Welcome to the fourth quarter presentation for Akobo Minerals. My name is Jørgen Evjen. I'm the CEO of the group. Together with me, as usual, I have Dr. Matt Jackson, our COO. Together, we will take you through the Q4 highlights. We will not dwell too much on the fourth quarter. That's already some time ago, so we'll do more focus on what's happening right now. I know we're all excited and looking forward to the first gold production. We will give you a lot of details around that, and also our very new exciting exploration target that we will get back to. That really might be the best target so far that we have discovered. I'll first do a quick introduction of Akobo Minerals for those who are not familiar with the company.
We're a Scandinavian-based gold exploration and mining company with assets in Ethiopia. We're listed on the stock exchange here in Oslo, but also on the Frankfurt Stock Exchange. A market cap of around NOK 300 million. We have some 3,000 shareholders and backed by a strong group of Norwegian shareholders. We also have $8.5 million in debt to Monetary Metals as a gold loan. The structure of our corporate setup is quite transparent. We have a Swedish holdings company, then the Norwegian MidCo, where a lot of the operational activities are done, and then Etno Mining, which is our operational asset and company in Ethiopia. That company holds all the licenses and is where we focus our activity these days. We have approximately, well, some 150 employees on and off in camp these days, so a lot of activity happening.
Just to remind ourselves of what we are, we're still an exploration company, but we will be supported by the cash flow from the Segele mine. Our corporate foundation, we feel is a de-risked mining project right now. We're building strong local footholds at camp in local community based upon good ethics, transparency and communication. We will continue low cost exploration with the same way we've done up until now. We will grow mineral resources, and we will discover new rich gold deposits. Looking forward, we have an ambition to become the major leading player in the Ethiopian mining industry. De-risked, what does that mean? We have received and been recognized for our ESG program. That's the backbone and the DNA of the company. We have long-term visibility these days with both an exploration license in place and a mining license in place.
That gives us a long-term visibility. Our mining operations are well underway. The processing plant has been produced and will arrive at site. Significant cash flow is expected, and there will be potential for dividend payments after repayment of debt. The new exploration targets that we've found so far are of really high interest for us. The first mover advantage is also important. We will be the first new private gold mine to start mining in Ethiopia since 1994. This is not just a milestone for us as a company, it's also a milestone for Ethiopia and Ethiopian mining sector. To put us on the map, we're in Ethiopia. We're close to the border of South Sudan, approximately 700 kilometers by road. We have an airstrip. We do travel back and forth. It's a very nice place. It's calm, it's quiet.
If you look at what we've found so far for the Segele mineral resource that's been verified by SRK, it shows an astonishing grade, some of the highest grades in the world. The resource is not that big yet, 68,000, 69,000 ounces, but the average grade is 22.7 gram per ton. That's leading world-class. Part of that, 51,000 ounces of the 69,000 ounces actually has an average grade of 40.6 gram per ton. You can see from the small table here that we're talking about the bonanza grades here. Usually, you will do mining at a lot lower grade than that, all the way down to 0.51 gram per ton. This is what makes the Segele Gold project highly profitable.
Looking at the cost of producing it, we're estimating an all-in cost of around $243 per ounce. That's compared normally to an industry average of around $1,000. For the future exploration within our license, there are plenty of targets. Matt will go through that a bit later. We have the ambition of developing a world-class deposit of 1.5 million-2 million ounces. We believe that's possible from what we're seeing these days. Yeah, again, there are several new targets that will support this. I'll run quickly through the key events during the fourth quarter. That's already long time ago. The first parts of the processing plants arrived at site. IW Mining deployed, started breaking ground at Segele. We secured a 5,000 ounce gold loan from Monetary Metals.
Important, an agreement with all artisanal miners to cease all activity in our mining license area was concluded, so we can work freely in our mining license area these days. We've also been working a lot on developing local community relationships, and one of those is an MOU with Dima Polytechnic to improve local access to technical and vocational training. Part of our ESG program is the tree seeds that we've been collecting. Those are indigenous tree seeds, and we've started a small community tree nursery. The company was also shortlisted at Mines and Money for our ESG program, and very important for Ethiopia and also for us, was the peace agreement that was signed between the Ethiopian government and the Tigray People's Liberation Front. It seems to be holding up very good. The country is moving in the right direction.
