Good morning, and welcome to all of you. Thanks for joining us at what is pretty short notice for this significant announcement. I'd like to draw your attention to four pages, actually, of disclaimers on this announcement. We'd hate for any of you to get into trouble, so please do take the time to avoid that by reading these disclaimers. Having done that, we'll get into the transaction. This morning, we're very happy to announce that the respective boards of CAML and Cygnus Metals have agreed to enter into a transaction whereby CAML will acquire the entire issued share capital of Cygnus Metals via a scheme of arrangement in Australia. The value received by Cygnus shareholders will be AUD 232 million, with a share price paid of AUD 0.176. This is for the entire share capital of Cygnus Metals.
The pro forma ownership of the company going forward will be 70% CAML and 30% Cygnus. Cygnus Metals owns the highly prospective and high-grade Chibougamau project in Québec. The transaction is subject to shareholder votes for both Cygnus and CAML. CAML requiring 50% of votes in favor of the transaction, and Cygnus requiring 75% of votes cast in favor of the transaction. We have 29% of the Cygnus shareholder register supporting the transaction, and have signed agreements to vote in favor of this transaction. Commitments on the part of the Cygnus board take this figure to 31%. It's a very well-supported transaction all around. CAML will endeavor to obtain a TSX listing as part of the transaction. The transaction is expected to close in September this year. What are we buying? Chibougamau is a high-grade copper-gold project situated in Québec, which is a Tier 1 mining jurisdiction.
It represents a high-potential brownfields opportunity. Chibougamau comprises five high-grade copper-gold deposits within a 30-km radius of a wholly-owned 900,000 ton per annum brownfields processing facility with an associated tailings area. If you have a look at the map on that slide, we have Cedar Bay, Golden Eye, Devlin, Corner Bay, and Joe Mann being the projects with the processing facility in that photograph situated just outside of the town of Chibougamau, at Copper Rand. There is a 6.4 million ton Measured and Indicated Mineral Resource, which has been estimated with attractive grades of 2.3% copper, 0.8 gram per ton gold, and 7.6 gram per ton silver. In addition, an inferred mineral resource of 8.5 million tons at similar attractive grades has also been estimated.
Cygnus is in the process of updating a PEA, which was last undertaken in 2022, and the new PEA will take into account a 78% increase in the mineral resources since Cygnus took ownership of the assets. CAML plans to conclude this study. The project is close to the town of Chibougamau, which benefits from year-round access via road, rail, and air infrastructure. It also has clean energy and a plentiful water supply. We're also excited by the potential for growing the mineral resource substantially on the existing land package.
Thanks, Gavin. I'll just run through some of the transaction highlights and rationale for both sides. Think for us, this truly will be a transformational transaction for us in terms of the size and scale of the opportunity at Chibougamau. If we look at the size of the resource, we look at the grade, we look at the 900,000-ton processing plant available, it's very easy to see that this has the potential to meaningfully add a significant copper and precious metal production to our existing production from Sasa and Kounrad.
T here's also the exploration potential that's really exciting for us. Not only is the resource that we've already got, we do see the additional resource upside that Gavin just mentioned in the wider license area, which is quite significant around those five key deposits that we've already highlighted to you on the previous slide.
Another attractive feature for this transaction for us is the location. Québec is genuinely a Tier 1 mining location. There's a skilled workforce. It's a very much a mining province. There's low-cost power. The town itself is a very mining-friendly town. There's also the factor that adding Québec to this will also increasingly diversify CAML's portfolio from Kazakhstan and North Macedonia, as well, where our existing operations are. Finally, on this side, we can really see a clear pathway as to how we can develop this project. There's the PEA that's already underway. There's environmental studies underway.
We've got exploration targets as well to infill and also extend the production there. We've got the mining skills, the operational skills, and there's a really strong Canadian team that Cygnus already has. We believe that together, we're very well-placed to push this project towards development.
