Good morning, ladies and gentlemen, and welcome to the Central Asia Metals plc Annual General Meeting. Throughout this recorded presentation, investors online will be in listen-only mode. Questions are encouraged and can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions at any time and press Send. I'd now like to hand over to Non-Executive Chairman Nick Clarke. Good morning.
Good morning. My name is Nick Clarke, and I would like to welcome you to this annual general meeting of Central Asia Metals plc, our 14th AGM since our listing in, on AIM in 2010. I would also like to welcome those watching online via Investor Meet Company platform. With us today are my colleagues on the board, Nigel Robinson, our Chief Executive Officer, Gavin Ferrar, our Chief Financial Officer, Louise Wrathall, our Director of Corporate Development, Mike Armitage, Roger Davey, Gillian Davidson, Mike Prentis, and David Swan, our Non-Executive Directors, are all with me in this venue. Before we proceed, I would like to set out the running order for today's proceedings, in line with the notice of meeting sent to shareholders in April. First will be the formal annual general meeting, at which we will handle the formalities required in connection with this.
The voting at this will be by a poll to ensure all votes lodged in advance are taken into account, and the results of the AGM will be announced to the market later today. Once this formal AGM has concluded, we will then move on to the presentation from management. Now, turning to the formal business of the AGM, the necessary quorum being present, I now declare the annual general meeting open. The business of the meeting is set out in the notice of meeting, contained in the circular to shareholders, dated 18th April 2024, and distributed with the annual report and accounts. With your approval, I would like to take the notice of meeting as read. Is that agreed? Thank you. The notice is taken as read.
I should now be happy to answer any questions in connection with the business of the AGM, as I intend to call a poll on all resolutions. I should be grateful if all the questions in connection with the business of the AGM be asked at this stage. There will be an opportunity to ask general questions during the investor presentation as the formal meeting is concluded. No questions on the AGM. Thank you very much. Unless there are any further questions or queries, I'll proceed to the resolutions. I shall now turn to the formal business of the meeting, being the resolution set out in the notice of meeting.
In accordance with the company's articles of association, and to enable all proxies lodged in advance to be taken into account, I now demand a poll be taken on all of the resolutions set out in the notice of meeting. There are 10 resolutions. Resolutions one to seven are being taken as ordinary resolutions, which require a simple majority of the votes cast to be passed. Resolutions eight to ten are being taken as special resolutions, which require approval of at least 75% of the votes to be passed. Before we proceed with the voting, I will give a brief summary of each of the resolutions being proposed. Resolution one, an ordinary resolution to receive and adopt the directors' report and accounts for the period ended thirty-first of December, 2023, distributed previously to the shareholders and available on the company's website.
Resolution 2 is an ordinary resolution to approve the board's recommendation that a final dividend for the year ended 31st of December 2023, of GBP 0.09 per share be declared payable. In accordance with the articles, company's articles of association, certain directors retire by rotation at this meeting, and resolutions 3 and 4 are ordinary resolutions to reappoint Mike Prentis and David Swan as directors. Resolutions 5 and 6 are ordinary resolutions to reappoint the auditors and to authorize the directors to fix their remuneration in accordance with normal practice. Resolution 7 is an ordinary resolution to allot shares and grant rights to subscribe for or convert any security into shares. This is a renewal of the current standing authority, as is usual in publicly quoted companies.
Resolutions 8 and 9 are special resolutions to authorize the directors to exercise all powers of the company to allot equity securities for cash, otherwise than pro rata to existing shareholders, up to the levels set out in the notice. These levels are as recommended in the most recent guidelines published by the Pre-Emption Group that represents the interest of shareholders in relation to such authorities. Resolution 10 is a special resolution to authorize the company to purchase its own shares and to apply limits to this authority. Again, this is a renewal of a standing authority already in place in the company. All these resolutions are being proposed at this meeting. Now, moving on to the voting. I now declare the poll open. Will those shareholders, proxy holders, and corporate representatives wishing to vote please complete a poll card now and pass these to the Company Secretary?