We're seeing only positive results from this. The peace treaty is holding up. What everyone has been waiting for, what are we doing these days? Well, we need to admit that we've been ambitious. We will still be ambitious, but we will also then have some delays these days. It might also impact our liquidity. Matt will get back to the reasons for the delay, but we have a very positive dialogue with our shareholders to solve this. Looks like we are going to do a loan, that will reduce and limit dilution for existing shareholders. That seems to be on track. The new exploration target discovered at Indaba, some of the most exciting things we've seen so far, most significant finding, I believe.
We'll look at a 2 ton per hour ultra-small plant to compensate somewhat for the delay in the startup of the main plant. This will, of course, not replace the lost revenue from the gold plant, the main plant, but it will give us a proof of concept, and we will be able to start production by the end of March, as we've stated earlier, but at a smaller scale. Good news is, of course, that the fabrication of shipping of the main processing plant has been completed, so it's now all in our hands, parts on sea, parts at camp. Underground mine box cut has been completed. Two entries to the ore body is being worked on. Very interesting is now the engagement we have with refineries that would like to buy our gold.
We're getting a lot of contacts out there who are interested in the Segele gold. It's unique. It's, yeah, and it's made from a way that's acceptable. We're doing that as part of our ESG program, so these things go hand in hand. We're really looking forward to establish offtake agreements so that we know where to sell the gold in the very short period of time. We're also finding more gold. Matt will say a bit more about that. I will not dwell on that. It's important to say that there's a new governor for the National Bank of Ethiopia, and there's also a new minister for the Ministry of Mines and Petroleum. We are very pleased and positive about that.
I think they will only continue the improved, to improve the framework, political framework for the mining industry and get the mining industry on the map as it deserves. The mining industry is one of the three pillars of the Ethiopian economy for in their long 10-year long plan. We're working closely with them to see how we can improve regulatory environment, et cetera. The key ESG community initiatives, we'll tell a bit more about that. There's a lot happening. Two happy guys here on the pictures when we were awarded the Indaba ESG Nature Award. That's really a great achievement for a small company like ours. On the financial performance overview, we only have costs so far. We're waiting for the revenue to start.
The loss for the quarter was SEK 34.2 million, and the operating loss for the year was SEK 53.8 million. The cash flow for the quarter was SEK 45.9 million, including it, that is the Monetary Metals loan. Cash at bank, $56.3 million at the end of the year. Total equity at the end of the year, $25.2 million. External debt at the end of quarter, $95.1 million. That is also related to the gold loan that we did with Monetary Metals. Just a few remarks. The company is still in the project development phase, so there is no revenue. Increase in costs in the fourth quarter is due to increased mining activity at site in Ethiopia.
We have started booking also some of the mining related costs in the P&L income statement as operational expenses. Segele, that is still our main focus these days. Get it up and running. We see no reason to change the forecast of the cash flow projection. We're still estimating a free cash flow of $50 million from that project over the current estimate of 27 months life of mine. We expect that to extend well beyond the 27 months of life. It's open at that still. There is no reason why this cash flow should not continue even after 27 months. The model is based on some key assumption, taking into account the gold price and also the royalties and free carries and taxes to be paid to Ethiopia. With that beautiful picture of our area, I will leave the next chapter to Matt.
Thank you. Great. Thanks a lot, Jørgen. I'm Matt Jackson. I'm the Chief Operating Officer. And I'll just run through a few of the technical details that will give some more color to what Jørgen has just said here. To introduce some of you to the Segele Mine that we could have some new viewers here. I'll just run through some of the details. As Jørgen mentioned, we have an astonishingly high grade in the Mineral Resource at Segele. That can be seen with the almost dragon-like shapes that come from the top left to the bottom right in this image. We're looking at a cross-section through the Segele project here.
The lines coming down from the top to bottom are the drill holes that we use to discover it. Very high grades. The highest grades, in fact, occur nearest to the surface. Those are the ones that we will get to, the richest gold rocks we will get to earlier on in the mining life. We have a very low as a result of the very high grade, we have a very low operations cost of $243 per ounce. We're building a production plant, which will be only a few hundred meters away from the entrances to the underground mines.
