Central Asia Metals plc

Hello and welcome to the CAML results call. Please note that this conference is being recorded. I'm going to hand over to the host, Mr. Gavin Ferrer, to begin today's conference. Please go ahead.

Good morning and welcome to the Central Asia Metals plc H1 2026 results presentation. Thank you all for joining and I'm looking forward to presenting what are a solid set of results to you today. I think if we skip through the next four slides, which is basically disclaimer, disclaimer, disclaimer, disclaimer, it's getting bigger and bigger because of the multiple jurisdictions now, but onto an overview of our business as it currently stands today. We have a portfolio of producing base metal assets complemented by some exciting exploration prospects. The producers are the Kunrad project that is in Kazakhstan. and it's been producing copper profitably for us since 2012 and it's licensed out to 2034. We have the Sasa underground lead zinc mine in North Macedonia again owned that since 2017 and has been producing lead and consistently for a fair amount of time with a mine life out to 2034 based on our current reserve statement and adding a small proportion of resources into that life and mine plan. In terms of exploration, As I said, exciting prospects out in Kazakhstan where we have two exploration companies focusing on base metals exploration and targeting high-grade base metals projects that we can afford to build. So we've completed some maiden drilling programs at two of our projects and we've added another important project to that portfolio in Kazakhstan as well. And lastly but not least, Aberdeen Minerals which is a minority position we hold in an exploration company privately held looking for copper and nickel mineralization up in Scotland and most recently we've agreed to invest another 1.15 million pounds into that business to fund another drilling program and that'll take our ownership there up to around 38.9% so a great underlying asset base and today we present a string of solid financials which reflect this solid operational performance in an attractive commodity price environment. So having a look at the financial results on the left-hand side, we produced revenue of $145.5 million versus just under $100 million in the same period last year, with EBITDA correspondingly higher at $75.5 million up from $39.9 million, with a healthy margin of 52%. That has generated cash flow of $46.8 million, and that has driven a dividend that we announced today of 8p, which is right in the middle of our dividend policy range of 30 to 50%, so that 8p represents 40% of that free cash flow. Cash in the bank at the end of the period, $97.2 million, leaves us in a very healthy position in terms of our balance sheet. and moving on to the operations as you can see there we've achieved a slight increase in production in Kazakhstan which has been a really good result given the the weather that we experienced in Q1 up one percent from the previous period and importantly North Macedonia and Sasa we've seen some improvements in product production there we've got an extra five percent of zinc metal and an extra six percent of lead metal as some of the improvement initiatives start kicking in in that operation. Unfortunately, we did suffer two LTIs. We do strive for a zero harm workplace. So the focus for the rest of the year is really getting that number of 1.73 down to our targeted number, but it's looking good so far in terms of that. But as I said, very focused on health and safety there as well. So if we move to the next slide, please. Which is our investment case for camel and I think if anything this investment case has become stronger over the last few months But we'll go through the three elements of it just quickly for you So first of all, we've got cash generation as I said earlier 40 almost 47 million dollars of cash generated which is almost threefold increase a period on period and with 97 and 97.2 million dollars in the bank, you know it is a really healthy position to be in. That cash generation is from the higher margin, current rate of copper production and improving size of performance. Returns, we've demonstrated consistent shareholder returns, returning over $437 million. In fact, our shareholders in cash since our IPO, which is a lot more than we've ever raised from the market, and we will continue with disciplined capital allocation. And importantly, we are now adding some really good growth to our portfolio. As I've mentioned earlier, the advancing exploration portfolio in Kazakhstan, Aberdeen Minerals, and the proposed Signus transaction, which we'll talk about a bit later in the presentation, has the potential to add a near-term producer to our portfolio, plus with significant exploration upside. So at this point, we'll just talk about that capital allocation on the next slide a little bit. And I think what we've got here is the balancing of capital allocation which is reflected in that AP dividend which I spoke about earlier and that we've announced today. That basically provides attractive returns to our shareholders while