If any shareholder, proxyholder, or corporate representative wishes to vote and does not already have a poll card to do so, please raise your hand, and the company secretary will pass you a poll card for completion. Thank you. I plan to close the poll shortly. If there are any other poll cards to be submitted, please pass these to the company secretary now. Thank you. There being no further poll cards to be submitted, the poll is now closed. Our company secretary and registrars will be counting votes cast at this meeting. The result of the poll will be available later today and will be announced to the London Stock Exchange as soon as practical. That concludes the business of the AGM. I now declare the AGM closed. I will now hand over to Nigel Robinson, our CEO, to give a presentation on the company. Thank you.
Thanks very much, Nick, and good morning, ladies and gentlemen, and welcome to the AGM and the presentation. Standard strapline, maintaining a solid platform for growth. That's what we believe we're delivering at the moment. Standard disclaimer, as you can see there on the screen, read that at your leisure. First of all, I've only got about 15 slides, but just starting off, just to remind everybody where we operate from. Two countries, primarily, Kounrad, where we own. Sorry, Kazakhstan, where we own Kounrad 100%, which is an in-situ dump leaching facility with an SX-EW processing facility also. That's now been in production for over 12 years, and the life of the operation is out to August 2034, so another 10 years of life at Kounrad, which has been a very successful and profitable operation for us.
On the back of the success at Kounrad, in late 2017, we purchased the Sasa, a more traditional underground lead and zinc mine, in the northeast of North Macedonia. Production commenced there well into the 1960s, and we, as I say, bought it in late 2017 and have been operating that now for almost 7 years in November of this year. The life of mine out there at the moment is out to 2039, so a further 15 years on that operation. Just some highlights, we announced our results on 25th of March 2024. Many of you will have seen these numbers, but just to reiterate them, last year, we generated revenue over $200 million, $207.4 million.
And on the back of that, we made what's known as EBITDA, that's earnings before interest, tax, depreciation, and amortization, of $96.5 million. That's a 47% margin on that revenue. The free cash flow, an important number for us, we generated from that, which determines the dividends we pay back to our shareholders, was $57.5 million. And we invested last year in the business at both Kounrad and Sasa, primarily at Sasa, capital number of $27.8 million. The group is now debt-free, having paid off all the debt that we took on board to acquire Sasa in late 2017. We have cash in the bank of $57.2 million. Remember, these numbers are to the end of December 2023.
and the dividend that we announced for the full year, in total for last year, was 18 pence, which is $14 million. The final dividend, which will be paid next week, was 9 pence for 2023, making 18 pence in total, compared to 20 pence in 2022. Since the inception of our dividend policy, way back in 2012, we've now paid back 170 pence per share, or $339 million, back to our shareholders, a number that we're particularly proud of as a board. Just a few operational highlights. As I said before, we did invest quite a lot of money back into Kounrad and Sasa to develop those operations. We came in line with our operational guidance.
Just to remind you on those numbers, copper production came in at 13,816 tons from Kounrad. At Sasa, we produced 20,338 tons of zinc and 27,794 tons of lead, all of which then goes to the smelter for onward production. We met our production guidance. We're on line for meeting production guidance in 2024, I can state. And we also had a very safe year of production. We had one incident, which is, which is one too many, of course, but we beat our target last year, which was 1.3 of what we call LTIFR. That's lost time incident frequency rate.
That's the number of incidents you have per million man-hours worked, and it came in at 0.4 on that one for the number of million man-hours we worked over the course of the year. Lots of achievements over the course of the year. We progressed quite significantly our capital projects at Sasa, spending $14 million on those, completing the paste plant, the paste fill, backfill plant, should I say, spending $2.4 million on that. Constructing, commencing the construction, which we'll complete this year, of the dry stack, dry stack tailings plant, and also continuing the new central decline, which we started a couple of years back, and that will again complete this year. We spent $2.8 million on that.
We updated our MRE with an increase of almost 1 million tons from some drilling that we did and reevaluation of the geology in the area. We completed the Kounrad solar power plant, more of which I'll come onto in a minute, with a total expenditure there of $3.1 million. Our investment case, hopefully many of you on the call and in the room here will understand what our investment case is, which is being responsible, productive operations. I think we've made good efforts on our sustainability and ESG credentials, as you can see from some of the numbers there. We are a profitable business, as I've just explained, with the financial highlights from last year.