You can see the green lines that again come from the top left to bottom right, that go down through the ore body, which are the access to the underground mine that will take out the ore for production. This is the concept by which we will be exploiting the Segele deposit. I'll in the next few slides, I'll go into some more details about the actual physical on the ground progress that's been made with regards to that. We have this fantastic resource. The actual rocks are very, very rich. In world terms, the actual size of the deposit is relatively small.
In the last few months, we've made, in fact, in particular in Q4 of 2022, we've made some fantastic discoveries, in fact. The Segele Berbera target is 130 meters to the west. Sorry, the Segele hilltop target is 130 meters to the west of the area that we're looking at. It's actually very, very close. We've seen fantastic visible gold in that. Just in the few hundred meters surrounding the area that we're looking at right now, we have really nice potential for extending the resource.
We can also see in the areas that were mined by artisanal miners very close to the mine, that there are other very, very good targets that can be used to extend the mine life and carry on production after 27 months. Just very quickly, I'll talk about our philosophy towards our operations. Jørgen mentioned that we've been very ambitious in our plans to get the mine up and running, and the way in which we've been able to deliver on our ambitions so far has been in large part due to our philosophy of reducing the risk of startup by using very experienced contractors.
On the ground at the moment, we have IW Mining, which is a South African mining contractor, who have brought in specialists with many, many years of experience of underground mining, and they are on the ground doing the work right now. This has enabled us to get started on the underground mining much faster than we would have been able to if we had decided to build up the competence within our own company. Likewise, we have Solo Resources, also based in South Africa, that have experience of many, many years of experience of producing mineral processing plants. In particular, they've produced 11 plants that are very similar to ours at the moment.
I think that their experience with regards to this has proven to be very, very useful in recent months, as they've, you know, been responsible for some fantastic delivery on that particular part of the project. I'll talk more about that in the coming slides. Going back to IW Mining and the actual progress with developing the underground mine. We've made fantastic progress with both the incline shaft and the winzes. I use the term winzes for the two smaller tunnels that will go down directly into the ore body. You know, we faced various challenges that many companies do, with regards to starting up new mining operations in new areas, you know, with regards to making sure that all the supply of the consumables and the equipment is actually in there and are in place.
Now I'm, you know, very happy with the progress that's being made with this particular team, and we have all the equipment that's there, and we have all the consumables that are needed. You know, work is underway, and we can see some pictures there of the fantastic IW Mining team and the miners that they have recruited in the local area. Yeah, progress is going very, very well. The incline shaft, the larger tunnel, has developed to 27 meters, and we're expecting the speed of development to increase greatly now that the team is well established.
With the current manning and the current equipment, we can mine over 2,000 tons per month once we get to the mineralization, to the rocks that has the gold inside them. We're looking at purchasing additional equipment which will enable us to ramp up to 5,000 tons per month a number of months into the future. Going back to the process plant side of things. You know, we were faced with significant challenges in South Africa due to power cuts. It's gotta be said that the way that Solo Resources dealt with this was very, very skillful and intelligent. The result has been very, very good. You know, this.
Now, all the shipments. All the fabrication has been completed, all the designs and all the drawings have been done. You know, all the equipment is now in transit. We will be receiving a very large number of containers just in the next few weeks. We're expecting construction of the processing plant to start on the first of April. Of course, the process plant has to sit on foundations. The designs for all these foundations are now complete. We have a very, very experienced, capable civil engineering team and consultants who are based at site now. They're well underway, as you can see from the photographs here.
A large amount of excavation has been completed, and the concrete pouring is happening as we speak. Right now, you can see the image on the top left, which shows that we have the areas that are in the color, the red and green, yellow and blue. All those areas are being developed right now. We're seeing very, very fast progress with that. Again, we did come across some challenges with supply of cement and the availability of various equipment. Now everything is on site and it's available and it's working. The issues with the cement supply has been overcome to a large extent with the help of the new Minister for Mines.
Jørgen mentioned at the start of the presentation that we have also put into place a program of establishing what we call our ultra-small production plant. This is a very small gravity concentration system. In many ways, it's like a shrunken version of the large-scale plant. That has been developed very, very quickly, again, by Solo Resources. It's a real credit to their skill. This is, you can see on the photograph on the right-hand side, this can be air freighted. This is being crated up as we speak, this will be flown to Ethiopia. It'll take only a day or two for that to arrive.