In terms of the Cygnus side, what's in this for them, they get to maintain exposure to the Chibougamau project that they very much want to, whilst also benefiting from our balance sheet as well. Together, we'd be in a really strong position with a cash balance in excess of $100 million, given that this is an all-share deal. That's a significant amount of money to develop the project towards eventual production and also be able to explore effectively as well. If we look at this slide, I think we've talked to our shareholders, our investors, about our portfolio before, explaining that we've got this early-stage exploration potential in Kazakhstan and also in our stake in Aberdeen Minerals. We've got our two producing assets in Kounrad and Sasa.
What Chibougamau really does for us is sort of fills that middle ground in terms of advanced exploration in a brownfields area with some key targets already known to us, and also as a development project, which we feel that we can bring our skills to that as well to develop into, ultimately, a third operating asset in the fullness of time. I'll hand back to Gavin to talk about the resources.
Thanks, Louise. Look, we've mentioned the resources and the resource size, and there's a table in the back of the presentation for those of you who want to go and delve into it. This is the bit where I get to wave my arms a little bit as a geologist and expand a little on the exploration potential, which I think is really exciting and one of the key drivers, and the rationales behind us making this acquisition.
Chibougamau is an area which has a rich mining industry. It has produced a lot of gold and copper in the past, and in fact, several of the assets that we're looking to acquire here have been past producers. Therefore, we're taking brownfields risk with exploration, and the estimated resources that we have mentioned in this presentation so far are open both at depth and along strike.
There are also numerous prospects within the existing portfolio and the land package that's been assembled by previous owners, including Cygnus, that represent immediate exploration targets, such as Henderson, Portage, and Jaculet, which are all along strike and on the same geological trend, and also have historical drilling that has taken place there. Really good near-term exploration targets available to us, and Cygnus has been probably the first company that's utilized modern exploration techniques in these areas, and we'll plan to continue to do so in order to generate more resource and more targets for drilling. Alongside the development of the existing resources into the mine that Louise was talking about, we'll continue to explore this highly prospective area. Given its location and the brownfields nature of the project, it's really set up for near-term production.
The existing facilities at Copper Rand, which I mentioned earlier, that 900,000 tons a year mill, plus also the existing tailings facility, basically give this whole project a head start in terms of production. All of the refurbishments and renewals that will be required are part of the studies that we'll be moving forward with. The town of Chibougamau is well served by power, water, roads, and rail, so we don't envisage any supply chain issues that one would with more remote locations. There's also a skilled workforce in town. A mining training center actually exists in town with a suite of industry contractors, which are readily available. Access to the market for the concentrate product would be via ports and rail. Again, easy access to the market to get the material to market and to get the cash flow going.
Look, a really, really good place to do business. Québec a s well always ranks very highly on the Fraser Institute. CAML's got many strengths that we'll deploy to deliver the Chibougamau project. We're an experienced operator in base metals. We have a strong financial position with little to no gearing on our balance sheet, and a healthy cash position of GBP 80 million on the CAML balance sheet as of end of last year. We also have good access to capital through our relationship banks and expertise relevant to Chibougamau in underground mining, mineral processing, and tailings deposition. We're also highly experienced in community relations, and we look forward to engaging constructively with the Oujé-Bougoumou First Nation in the area. We have an excellent track record of environmental stewardship at both our operating assets and proven operating experience in harsh climatic conditions.
We also have the resources within our business to support project development and the exploration activities. The next steps to get us through to the end of the transaction. We've built a strong relationship with Cygnus over the past few months, working really hard on getting to today, and we continue to work together to complete the transaction in September this year. Cygnus is busy updating the PEA, as I mentioned earlier, for Chibougamau, and that includes drilling, metallurgical test work, and mine and infrastructure design.