I believe as a board, we're very accountable in terms of delivering local employment for the people, which is around about 99%, 100% at Kounrad, and slightly less at Sasa, where we have some expats for the changing mining methodology that we're going through. And dependability, certainly in terms of what everything we do, I think what we say we do, we've normally delivered on. And certainly in our dividend policy, we've been very good dividend payers since 2012, as has already been mentioned. So just moving on to the various operations now, a few slides on each of the operations. Kounrad copper operation, as many of you know, that's an in-situ dump leach. We don't move any of the material. We literally leach it in situ and put it through an SX-EW plant.
And that's an aerial shot of the site, which is a huge site, with an open pit, as you can see there. We've more or less exhausted the eastern dumps, where we started back in 2012, and most of the copper now, around about, 75%-80% of the copper production, is now from the western dumps, as you can see there on the diagram. Just a bit on the finances of Kounrad, a highly profitable operation. You can see the EBITDA margin there of 71%. And the table on the right-hand side just gives a summary of the costs of operating that business.
What we get down to, which is called a C1 cash cost, which includes all the, the reagents, the power, the payroll, the materials, and then the cost of actually getting the copper to the end consumer through the markets. Total there, about 10% with inflation last year, from $20.5 million in 2022 to last year's numbers, around about $22.6 million. Most of that inflationary increase was through payroll, a bit on the reagents, and a small amount on power, which is generally low cost in Kazakhstan. Final slide on Kounrad. One thing we're proud of is that we, in terms of our enhancing our ESG credentials, we built a solar power project in Kounrad.
We started it in late 2022, and we completed it in November and commissioned it last year, coming in well under our budget of $3.1 million for what's effectively a 4.77 MW solar power plant. It's quite small by international standards, and it'll generate around about 16%-18% of the electrical requirements for the SX-EW plant at Kounrad. Just moving on to Sasa quickly. Sasa, a more traditional mine, as I said, underground mine. Historically, that's always been mined through sub-level caving operation, but we did make a commitment a couple of years back to transition this to a cut-and-fill method of mining and longhole stoping with high-density paste fill.
I think that, that decision is, most certainly the right decision from two years ago, both in terms of how we manage the waste processes and also in terms of the way the ore body, is changing as we go further underground at the, the Sasa mine. We have reserves and resources out to 2039. Again, similar to Kounrad, looking at the costs, they're not quite as profitable. There are a lot more moving parts. It's a lot more complicated operation, but you can see there a small increase in costs year to year, and the absolute cost for 2023 of on-site mining costs moving up from around about $45 million per annum to $47.2 million. So something like about 6%-7%, cost inflation there over the course of the year. So fairly well controlled cost there.
And then the other side of it, which is different, very much to Kounrad, is that we need to use local smelters in the European area for actually processing the concentrate into a metal at the end of the day. And that went up last year on about $2 million, from $19.5 million- $21.4 million, giving a total C1 cash cost of $68.6 for 2023. Margin, as you can see there, 39% for Sasa in terms of EBITDA margins. And as I said before, we did spend quite a lot of time and a lot of money on developing Sasa to transition from the sub-level caving methodology to a cut-and-fill mining and a longhole stoping.
Effectively, three aspects of that project, and we significantly advanced it during the year, and we intend to complete all these projects this year. The backfill plant, that's now completed and commissioned, and the actual reticulation, which is basically the plumbing, which takes the material down into the underground voids, which is effectively placing the waste, instead of into the tailings dam, into the underground voids that have been created by the mining themselves. So a very effective and environmentally friendly way of managing the waste. Both aspects of the project there are complete and are now moving into operational phase, this year. The dry stack tailings plant, which is another method of how we'll manage the waste in the future, that is ongoing.
We intend to commission and complete that in Q3, Q4 of this year, but a lot of work was done last year in terms of the earthworks, starting the construction in terms of the concrete pouring and the steels. Clearing the landform, which is where you place the actual paste and the cake onto the land, clearing the vegetation for that, and that's gonna be completed, as I say, this year. And the last part was the central decline, which we started a couple of years back, and again, will be completed this year, which will provide more productive methods of accessing the ore body lower down, improve ventilation, and thereby increasing our productivity on-site from the central decline. So that's the two operations, Kounrad and Sasa.