retaining enough capital and cash on the balance sheet to finance our growth ambitions. So as you can see in these three sort of bullet points here we'll see sort of columns of the slide you know we've we've returned a significant amount of money to our shareholders via the share buybacks and dividends the strong balance sheet supports our growth ambitions we've paid over 208p of cash to our dividends since IPO and now we're going to continue with a balanced approach to capital allocation funding both returns to shareholders growth and continuing with financially strong base on our balance sheet so effectively this allows us to build on the strong foundations that we currently have and set the business up for long-term success so I'll hand over to Louise now who's her and her team have been slaving over the summer to generate the sort of financials that we're presenting today so thanks Louise thank you yeah keep going to the next slide and then next slide yeah perfect thanks

And so if we just start off by looking at some of the macro conditions that are important in understanding the very strong results that we have announced this morning. Obviously, we've had strong production performance in the first half of this year, but I think it's important to acknowledge the commodity prices, which has been very supportive of our financial results today. in particular and we can see in the little table at the bottom we've got a copper price which is 39% higher on average for the third half of this year versus H1 2025 and also the zinc price 26% higher in the first half of this year versus the third half of 2025 also it's worth pointing out silver the silver price has had spikes of up to 115 dollars an ounce in the third half of the year As we've explained before, silver doesn't affect our profitability, but it does affect our revenue and it does affect our cost. So you do see increased revenue and increased cost to sales because of that silver. So that's been very high silver prices during the period, which affect the way the P&L looks. Looking over to the right-hand column, treatment charges. this has been very supportive for us as well during the first half of this year so in total our treatment charges came in at 2.7 million and that's 2.2 million less than they were for the first half of last year and that was very much supported by lead treatment charges actually turning negative in the second half of this year and we have those contracts to remind you from the 1st of April all the way through to the 1st of April 2027 so we've locked in those negative lead treatment charges And then finally, just to look at foreign exchange and inflation, this is a little bit more of a negative story for us, with a weaker US dollar against both of our operating currencies. So US dollar 7% weaker versus the third half of last year for the Dinar and 5% for Kazak Tenge. And that's really... It has the impact of increasing local costs in both of the areas. Inflation, it remained elevated at 11% in Kazakhstan, a little bit lower at 4% in North Macedonia. What I should point out in terms of the zinc and in terms of foreign exchange, we had entered into some hedge contracts. So 50% of the zinc production at Sasa for this year, we've hedged at 3,011. So we've recorded the P&L a loss of around 1.4 million for that. And on foreign exchange, we'd also hedged some of the US dollar euro exposure because the DNR is pegged to the euro. And that's been more or less flat. I think it's a tiny loss of around 0.1 million for that hedge as well for the foreign exchange. Moving on to the next slide, we can talk through the income statement. So I think first to point out, Our revenue is up 46% period on period, and that is from 99.5 million up to 145.5 million. That's driven by the commodity prices being much higher that we've talked about, the copper, the zinc and also the silver of 128% versus the previous period. But it's also due to not just strong production performance, but also higher sales. Interestingly, in H1 2025, we ended that period for copper with a fair bit of copper in stock. So our actual copper sales this year versus the first half of last year are 9% higher as well. And zinc can really just reflect the increased production of the two periods of around about 5% and 4% respectively. And of course, we were also helped on the revenue line with a reduction in treatment charges because that comes off on the revenue line in the P&L. Cost of sales, that was up by about 10 million. You couldn't explain more than all of that with the increased silver purchase price, the 8.8 million that we have to pay to purchase silver to fulfill our contract with OR Royalties. And also there was an increase in our depreciation, which I think was previously flagged. that was from 14 million to 15.9 and that really reflects the sort of mathematically shorter life at Sasa that we're currently envisaging to 2034 and that gets you to effectively an increase of 11 million and there's a big positive in cost of sales there because Kunrad's MET which is the revenue royalty that we pay that reduced from 5 million down to 0.8 million and there was a reduction in the rate by about 90% there so there's a positive for our cost of sales there We did also have cost increases of 2.4 million at the operations, and that was largely related to this week, a US dollar against our operating currencies. And then finally, the last main factor in there is an increase in concession fee at SATA due to the slightly higher production and due to the higher commodity prices as well. Admin, relatively flat there. It's up by 3% or 0.5 million. 