Good afternoon and welcome to the ACG Metals Limited H1 2025 operations and capital structure update. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and they 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 and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following polls. I would now like to hand you over to the management team of ACG Metals Limited, Artem Patrick. Good afternoon to you.
Thank you very much and welcome everyone. I appreciate your interest in ACG Metals. I am Artem Patrick, Chair and CEO of ACG Metals Limited. Been in mining close to 30 years, buying and selling mining companies mostly. We are very much in the process of building a large global copper company with our foundation asset being the Gedetepa asset, on which operational performance we report today. Patrick?
Hi everyone. My name is Patrick Henze. I'm the CFO. I've been in mining also since I started my career and been seeing everything from the debt, the private equity, as well as the corporate angle throughout the career. I'm happy to report the operations and financial structure update today.
Thank you. Just a brief overview, we are talking today about the first half of this year. You can clearly see on this slide when we started institutional marketing that was in June. In the middle of June, Canaccord Genuity and Berenberg initiated research reports with a target price average of GBP 8.25. Today we are up to GBP 7.00, so we do expect to reach those target prices pretty soon. The company is a healthy cash generator and as we'll show in the few slides at the end, we are trading at a very low multiple of those very significant cash flows and a steep discount to NAV. That explains the trajectory in the share price and we expect that trajectory to continue. I don't think we need to spend much time on this slide just to say that our free cash flow last year was close to GBP 90 million.
Once we move into the production of sulphide, which is in next year from the sulphide part of the deposit, those cash flows are expected to increase. EBITDA on average for the life of mine at consensus pricing is GBP 110 million, at spot that will be around GBP 125 million. Clean capital structure with bonds of GBP 200 million, net debt of about GBP 66 million and cash at hand of GBP 136 million. 21.5 million shares in issue, 11 million warrants, but because the majority of those warrants are privately held and can be exercised on a cashless basis, we do not expect a significant dilution from those. We'll fully diluted share numbers of around 25 million. By the way, warrants are trading at GBP 1.35 today, so already showing that they are in the money.
The bonds are trading at GBP 107.5, so there is a good interest from investors in all of our instruments traded both in London and bonds in Oslo, Norway. Our starter asset is Gedetepa, which is a world-class first quartile, currently gold producer, transitioning into copper, very high grade, 2.32% copper equivalent, currently producing gold and silver dore. As we explained in this presentation, we just increased our guidance for the year, expecting to produce 36,000 - 38,000 ounces of gold equivalent, moving to 20,000 - 25,000 tonnes of copper equivalent from the next year. Very strong cost positioning on a global cost curve, first quartile in gold, first quartile in copper, and that obviously leads to very significant cash flows. Patrick?
Yeah, thanks. Picking up on what Artem just mentioned, you know, grade is king, they say in mining. We see here that compared to other peer group and also larger company assets in the open pit mining space, the grade here is significantly higher. That also, by the way, counts for the existing current oxide production where we're producing gold and silver. We have around 2 g a ton of gold equivalent, and that is also significantly higher than a lot of other mines in the region. It almost compares to underground mining, which are significantly more costly to produce the gold or the copper as we are. On the other side, what we can manage as a team is obviously the cost.
If we look at the global cost curve on the gold side on the top, you see not only that we reduced a bit of our cost in the first half of 2025 versus last year, we are still in the first quartile and even better positioned. Also, going forward with 2027, the full first year of copper, zinc, and gold and silver production, we're basically still in the first quartile and also at a very competitive position in the global cost curve. When we look at the first half of 2025 on the operations side, I think we're really proud of the achievement on the safety side. There has been no incident at this mine since the start of the operation. Even now with an increased workforce on site, more contractors on site included, we are still having no lost-time incidents and the record is just continuing.
That's a big achievement of the team. When you look at the production, the prices as well as the cost side, all are significantly improved since we took over the operation. We're really happy how that is progressing. That is manifested if you look at the previous year to this year on all fronts, production slightly up, the realized gold price, we benefited obviously from that. We also secured part of that as we announced previously with a hedging instrument. We are significantly above budget because of those two factors. The other side of the coin, the cost, as we just mentioned, especially the C1 cost to achieve, less than $400 an ounce on the real operating cost of the mine is a significant achievement.
That's obviously led by the lira depreciation on one side, but also a lot of discipline and strict controls on the cost side while we are actually transitioning to the sulphide phase that the whole team is implementing and the whole team stands behind. If we're looking at the sulphide side, the expansion is on time and on budget. I've just come from site last week, had a look at everything, the full camp for GAP İnşaat, the contractor is in place, 550 people can be hosted there. The heating is the last thing that's been installed and that's not immediately necessary as we know. I think we had 38 degrees on site. That's going to be constructed in the next couple of weeks. Most importantly, all the long lead items have been ordered. We are ahead of the schedule on the long lead items.