Just a little bit on sustainability, which we've put a lot of effort into over the past two or three years to improve our credentials in the marketplace. Three areas that I've highlighted here. The environment, I've already mentioned the solar farm that we developed and commissioned last year. We have developed a corporate biodiversity strategy, which we're on with at the moment, and we've completed, which is part of our improvement to the environment at Sasa. I've already mentioned the backfill plant, and the actual methodology of managing waste at Sasa, which is improving the environmental footprint. We finalized a water management strategy, how we extract water from the local area and how we can reduce that by recycling. We've calculated also, as we move and improve in our reporting, our Scope 3 emissions.
We're already reporting Scope 1 and Scope 2 emissions, as is required by the market. Health and safety, not a lot to really add on that, but we did have a very good year with only one incident through the course of the year. The box there highlights what our target was and what we actually achieved for 2023, which is a 0.4 LTIFR, which is a very, very good number. The last bit, certainly by no means least on ESG credentials, looking after the local communities, both in Macedonia and in Kazakhstan. Put a lot of effort into that.
We set aside 0.5% of our revenue for these purposes, and we've got foundations, basically a legal entity, which is a charitable trust, to actually look after those communities and develop plans for the future, for the longevity of the community there. Business development, this is probably one of our biggest challenges. We've got two very good assets that generate good cash flows, are well-managed, well-run, safely run, highly productive assets. And what we now need to do to grow the business is to develop the business by acquiring other assets. We made some advances during the course of the year, which I'll touch on in a minute.
The strategy, effectively, is to use the balance sheet for earlier stage exploration, and also to look in the marketplace for opportunities that will be more transformational, a bit like another Sasa acquisition that we did six years ago, of that level of investment into the business using debt and potentially equity. And we've put a lot of effort into that, and the table on the right-hand side shows you some of the activities. 37 opportunities appraised, 17 NDAs signed, seven site visits, and four projects looked at with external consultants, which mean you've gone further down the path of commitment. We haven't as yet landed on anything, but we are fairly active in that area to actually add to the very attractive two assets that we've currently got. Jurisdiction-wise, we look in the European time zones. Obviously, all of Europe.
That includes some African countries and also Kazakhstan. We're comfortable operating in Kazakhstan, as we have been doing now for almost 15 years, since we acquired the asset in 2007. And the other aspect of business development, which is now important, is sustainability. We've made, as I said before, good inroads into our ESG credentials. We wouldn't want to go backwards in any kind of acquisition opportunity on that particular aspect of our business. We did make announcements regarding developing more exploration pipeline with Camelex in Kazakhstan and Aberdeen Minerals, and you can see on the slide there the details of money that will be spent this year on further enhancing those exploration opportunities. And so that really concludes my presentation. Just an outlook for this year. We are on track.
We're now into the month of May, obviously, so as a management team, we know where we are in production for this year. We believe we're on track for our production guidance of this year, which, just to remind everybody, is 13,000-14,000 tons of copper from Kounrad, 19,000-21,000 tons of zinc concentrate at Sasa, and 27,000-29,000 tons of lead concentrate also at Sasa. We have already announced our Q1 production numbers, and you can just see those there, which substantiate what I just said about being on track for our guidance for the year. We will continue the capital investments at Sasa, with very little capital investments at Kounrad required this year, and those projects will be concluded this year and go fully operational in terms of the transition to cut-and-fill and longhole stoping mining.
We'll continue to assess actively new business opportunities. As I've mentioned before, we've put a lot of activity into that both last year and we'll continue with that. And then, in terms of exploration, we'll increase the exploration work, both in Camelex, in Aberdeen, and also at Sasa, where we've got 6,600 meters of exploratory drilling planned at Sasa for the year. And we'll continue on our improving our ESG credentials with the solar power project and reducing our carbon emissions. And on that note, concludes the formal presentation. And so I'll open it to the floor for any questions from the audience or online.
We take questions from the press first. Are there any questions? Yeah, setting up to the mic.
Hi.
Thank you.