Those activities will continue until the day that they hand over the keys in September. Where CAML's experience of operating these underground mines, dry stack tailings, and winter operations will be valuable in terms of engineering and ultimately delivering these projects. We intend to advance the PEA to completion, but also to continue with more exploration drilling. We'll work in collaboration with the host communities and other stakeholders such as the Oujé-Bougoumou Cree Nation, the city of Chibougamau, and the government of Québec. That concludes the presentation formally now, and I'll open the floor to questions.
Thank you very much, sir. Ladies and gentlemen, if you'd like to ask an audio question, please press star one on your telephone keypad and just make sure that your line is unmuted so I signal the reach your equipment. Press star one for questions. Our very first question today is coming from Laura Chan calling from RBC. Please go ahead, Laura. Your line is open.
Hi. Good morning, Gavin and Louise. Congrats on the deal.
Thanks.
Just a couple of questions from my side. Obviously, adding a development stage asset in a new geography is a pretty meaningful step change in operational complexity. Could you just talk a bit to the team you're putting in place around Chibougamau? I hope I'm pronouncing that correctly. Are you retaining the full Cygnus technical team, especially since exploration is such a big part of the story?
Yes, of course. Thanks, Laura. Yeah, first things first, we will be retaining the whole of the Cygnus Canadian team that has been working on this asset for at least a couple of years. Some of them have a longer experience with the project as well. We've been working with the Cygnus team, as I said earlier, not only in terms of completing the transaction, but also in terms of the due diligence to work through the understanding of the asset.
Through that process, we've got to know them all quite well and are impressed with the team and their skills. Very happy to retain that team on the ground, which will give us a little bit of a head start. We'll obviously draw on the experiences from our own operations as well and deploy people and skills as and when necessary.
If it does become necessary to expand and grow the team, we are in a mining jurisdiction there, attractive location. Getting people in to do further project work as and when necessary will be possible as well.
Okay. Understood. Possible to give maybe a kind of initial figure on the CapEx for the project? Hopefully, with the processing plant on site, it should be generally lower than what we saw compared to New World. How should we think about the dividend policy from here?
I think I got that question.
Okay
It was about the CapEx and also the dividend policy, just for those of you who didn't hear that clearly. I'll deal with the second question first. The dividend policy of 30%-50% of free cash flow will remain in place. We intend to continue with a sort of disciplined capital allocation program. We've got, as Louise mentioned, the wherewithal to run the development off our existing cash balances and cash generation and also continue with dividends. In terms of CapEx, we're slightly restricted in terms of what we can say here, but we do sort of guide you towards an old PEA from 2022, which gives you a little bit of a flavor for the CapEx there.
Clearly, there's been some inflation, and we've taken all of that into account, plus also, through our technical due diligence, identified areas where we think adjustments to that capital number would be necessary. We still believe that we are paying a reasonable price for an asset here with a huge potential for value increase for our shareholders and combined shareholding going forward.
Yeah, just to add, part of the attraction is the fact that the processing plant, there is an existing processing plant there, albeit there'll be some work needed to be done on that, clearly. There's the site, there's the layout, the civils, the power to the site. There's roads. The plant which some parts of it we'll be very much able to use, and also an existing tailing dam, which the vision is that one would build on top of that. There are some key features with this being a brownfields operation as to why the CapEx should be very manageable.
Okay, understood. Thanks so much.
Thank you very much for your questions there, Laura. Ladies and gentlemen, once again, if you have any questions, please press star one. Our next question is through from Richard Hatch of Berenberg. Please go ahead. Your line is open, sir.
Thanks very much. Morning, Gavin and Louise, and congrats on the deal. A few questions. Firstly, just on the First Nations piece. Can you just talk us through exactly where the project is in the First Nations pathway and what you need to do to get approvals there? First one.