It's capable of extracting around about 40% of the gold from the rocks, because it doesn't have the chemical extraction methods that are used in the larger plant. The waste which will be produced from this that will still have 60% of the gold will be put back through the main plant later. This is bringing forward some production, and it's also a very, very useful way of ensure, you know, of testing all the systems that are needed for the main plant.
This can be operational within one week of receipt of the equipment, and it's a very, very sophisticated system that can, and a very robust system that our team, our processing plant team at the site is able to use very, very quickly. This should help us to ensure that we reach our first gold production target on time. A very exciting part of this particular presentation today is our exploration progress. The team have been very, very busy. They've been collecting soil samples. They've been collecting samples of the rocks from the surface, and they've had some really quite exciting results. You know, this is...
A lot of the exploration work that's been happening has been quite a long distance away from the Segele mine. In addition to that, we've had the fantastic results of the Segele hilltop, which found visible gold both in the drilling and in hand samples taken from surface. I'm going to go into a little bit of detail now about the exploration targets that the company has. In previous quarterly presentations, we focused very much on the progress with the mine itself, and now, and since that time, we've not been talking so much about exploration. We have a very large number of exploration targets.
The map in the middle of the of the slide shows lots of different dots, which are areas where we are excited about and we believe there is a chance of making a new discovery and establishing a new mine. Not all of these dots will develop into a into a commercial operation, of course. What I've done with this slide is that each of the colored boxes shows, focuses in on the particular targets that we are most excited about. Needless to say, we are going through a process of prioritization and selecting the targets that are most likely to bring us into production and to produce new tons of gold-bearing rocks that we can put through the Segele plant.
Of these targets that you can see here in the colored boxes, the green ones are that are the highest priority for us. Where in the middle, on the left-hand side, we can see it says Segele Main. That's the resource that's being mined. The 27 months that we've mentioned before of mine life for Segele is based on just the Mineral Resource Estimate. The rocks that have the gold continue down further at depth, and those rocks have not been defined in the mine life. That's a very exciting place that we can develop more ore. Now, we mentioned the Segele hilltop target, which we previously called the third mineralisation type. We have visible gold there.
It's only 130 meters away from the actual mine at the moment, that's very, very exciting. We've talked about Joru in the past, we did a lot of drilling at Joru Central, which again came up with lots of high-grade intersections that are exciting in their own right. In fact, there's another area around Joru called Joru South, where we've had grab samples of up to 60 grams per ton, which if we remember from the Segele resource, even 40 grams per ton is an extremely high grade. When we look at Joru South, there's the potential to find something very exciting there. Even more exciting than Joru South, in fact, is Gindibab. This is a discovery which Johan and our talented team have come up with just very, very recently, in fact.
They found visible gold in numerous hand specimens, I'm gonna talk about that more in one of the later slides. We've prioritized the four targets that are in green, but there are other targets that are in orange that are just waiting to be assessed, these will also develop into drill targets. In addition to that, we have the ones in purple, which are still very, very exciting. Needless to say, I think that most people, even non-specialists, can look at this slide and understand that you know, the exploration potential here, these targets, you know, are justifiably very, very exciting.
We're focusing in order to, you know, use our resources to be targeted towards the most likely projects to bring in new tons and new mineralization to be processed, we're focusing on the areas that are green. I hope this slide is able to illustrate the reason why we are excited and we have been excited for so many years about the areas well outside of the Segele mine. This is the Segele hilltop target, and this is very, very exciting. It's the one that's close to the Segele mine. You can see here there's an image of the visible gold that's been seen here. When this was discovered in Q4, in fact, initially.
When the geologists found this, they were delighted because the team had been seeing rocks like this that had gold in them for many, many months beforehand, and they'd spent a lot of time trying to tie down exactly where this was. Not only have we found this in hand specimen, we've also hit it in the actual drilling. We're waiting for the assays from this in the expected second quarter. This is the last slide about the exploration areas. The reason why this is the last one is because this the Gindibab target may well be our most significant discovery yet.
In the past, people who've listened to me talk and listened to the discussions with Jørgen, we speak a lot about Segele and how rich Segele is. It's an astonishing area. When we show even the due diligence geologist who came to establish whether we should have the loan from Monetary Metals, he came, and he didn't believe until he actually saw the rocks, he didn't believe the amount of gold that was in Segele. I often tell people, you know, or tell geologists, "I don't think you'll see more visible gold than you have seen in Segele in the rest of your career." What we found at Gindibab is very, very exciting indeed. On the left-hand side of this image, you can see the purple marks that are on the rocks.
