the end of March 2023. We don't expect any volatility there. I spoke about a 15% decrease year-on-year from 2020- 2021 treatment charges, talking about a favorable sort of 2022. Now, that implies, I guess, that the terms we're getting in the round are better than they were previously. We do expect that to at least go all the way through to the end of March 2023.
Brilliant. Thanks very much.
As a quick reminder, please press star one to join the queue. At this time, we have not received any further telephone questions, so I would like to hand you back to our host for any additional or closing remarks.
Okay. Well, if there are no more questions, thank you very much to everybody for their time. As I say, delighted to announce these results this morning. It was a great year for us in terms of financial performance, and we look forward to more in the future year and keeping everybody informed on how we progress on our cut and fill projects and also our business development work as well to try and grow the business in a pretty volatile world that we all live in at the moment. Thanks to everybody for their time. We'll keep in touch.