We also completed the first upfront payment, so everything has been manufactured now. We see that the earthworks, which is a lot of the preparation work that has to be done, is already completed. We see also that the major contractors, the real contractors for the build of this plant, are already mobilizing on site. Everything is pretty much on time and on budget. Coming to the financial side, just want to highlight a few points here, how that is tracking with the bondholders and the bond that we raised in the beginning of the year, completed on January 13. By July 13, we're happy to report that we paid our first coupon. All covenants, everything fully compliant, and we made the first payment. Given the strong cash generation from the asset, there's a very good leeway already for the second one by the beginning of next year.
That will be on January 13, the second coupon payment, and we are absolutely comfortable with that situation. On the other side, we also had the remaining sponsor loans that were due by October this year. Again, given the production as well as the gold price and the cost position that we really made some good efficiency gains, we were able to pay those back already in May. That last overhang from the previous periods was dealt with. Now we are actually further increasing our net debt position, but significantly less than what we assumed in the beginning of the year. The risk management, as we mentioned before, we did a hedging program for 50% of the production. That actually didn't really have any impact on the realized gold prices because we did it as a collar.
We are still benefiting from the gold actually as it moves upwards on the 50% unhedged, but also on the 50% that is hedged. If we just look at this slide as a last slide in the finance section for the generalist, more generalist investor base, you know, if you look across sectors and across different investment opportunities, the margin that we have in this mine as a starter mine is absolutely phenomenal. The implied PE ratio is significantly below other industries that are investable. From that perspective, we are, I think, having a really good proposition here.
Thank you, Patrick. Update in guidance for the year, as we have mentioned, given the excellent work by our operating team, we managed to increase and stabilize recoveries. We're below 80% now, above 80%, and improving, which has given us confidence to increase the guidance for the year by about 17% at spot prices at $16 million and $17 million. We feel quite confident about achieving those numbers. The company is doing well, producing lots of cash flow, sulphide project on time and on budget. I see there are already some questions in regards to the life of mine extension folks' side. We'll answer those. Let us just get through some of these final slides. I think this one, which is my favorite, shows the upside potential in shares.
Yes, ACG Metals shares are up 60% over the last six weeks or so, but we're still trading below two times free cash flow versus average for similar companies of around eight. That is four times. I'm really focusing on cash flow because that is one of our key advantages given the low cost positioning and operating nature of the asset. If you look at any other metrics, whether it's PE, price to net asset value, or EV to EBITDA, it shows the same direction. On top of, so essentially what we say in there is three to five times upside on a base case, which is Gedetepa only. If we add additional assets to our platform, that should troubleshoot the returns. I'm happy to talk in general about where we are looking, which is essentially, the story is simple.
If you're in copper, you have to be where copper is. We are currently on a Tethyan Copper Belt. We're looking at targets in our jurisdiction and in surrounding countries, Eastern Europe, Balkans, Central Asia. There are two other big copper belts. One is in Africa, another one is in South America, extending into North America. We have targets in all of these jurisdictions. The rule of thumb is pretty simple. It is one of three, if you're lucky, one out of five, if you're less lucky. That works. We have currently, out of 35 targets pipeline, we are working on around 10. We have confidence in the ability to add further producing assets to our platform.
The plan is, as we said, is to ensure the rating happens on a base case scenario, which is continuous operational delivery to the same level of excellence as we have achieved in the first half of this year. Building the sulphide project on budget and on time, commissioning in Q1 next year, which is very much on schedule. That will deliver three to five times return to our current share price. On top of that, we are working on 10 or so acquisitions, which should come in when appropriate. Essentially, we're looking to fill the gap on the London Stock Exchange, where after Antofagasta, which is a GBP 20 billion giant, there are very few pure play copper companies. We intend to be there in a short order, inshallah, as they say in Turkey. Happy to go into questions.
Fantastic. Artem Patrick, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q&A tab situated on the top right corner of your screen. While the company takes a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. I'm Artem Patrick. As you can see, we have received a number of questions throughout today's presentation. Artem Patrick, if I may now hand back to you and kindly ask you to read out the questions where appropriate to do so, and I'll pick up from you both at the end. Thank you.
I see questions starting from number three to number five, to number six. Number three, four, five, six all relate to life of mine extension for production of the oxide ore, which is production of gold and silver dore. Maybe, Patrick, you can address those at once, and then I'll deal with the next ones which relate to the M&A strategy.
Yeah, happy to. Thanks, Artem. I guess regarding the extension location-wise, we have a licensed area where you have in the northern part the oxide plant, which you see actually on this picture here in front of you. That's the, on the right side would be the heap leach. You see the ponds where the liquid solution goes in, and then there's the Merrill-Crowe plant, which enhances the silver recovery in the dore and pours actually the bars that we then ship to Istanbul. That's in the northern part. In the southern part is where we are now building the sulphide plant. Logistically, you can actually operate both in parallel. There are a couple of options that we're looking at in how to extend the life on the oxide. You can do exploration in the area. We can think about toll treating arrangements with others, external parties.