Sure, Richard. The First Nation there, as I said, is the Oujé-Bougoumou Nation. Cygnus has an active engagement program with that First Nation in terms of explaining the project, what it's going to be, what the potential benefits are to the community. The First Nations already have been active in terms of project development, supplying staff to line cutting, drilling, drill programs, those sorts of things. Already seeing some of the benefit of the exploration work that's gone on there. There's a long way to go in terms of permitting here. Ultimately, you're correct. The Oujé-Bougoumou Nation is going to be key to that permitting process.
We will be engaging with them in future and closely with them in order to ensure that the project is developed in line with their expectations, so that we have the best chance of getting the permits in place, as and when that comes. There's still a long way to go there. If you remember in Canada, we need to get to the DFS stage first. Once that DFS goes in, that's when the permit applications are made. The baseline study's already underway, in terms of the environmental baseline stuff. Plus also some of the engineering work is underway to drive into that feasibility study. As one slide says there, we are fast-tracked towards production. In the context of the location, that Oujé-Bougoumou Cree Nation is ultimately a very important factor there.
Okay. Helpful. Thanks, Gavin. Then, just following from that, just in terms of timing to first production, I guess, what you'd expect to get an updated PEA out into the market by the end of this year? I think looking at Cygnus, they targeted their PEA to be done by Q2, but I guess with you taking the company over, that gets delayed. Then, DFS, I suspect, would argue perhaps by the end of next year and then two years production. That puts you into first volumes in sort of 2030, 2031. Is that the right way to think about it?
Yeah, I think that's pretty much along the lines of what we're thinking as well. We've still got to get to grips properly with the study work, particularly on the DFS side. I think the PEA that's being undertaken looks like it's going pretty well. Ultimately, understanding that permitting timeline, post that DFS submission, is going to be key as well. 2031 is probably a reasonable estimation at this point.
Okay, thanks. Can I just perhaps just push you a touch on the CapEx and the OpEx? I sort of consider that, firstly, it's a few years old, although fairly recent. Secondly, it's also a PEA standard; it's going to have to be sharpened up a bit. Is it fair to assume that maybe if we were being conservative, we increase the CapEx by sort of 20%, that keeps you in the range of where you think you might sort of shape out in time? Or is that too aggressive?
It's not dissimilar to what our due diligence showed. Yes. I think we do need to caveat the fact that it's a PEA from a few years ago, and that obviously, the PEA is being updated now. We'll want to get our feet under the table and have a proper look at everything as well. Yes, but what you've said is not wildly out from what our due diligence has sort of looked at. How we've kind of thought about that.
Okay. Thanks, Louise. I've just got two more. First one is just on the, like it's quite helpful to sort of shape and frame it with this medium-term piece that you've talked to. I guess Antler was a little bit more shorter timeframe to first production. Should we take the view that this is the project which really is front and center now, there's nothing that comes in potentially in front of it that's nearer to sort of first production, or is that the wrong way to think about it?
Oh, look, it's an interesting question I suppose, Richard, because it does populate that space between the exploration and the production really well for us. It is longer than the Antler timeline would've been, but that is more than offset, we believe, by the exploration potential that we've got here as well.
That could impact timelines a little bit if we have a lot of success with the drill rig. We might have to look at maybe a slightly different- looking project. However, we have kept the balance sheet completely clean at the moment, and if something came up that was nearer term, that made sense and was available at the right price, we'd have a look at it. I think for the time being, we've got a long way to go just to close this transaction, so let's not get ahead of ourselves. I think the main target now is to get through to September, along with David Southam and his team at Cygnus. Then get the feasibility study up and running as soon as we can, and then get our heads above the parapet and start looking around again at that point.
Until then, we need to keep focused. We need to deliver this transaction first and foremost, and then ultimately get the project set up well, so that we're confident that we can meet timelines and engineer the thing properly before we start looking elsewhere.
Okay, that was clear. Just on the sort of the deal, sort of metrics and the consideration. Obviously, with the shares sort of at or around five-year lows, I guess some may argue that you're using your currency on a cheaper level than where it's been in the past. Can you just talk a bit about why you've gone for an all-share transaction rather than a mixture of cash and stock, just given the fact that it is a bit longer dated to first production, and you're clearly generating a lot of cash flow from Kounrad and Sasa at this point?