Each of those purple marks is where the geologists have indicated that they have seen visible gold. These rocks have been collected over an area that is right next to and in some quartz veins. There's an awful lot of visible gold in here. It's been panned and liberated. You can see that in the image that's been zoomed in to the right of it. These quartz rocks, these are very much what geologists look for with gold deposits. Given the richness of the soil sampling and the success of the soil sampling that's been done in previous years, we, you know, the geologists that have been involved in this have been expecting to find something more like this for a long time now.
When this was discovered, this could well be a really big milestone for the company as a whole. This is very much like many gold deposits all around the world. It has the right kind of alteration. It has the right kind of mineralization. It even has base metal-bearing sulfides with it as well. The Qafaris have been mining this in places as well. Sorry, the artisanal miners have been mining this in places as well. This is something that gives us has renewed our excitement to discover 1.5 million- 2 million ounces in the exploration license area. It's being fast-tracked for drilling, we have an awful lot of hope for this.
This is just one very exciting target in addition to all the other exciting targets that I've mentioned in the previous slide. You know, the exploration team is very, very motivated by this. The whole company is very, very much looking forward to seeing the results of what comes from this. Again, you know, Segele has enormous amounts of visible gold. It looks like we've stumbled across something else, not so much stumbled across, it's been part of the, you know, systematic exploration program. Now all the effort that's been put into the systematic exploration that's been done in the last few months is really turning up the goods for us.
This is something that we'll be focusing on to a very great deal in the next few months. Now I'll hand over to Jørgen to talk a bit about the ESG work that's been done. Thank you very much.
Thank you, Matt. Yeah, we are definitely all excited about the new targets. It's good to be reminded of where we started a few years ago with the ambition to actually build a world-class deposit of 1.5 million-2 million ounces. I think we can say that we're now fairly optimistic of delivering on that over time. Getting to that point, we need to do more work on the ESG side, of course. We need to keep up our social license. This is part of our every day. It's part of the DNA, as I said. It's why we won the award at Indaba in Cape Town. We're focusing on this. Building a women and youth association that's been registered.
Artisanal and small scale mining and solar technology teaching materials has been prepared. We're doing community eco-brick production started. That's a different way of making bricks for houses, with a much better and more efficient way of doing it. For the associations we are establishing and the training, that's to make sure that they can improve health and safety in all their work. They do participate in local mining operations, from the seabed, from the riverbed, I mean. Also from inside our license areas. We work together, and we would like also to see them improve the standard of working and make sure that they can make their health and safety program better.
We've also done a lot of working with universities, both in Oslo, in Addis, in Jimma and in Dima. We're starting an ecological monitoring program now with the university in Jimma. That's important to establish, the ecological status in the area. As we all know, there has been no previous mining in the area or large scale modern mining. It's really a... This is a place where we can do everything right from the beginning. We also made an education program that was approved by the Gambella region that we will roll out. Again, I must say, thanks to the whole ESG team and Dr. Cathryn MacCallum for the work they did that gave us the ESG award in South Africa. It's a huge milestone and something we really appreciate it.
Moving forward then to the financial sides, I will not go into the details here. If you have any questions, I think it's better that you call me or email me. Again, the numbers are based on no revenue, so there is a lot of cost here. We're sticking more or less to the budgets and the plans that we have. There's been some inflation in Ethiopia, but that has also been mitigated by the strong dollar. You can see here the main parts that we're spending money on. A lot will be going into the mine operations now also going forward. On the balance sheet, it's really not much happening there. We have a lot of fixed asset that is related to the mining and exploration in Ethiopia.
There's a long-term debt here, which is the 5,000 ounces gold loan to Monetary Metals, and the rest is not really significant. We have also the convertible loan that we did last year. That will run out, well, within a couple of months right now and will be converted into equity. Again, the cash flow here shows probably a better picture of what we're using our money on. The cash flow from the operating activities relates to all entities. The cash flow from the investing side relates to the work being done in Ethiopia that is being capitalized. You can see the short-term debt, that's the convertible loan, and the long-term debt is the Monetary Metals loan.