Obviously, there's also further opportunities that we're looking at how we can technically advance the things that we could potentially also run through the oxide plant. We will update the market as and when we see some of these initiatives coming to fruition. I can tell you that we, including the team on site, are working on it. At the right time, there will be an update on that. You saw that the performance in 2025 is actually quite a bit better than we thought it would be. That's some efficiencies that we could actually make on the reagent mix. There were some improvements that we did with regards to the process and the flow sheet. I think there will be some opportunities also to intrinsically upgrade this plant. Certainly, we have a lot of options how we can increase this.
It's just a question of when we feel comfortable of communicating this.
Thank you, Patrick. As mentioned in some of these questions in regards to oxide life of mine extension, we are very much focusing on developing the technical solution to process so-called enriched ore or transitional ore at the current oxide plant. That is where our efforts are focused at the moment. We shall be updating the market shortly. The next two questions deal with M&A strategy. The first one is, what is your argument for focusing on buying producing assets versus buying build approach? Very simply, we do believe in copper price upside. CRU, which is a relatively conservative organization, predicts the first deficit in 2028. Any acceleration in the demand for the metal could potentially move this deficit to 2027, which means we have two, three years before the copper prices are likely to move to the next floor higher up.
That means we have limited time to get size and scale. The best way to get size and scale is to acquire the producing assets so that when the copper prices reach new equilibrium, we can take advantage of the higher price environment. At that point, we can focus more on greenfield buy and build, developing stages, etc. Our current focus and immediate focus is in getting size and scale through acquiring producing or near producing assets. One other element which supports this immediate focus is the fact that we can utilize debt to acquire producing assets, which is obviously more difficult and more time-consuming with building things.
Now that we have access to the bond market and our bonds, as I mentioned, are trading at a significant premium to the issue price, we can tap it again for the next acquisition, which moves you to the next question, which says, when do you foresee your next acquisition occurring? Do you currently have deals at an offer negotiating stage? As I mentioned before, the simple way to ensure success in M&A, and this comes from close to 30 years experience in doing this in this particular sector, is to work on several transactions at once. You've seen a number 10 in the previous slides where we are working on. I cannot possibly say at what point which transaction will occur. Nothing is done until it's done. We are working on several targets, and those are discussions at various stages of progress.
Some of them initial, some of them in term sheet stage, etc., etc. Nothing is done until it's done. You can only be sure that we will get something done because we are working on a number of opportunities at the same time. The next question, has the recent tariff announcement from President Trump and a subsequent copper price reaction impacted the potential returns from sulphide or Gedetepa and any near-term M&A you may be considering? The most visible impact from a tariff announcement was an increase in arbitrage between the U.S. and the rest of the world. Copper prices in the U.S. are slightly higher, but not to the extent that proposed tariffs would imply. That potentially could make things in terms of M&A interesting in the United States. Administrations come and go, and the copper investment is a multi-administration endeavor.
When considering the expected returns of any of our M&A opportunities, we do look conservatively at consensus pricing and disregard short-term fluctuation.
Maybe.
Next one is for you, Patrick.
Yeah. The last one was regarding the capital structure update, just a general expansion to what we presented. I think overall, we started this business with a bit more complex capital structure. We simplified it throughout the last nine, ten months by, first of all, reducing some of the inherited debt. We had a bond raise to fund the full expansion. We cleaned up the warrants. Now we are actually another step ahead because we reduced these sponsor loans to zero. That was another big achievement. You can see that the net debt position, despite us drawing funds from the bond account, spending money on the build of the sulphide expansion, we are still in a very healthy net debt position, as well as we have a very good cash balance on the books at the moment. There is enough buffer in the system.
Just to remind everyone, the bond is sized with $200 million. We refinanced $25 million. We have a $146 million fixed price EPC contract, which we are paying in local currency. Basically, we have a $25 million buffer in the bond. We have excess liquidity from other facilities, and we have a significant cash buffer on the balance sheet. As such, we are really well capitalized as a business. We see obviously the gold prices are holding. Copper prices seem to come exactly in 2026 when we start producing to another term between supply and demand. Ultimately, we feel very comfortable with our capital structure as of now.
That's great, Patrick. Artem, thank you for addressing all those questions for investors today. The company can review your questions submitted today, and we'll publish those responses on the Vesami company platform. Artem, before I redirect investors to provide you with their feedback, which is particularly important to the company, could I please ask you for a few closing comments?
Thank you. It's really simple. This is a simple story. We have a massively cash-generating asset. We are halfway through the project to make the asset even further cash generation with free cash flow on spot well above $100 million, average for the life of mine. We are trading at a fraction of what comparable companies are trading to. Why? Because we are a new kid on the block, and we really started marketing only six weeks ago. This is a time to get us to know better and hopefully follow us as a partner, as an investor.
Fantastic, Artem Patrick. Thank you once again for updating investors today. Could I please ask investors not to close this session? As you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure it will be greatly valued by the company. On behalf of the management team of ACG Metals Limited, we would like to thank you for attending today's presentation, and good afternoon to you all.
Thank you very much.