Look, I think the key thing here is to retain the flexibility around the balance sheet and the capital allocation. Partly because it is a longer time to production here, so that our shareholders of the combined group will continue to benefit from the capital allocation program, both in terms of growth and development, in relation to Chibougamau, plus also the dividend. As I said earlier, to Laura's question, the dividend policy will remain in place. In terms of why, did we do we believe this is poor value for our shareholders? No. I think we've had a pretty robust discussion with the Cygnus team in terms of exchange ratios and relative valuations.
We've been watching the share prices as they move relative to one another, and generally, they've moved in step, so we don't think we're out of sync in terms of where are we paying for this asset now. Clearly, with both boards recommending the transaction, it looks like a win-win for all of us.
Okay, thanks. Sorry, last one is, I guess, just with the last transaction being frustrated by a competing bid. I guess with this one, as you say, you've got a significant portion of the register that have committed to the transaction. I guess, and I also see in the presentation, you've got a call option over some of those shares as well. Is there anything else you'd add just in terms of just giving the market some confidence that you've identified the right asset, you've laid your hands on it, and it's not going to be wrested from your grasp again?
I think we've learned a lot of lessons from the Antler experience. We've been pretty clear around deal protection here, and I think what we've put in place is fairly robust or as robust as it can be under the regulatory sort of frameworks that we're operating in here. You've got to deal with Australian, Canadian, and the U.K. listing regulations. What we've got in place is robust. I think the key thing here is that we do have 29% of the register that's outside of the board of Cygnus that is supportive of the deal. I think one of the key things here is that they can only sell their shares if the board of Cygnus changes its recommendation at some point. It's a fairly robust construct, we believe.
Ultimately, though, I think it is the same worldwide, that there's a fiduciary out for the target shareholder, the target board. We can't legislate for that as well.
I think in terms of the option as well.
All right. Thank you for your time.
Sorry.
Sorry. Go on, Louise.
Louise, go ahead. Yeah.
Well, I was just going to add a comment on the option. The call option, we view that as quite powerful, really, because that gives us the opportunity to effectively end up with a 9.9% shareholding in the business in the event that there's a competing offer and that becomes a superior proposal. We think that puts us in a very strong position in terms of voting rights, et cetera, going forward. We're very, very pleased with the support that we got from the major shareholders to be able to put that call option in place, as well as obviously the 29% voting intention statements as well.
Yeah, got you. Okay. I do apologize. I promise this is the last one. With New World, I remember you did buy some shares on market just to try and strengthen your position. Is that a consideration with this one as well, like just mopping up some of that retail? I think retail is about 25% of the company, 29% of the company, something like that. Is there a consideration to start mopping up a bit of the shareholding just to give yourself a bit more sort of, few more cards in the deck?
It's a possibility, we've really got an effective 9.9% shareholding.
Yeah
Should we elect to exercise that call option? That's the way we view that. We view that as a pathway to 9.9%.
And then via-
Thanks for your time.
Via your mopping up strategy go above 10 fairly quickly.
Yeah.
Yeah. Which is a key threshold.
Yeah, got you. Cool. All right. Thanks for your time. Congrats.
Thank you.
Thanks, Richard.
Thank you. Thank you. That's your question, Sir Richard. As we have no further audio questions, Gavin, later I call back over to you for any additional or closing remarks. Thank you.
Great. Well, look, thanks again to everybody for attending. We hope you enjoyed what you heard. We certainly are very excited by the opportunity that this transaction represents. Again, thanks to the Cygnus team and all of our advisors for getting over the line, and to the CAML team for all the hard work they've done, but also to all of our shareholders for continuing to support us. We look forward to working together with all of you moving forward. Thanks very much.