Thank you for your presentation. I just wondered whether there's any timescale before we know the results of this Aberdeen drilling. Would you think there'd be another announcement, or are we likely to put more money into it?
I think we've invested the money, or we've got a final condition before we fully invest the money. And then we'll go through an exploration program that we've agreed with the management team over this year and the next year. So as and when we do that exploration, we'll come out with announcements at the time. So we've really got a timeline that takes us out, I'm looking at Louise here, for the next two years, effectively, as a company. And if anything, you know, exciting comes, we'll announce it to the market, obviously, but we'll carry on. We'll work with the Aberdeen team to actually develop that asset. Do you want to add anything to that?
No, that's fine. I think... Well, I was just going to say, the GBP 5 million, if we were to invest the full amount, would be for two years, as Nigel said. But I think hopefully we should start to get some interesting drilling results sooner, you know-
Yeah
... a lot sooner than that.
And when we do, we'll announce them-
Yeah
... accordingly.
Thank you. Any other questions in the room? If there aren't, then I'll maybe turn to Louise. There are some online questions, if I-
Yeah, sure
... hand over to you.
We've got some, we've got some questions through the system.
Mm-hmm.
So, the first one is from David, who's asking: What are the key focus areas in your upcoming sustainability report?
The key focus areas in the upcoming one.
We have just published it-
Okay
... yeah, a few weeks ago.
Yeah.
Yeah.
I suppose the key areas that we look at is community development. That's important to us, how we develop our local economic development plans at Sasa, and we're also developing that in Kounrad. Health and safety, maintaining our targets. On the environment, we've set some fairly, you know, quantitative targets, I would argue, in terms of reducing our carbon emissions by 2030 by 50%. I think we're well on track for that. I think the numbers report at about 41% at the moment, so we'll be looking at other opportunities to reach that target in the next 5-6 years. I think also the water management, I briefly mentioned in my presentation, that's important, as we've got a target that by 2026 we'll reduce the amount of water we abstract from the local rivers by 75%.
So I think there's a few key numbers in the environmental areas. I mentioned community and health and safety. Then obviously, governance is ongoing in terms of how we manage our suppliers and the governance of the business. And people management is very important to us, how we train and develop the staff. Certainly at Sasa, where we're going through a transition period, and there's obviously a learning curve for all of the staff there, so we've got quite a lot of emphasis to develop the staff, as best we can in terms of the new technologies and new methods, and slowly but surely getting to almost 99%-100% local employment, which is something that we pride ourselves in, in terms of, in terms of that. So I think those are the key focuses.
I mean, as anybody who's read the sustainability report knows, it's a good report. It's, it's, for the size of the company, I think we punch above our weight, I would say. And we've got five pillars, and it covers those five pillars effectively, that are our targets as a management team to deliver on.
... The next question is from Mike, who's asking: With the completion of the major capital investment program at Sasa, how do you plan to allocate capital going forward?
This is always a good question. I'm looking across at Gavin as the CFO, but, I mean, obviously, our focus has always been on getting the balance right on capital allocation. I think we've done that right historically. I hope we'll continue to do so. It will be attractive for us, that we were then fully invested, other than ongoing sustaining CapEx, which is of the magnitude of maybe $10 million-$12 million a year, but certainly far less than we've had in the last two years.
But that additional capital will either build up the cash balances, and we'll look at, when we get to certain cash balances, whether we give more back in dividends, or hopefully, what we'd like to do as a board, as I mentioned already, is put the effort into business development and acquire additional assets to grow the business. That's our main focus, really, but clearly, we don't intend to run with too high a cash balances without thinking about how we use that money sensibly.
Our next question is from Andrew, who says, "Despite strong operational performance, CAML's shares underperformed. What factors do you believe have contributed to this?
That's a tough one for me to answer in many ways. They've performed well over the past 3-4 months, I think it's fair to say, and maybe that's not just purely because of the announcements on the 25th of March, but much because of fairly strong of macro conditions. Copper is now trading over $10,000 per ton. Zinc is getting close to $3,000 per ton. So I think that has helped us. I think as a management team, we focus very much on the day-to-day operational delivery that we need to deliver on. And so that's all we can really focus. I don't think at times we're helped by some of the optics around the market around mining, which is not necessarily always in favor.