0.3 million of that is increased business development costs mainly related to the potential sickness acquisition and there's also there's a few other ups and downs in there because actually UK costs were generally flat we had 0.1 million up in Kazakhstan and then at SASA there was also some elevated admin expenses in large part related to the severance pay that we've paid so taking all that into account EBITDA up by 89% to just under 76 million and a good EBITDA performance at both of the operations as well 78% increase in our EBITDA at Conrad and 62% increase at our EBITDA at Sasa up now to 19.3 million at Sasa So if we look as well at some other aspects to pull out on the P&L, one of the biggest swings there is this fair value movement in share-based payment liability. This is since we accounted for our LTIPS as being cash settled rather than equity settled. So there's a swing of around 9 million there. That reflects the weaker share price performance up until the 30th of June. And so clearly that will move up and down period on period depending on the larger share price factors. Tax. up quite significantly, up by 10.8 million. That's driven by higher profits at Conrad because those are taxed at 20%. And also there's been an increase in Kazakh withholding tax from 10% to 15%. And that's referenced from the 1st of January this year. We did bring all our cash back to the UK in the first half, but we just take half of that 50% of that through the P&L for the first half of this year. And then really just to finally focus on the EPS, which is up by 330% period on period. We've also highlighted there an adjusted EPS. All that does is strips out a 1.5 million unrealized hedge loss, which mathematically is accounted for the hedge loss maybe in the second part of this year. So we've provided the adjusted EPS just so you can see the underlying profitability of the business on that basis. So if we go on to the next slide please and we can look at the costs of both of the operations now and so at Kinrad our costs for the first half were up by 12 cents and that was really based on pretty much consistent cathode production as we say up by one percent. this was over half of that was related to the strengthening of Tenge versus the US dollar and actually if you look at that processing total line where we've gone up from 8.4 million to 9.5 million and over half of that was related to foreign exchange and the rest of the costs are up by about six percent which is less than inflation so all in all a pretty good result there and a couple of other factors just to point out we also see higher payroll there Again, payroll is very much linked to the strength of the 10-day and also to pay rises, inflation-related pay rises, which we gave the workforce in January this year. It's also worth pointing out power costs were slightly lower period on period. That was rather due to a large amount of power used in H1 2025 rather than necessarily a reduction per se in this half. That's just due to some changes in the chemistry. but it's worth pointing out that we know we're going to get a power increase and for seven months this year starting from the 1st of June and that's because the tariff has been increased from round is from six cents per kilowatt hour to seven cents per kilowatt hour so we will see a slightly higher power charge come through in the second half of this year But all in all, I think a good performance in costs given the headwinds from the exchange rates. And we've delivered an EBITDA margin for Conrad of 84%, of course, helped by the strong copper prices for the first half of this year. So if we go on to the next slide and we can look at SASA now. So we're very pleased with the performance of SASA. So site operating costs, More or less flat or up by 2% or $0.4 million. Again, we're dealing with a weaker US dollar there, so stronger operating currencies of 7% and that cost is factoring that in. We can also see the largest increase in costs that you can see in the processing line. and a million of that increase is due to our tailings disposal costs where was purposefully prioritized putting our tailings in the paved backfill underground and on the dry stack tailings as well to maintain the capacity in TSF4 so that's the main factor but actually our mining costs have been very encouraging that's an area where we've had a lot of emphasis on our improvements So all in all, our mining costs are lower by 0.7 million. There's actually an increase there in fuel, which is just to do with some of the conflicts that we see in the world. And actually, so taking that out of