Translation differences relates to changes in foreign exchange values on the bank deposits that we have. Again, feel free to reach out if you have any questions about our numbers. The key metrics, that's just for information on a few of the items that we would like to follow up on, meters drilled, trenches, samples. Feel free to study it, and if you have any questions, get back to me. With that, I think we're ready for Matt, any Q&As if there are.
Yeah.
We'll see.
Yeah, we have a couple of questions here. I guess I'll answer the first question. Yeah.
The first one definitely for you.
Okay, great. We have a question here saying, "Regarding the new exploration discoveries, is it possible there is a continuous vein going all the way from Segele to Joru?" That's a fantastic question. What we see is that there is a structure that goes from Segele to Joru and further north, in fact, and the structure also goes further south from Joru. If there was a continuous vein that held the gold all the way in that distance, it would be a vast resource, one of the biggest in the world, in fact. It's possible but unlikely. What is certain is that the targets that we're looking at and that we've found so far are generally controlled by this structure that goes from north to south.
I would love to come out and say that there is, you know, there is a vein that goes all the way along that distance because it would be an absolutely brilliant result for the company. It's unrealistic on sort of geological terms. These targets are, you know, are part of that structure that goes from north to south. It's part of the reason why we are so excited. Does that answer the question, do you think, or?
I think so.
Yeah?
Yeah. Definitely. I'll do that one maybe.
This is. Yeah.
When do you expect the first cash flow from Segele Gold actually entering the company's bank account?" Well, the structure usually is, on selling gold is, there's not a long delay from selling and getting the cash. It's more or less immediate. We're working on different solutions also with some international big trading firms that usually do this kind of transactions. There's also possibility once you've established a good relationship that you can get some of the cash upfront. So there'll be a limited delay. The first gold, if we now look at the small, ultra-small production plant, getting into a, we must admit, a limited production, but still a production that will give us the proof of concept that the gold can be mined, which is also just as important.
If that happens at the end of March, probably the easiest way for us to do then is to sell it to the National Bank, and we'll get that money paid immediately once we deliver the gold to the National Bank.
Okay. We've had a lot of questions coming in now. The next one, I guess this is one for me. "Do you expect similar low extraction cost on the new possible gold discoveries beyond Segele, or will they be much higher?" Obviously, that's a question that can't be answered for certain right now. The extraction cost, the operational cost per ounce is based very, very much on the grade, of course, and the grade will be very different from one place to another. Well, if I just look at the samples in the image that I showed you, from the new target at Gindibab, the new discovery that we announced today, it looks like the grade is really, really quite high.
That would expect a relatively low operations cost. We are If we discovered a deposit that was 1.5 million- 2 million ounces that we're very excited about, the chances are that the grade of that deposit would be significantly lower than Segele because realistically speaking, large deposits don't have high grades like the small ones do at Segele. Needless to say, you can see from the assays that we showed in the slide showing all the targets that there is potential for more. There's, you know, there's a really good reason to be excited about discovering additional high-grade deposits in the area.
Yeah
... which then translates to a lower operating cost.
Might also mention that if this develops into a more open-pit mine, there will also be less explosive- and less underground that is that drives the costs.
That's right. Yeah.
For those interested, actually quite interesting company to follow is TRX Mining in Tanzania. They mine at, I say, close to 1 gram per ton open pit. They have an average all-in cost around $500-$600 per ounce. It's definitely doable to still get a low operational cost even though the grade is grade is lower.
Yeah. Absolutely.
Yeah.
Another question. "When do you expect the big plant to be operational?
Well, we've said that we expect it to be a couple months delayed. From what we've said previously, we hoped it would be operational by the end of this month, May. That means by the end of May is what we're aiming at right now. Everything seems now to be in our own hands. We're not waiting for shipments or production still at the processing plant. IW Mining is blasting away every day, developing the mine. The foundation work is moving forward now every day. With the construction of the plant starting 1st of April, we believe that within May, that we can probably hit the start button and then see what happens and what comes out of it.
Great.
Anything? No?
Yeah. That makes sense to me. I think that was the last question. Great.
Yeah. Great. Okay. Thank you everyone for participating and listening. Again, if you have any questions, comments, feel free to reach out to Matt or myself. If not, we'll probably see you in three months' time again, doing an update. In the meantime, we'll keep sending out press releases and keeping you informed about the progress. Thank you.