I think that's changing a little bit over the past couple of months, but I think we're impacted by those things. The fact that at the end of the day, we know we pay good dividends, we know we got good assets, but we do need to look for this growth in the business, and growth is important in terms of driving that kind of aspirational aspect to the share price, I think.
Ian is asking us: Why do you not increase the size of the solar farm to reduce the energy you require for the mining?
That's a fairly easy one at the moment to answer, because there are restrictions in Kazakhstan, that if you go above 5 MW in a solar farm, you have to actually connect into the local grid, and the bureaucratic issues associated with doing that are quite complicated. So we thought as a kind of starter pack, so to speak, we'd limit it to below 5 MW. In the future, if those restrictions change, and they may well do, because Kazakhstan is looking to increase the number the percentage of renewables. I think they've got a target of 15% by 2030, and it's currently something like 3%.
If those regulations do change, we will certainly look at it, 'cause we've been through a pretty steep learning curve, and I think we've done a good job of it, and I think we could actually increase the size of that solar farm with a modular approach to it and actually increase the electricity. Obviously, there's a limit on how much you can do, because you need that stable base supply of electricity to an SXW plant, which consumes a lot of electricity.
Stoyan is asking if we have any plans to build a solar power plant similar to the one in Kounrad, in North Macedonia, given the positive investment climate for this type of project there.
We have looked at that. Sasa is slightly different in terms of its topography. If you look at the... You might have seen pictures of Sasa. It's quite a tight valley, so to actually build one in the local area, close to the mine, would be difficult. But we have looked at opportunities and continue to look, I think it's fair to say, Gavin, in terms of whether we could build one further away and then feed into the local grid, and therefore benefit from a lower level of electricity prices within the, within the grid system, so to speak. So it is on our radar. We are looking at it, but we've no immediate plans this year to actually announce anything on that.
You purchase.
Yeah, and what, in terms of price? Yeah, I-
Well, you purchased the
Yeah. That's a good point Nick raises, actually. That we do actually claim 100% renewable, because where we claim it from, the grid supplier, is on a 100% renewable contract, so it doesn't affect the footprint. But it might be something that we can look at from a commercial basis to actually reduce the cost. Although, the cost of electricity in Macedonia has come down significantly. We're now paying around about, I think it's $0.09-$0.10 per kWh from where we were a couple of years back, or even twelve months back, which is a lot higher than that.
We're on to the last, comment and question on the platform, which says, "Congratulations to the team, and great to see the share price recover and to have a healthy dividend. Is the next big project slash purchase likely to be in 2024 or 2025?
I wouldn't like to commit on that, but as I've said a couple of times on this presentation, we are putting a lot of effort into trying to find that next opportunity. But I don't think we'll do anything rash, is the main thing to say, and we're not in a rush. I think we've done well on the exploration side of it, using our own balance sheet, but the bigger transformational transaction has to be the right one for CAML, so we'll take our time to make sure that it is the right one for CAML.
Thank you very much. There are still questions online.
Okay.
Yeah.
I've got to ask, Richard, starting last time, but, I just wondered, do you have any competitors in these countries where you operate?
That's a very good question, actually. I mean, obviously, there's people who are mining companies, but they're far bigger than us. Things like KAZ Minerals and Kazakhmys. You know, generally, anyone in Kazakhstan, certainly, you find it's the big, either state-owned enterprises or they are big companies, so I wouldn't class them as our competitors, to be honest with you. I don't think there's anybody in Kazakhstan that is a similar, nimble, you know, small, London-listed company that's operating in the copper space. So not there, no. There are companies similar to ourselves in the Balkans. There's Adriatic Metals, for example, which is in a different country, but it's in the Balkans, so we don't. I don't know if we can class them as competitors.
We certainly class them as peers in the area in which we operate.
Thank you. Thank you. I believe that concludes the question, the Q&A session, both online and in room. So back to you, Mr. Chairman.
Okay, thank you.
Thank you very much. Meeting is closed. Thank you.
Please ask investors not to close this session, as we'll now automatically redirect you to the opportunity to provide your feedback in order that the company can better understand your views and expectations. Good morning to you all.