our savings would have looked would have looked even higher. Reduced spare parts and payroll savings as well were two key factors from the headcount reductions which we pushed through in November and also some additional ones in the first quarter of this year as well. Electricity costs remain stable because we hedged the electricity price for H1, so they remain stable versus H1 2025. All that's very positive on the site-based costs and encouragingly our C1 cost base is actually lower period on period. That's fallen from 32.1 million down to 30.8 million and that's really helped by those lower treatment charges that I mentioned and so that brings the overall package of realisation costs down from 6.4 to 4.7. And we've got an EBITDA margin now back into the 30%, which we're very encouraged about. We move on to the next slide. and just a quick look at our capex which is very much on track so group capex for the first half at 9.5 million staff the capex of that was 8 million underground development underground equipment and also the raised boring project there was 1.4 million of that and that project concluded in July this year at Kunraz we spent 1.4 million which is the usual drip of pipes Some new anodes and also 0.2 million on replacement boilers as well. And then we reiterate our guidance from 14.5 million to 17.5 million for the two operations for the full year 2026. Exploration-wise, it's worth pointing out we spent $1.6 million at Kamalex and Kamalex-D. We've done maiden drilling programs at two of those sites, and we've done some geophysics at the third site as well. We still intend to do some more drilling as the year progresses there, and we should still spend between $3 and $3.5 million in Kazakhstan as well. We turn to the next slide, please, and we can look at the balance sheet. So PPE, what we see there, the difference there reflects depreciation plus capex and a little bit of adverse foreign exchange movements in the difference between the £239 and the £226 million on the balance sheet. Investment in Associates, that's our holding in Aberdeen Minerals. We have, since the period end, we've agreed to invest in The final £1.15 million or just under $1.6 million to take our percentage ownership up to 39, just under 39%. So the 1.2 million of warrants mentioned there is what we exercised in January. So the second half will see the last portion of those warrants exercised. inventory we were very pleased to see that that's decreased by three million that reflects a lot of effort that we've put in at Sasa in a program to reduce our inventory which is actually reduced from around about this time last year to here by almost five million and we see three million of that reflected in these in these results so that's very pleasing to see other factors points out there is as we announced we completed share premium cancellation in April this year and that really transfers from the share premium account 206 million into our distributable reserves into retained earnings sorry to create distributable reserves primarily for future dividends so that sees that bigger swing on the balance sheet there and then finally just to say that we've got a really strong balance sheet ended 30th of june with 97 million dollars of cash we also have 0.4 million of restricted cash and the 97 million does include a 0.9 million overdraft but that's all the borrowings that we have and then Final slide for me, if we move to the next one, thank you. And we can look at the H1 2026 free cash flow. So if we go across the waterfall chart, we've got cash generated from operations of 71 million, the 17.3 million of dividends, that was the 2025 final dividend of 7.5p. income tax and withholding tax at 19.8 and that's less cash tax than we see on the P&L that's because particularly Kazakhstan you pay your tax based on last year's profits and so there'll be a catch-up that we'll have to do in paying some more tax from August to December this year we've put that plan in place But that does, that 19.8 million does include the full amount of the withholding tax of around 10 million that we paid when bringing our dividends back to the UK, all of them in the first half of this year. CapEx exploration as a big investment, we've already talked about. The share buyback of 4.8 million. We completed a 10 million share buyback, half of which was in the second half of last year. And the 4.8 million was completed by March this year. So that was the final portion of that 10 million that we committed to buy back. And so we ended the period with the 97 million of cash that I mentioned, excluding the 0.4 million restricted cash, but including the 0.9 million overdraft. When we look at our free cash flow and our adjusted free cash flow, which informs the dividend calculation, we have added back on half of that withholding tax just to spread that evenly over the two six-month periods. So that gives us adjusted free cash flow for the six months of 46.8 million, and that's an 189% increase versus the 16.2 million that we generated in the first half of 2025. So I'll hand back to Gavin to come through the operations.