Akobo Minerals Ab

Good morning and welcome to Ecobo Minerals Q2 presentation. For those still with us, I'm truly sorry for the delay. I just arrived from an overnight trip from Addis and of course today there were technical issues and delays both here on the train and on the plane and everything. We're here now and I will take you through the latest developments in ACOBO Minerals. I will not focus that much on Q2 since we've kept you more or less updated every month since that period. We will talk about the latest developments. And I can say that my last trip now, the two weeks I spent in Addis, I'm seeing a great positive movement and development. The team is working hard. They're doing the right things. We have great support from the Sutton team that is managing our mining operations. We're getting great support from Monetary Metals, our lenders. We are getting great support from the government and from stakeholders and shareholders. So very happy to present the latest news. It's looking better than ever and the plan is sound and we are executing on the plan. So we'll move Forward, as always at Kobo Minerals, we are an Ethiopian gold producer, not only exploring anymore, but a producer of gold. We've been in Ethiopia for 15 years, we've done it the right way, and now we're ready to move forward with the mine operating and generating gold and cash. And we will then now start to look more towards the future and the next phase of the company. So looking at the latest key events. First of all, we produced 45 kilos at the end of August. For those waiting for the September report, we are preparing for smelting and processing these days. So we will probably have that result ready in one to two weeks and it's looking good. We are expecting our third quarter to be the first quarter where we actually make a profit on the operations. We will deliver positive cash flow. That will be a big milestone for the company after 15 years of what I would say hard work. Just some of the key points here. We managed eight kilos in July, seven in August, totaling 15 so far in Q3. Even achieved 45 gram per ton in average grade in July and hitting a purity way above 90%. This is pretty amazing. And as you can see, the all-time average is hovering around 20 gram per ton, which fits well with the overall grade of the resource. The gold price remains strong. I think today, also yesterday, it passed $3,800 per ounce. That will have a huge positive benefit for the Segera deposit going forward and the cash flow. Will it continue? Who knows? All indications say so, but we will see. Any kind of increase in the gold price will merely be pure margin for the company, except for some royalties and taxes along the way. A very important milestone for us, of course, EIH, the Ethiopian Investment Sovereign Fund, became a shareholder in the Kobo Minerals. investing three million dollars. We'll have a more detailed look at that later. We also concluded our financial restructuring with monetary metals and we also now converted the two remaining convertible bonds we had towards existing shareholders. A very important appointment for us, Johnny from Sutton. He is now our new operation manager. He is one of the best you can get. He can get gold out of anything and we're seeing major improvements already after he arrived at site. So again, the team is working very well these days. And most importantly, maybe right now, is the fabrication of the vertical shaft gear, the headgear. It has started. It's on track. And also a very important point, it's the end of the rainy season. We managed well through the season this year. It's hard work. And I must say the team has really stepped up and done a great job. So let's move to the most important project we do have right now, which is development of the new shaft that will take the company to the next level. We will increase our revenues significantly once that shaft is up and running. And as you can see here from a few pictures that we just took recently visiting the GoMine site where they are fabricating everything, it's in process, it's in good process. We're planning the logistics already. We're going to fabricate it at the GoMind site. Then it will be assembled and it will be disassembled and then packed into two containers. So just to give you an idea of the complexity here. doing the mine and the processing plant, we imported more than 60 containers for that. So this is nowhere as complicated as what we've done previously. I'm not going to say it's straightforward, but this is a much smaller project and we have a very good follow up from our local team and from the Sutton team. So I'm quite sure this will be delivered on time. We're planning to ship this from Djibouti, Durban to Djibouti, and we do expect arrival before the end of the year. And again, it's a close follow-up from our team in South Africa, from Sutton, and as you can see, it's all in progress now. Just to give you an idea of what the headgear looks like, This will sit on top of the sink shaft, the vertical shaft. And you will have, it looks like a, well, something you can jump off from but this will be on the ground and it will be connected to a big winch that will pull the elevator coach up and down that you see in the middle and you see a bit more close up of also how the elevator in itself will look and you can see the rails there That's for the cocoa pans that will go into the mine or into the ore body and we will have a much more efficient way of taking out considerable tonnage in a very safe manner. So this is all progressing well. And then the other part of this is actually making the incline shaft. Oops, it's not an incline, it's a vertical shaft. So a small misunderstanding there. It's vertical, that will go straight down. You can see some pictures from another project. This is more or less the same that we will do. And we already started the site preparation. It's with heavy machinery being mobilized on that site. You need to flatten the area and then start the civil works for the headgear and the shaft. So that's secure and will carry all the load that will go up and down. So a solid amount of rebar and cement is now in progress of being bought and shipped to site and also the blasting then after that, after the construction is ready on top, we will remove the first 12 meters of overburden and then the next stage will blast down to 60 meters first and then extending down to 100 meters later or deeper if necessary. And from that point we will consider putting down the small drill rigs for continued exploration from the bottom of this vertical shaft. And again this shaft will give us access to the whole ore body in a very efficient way and can produce a considerable amount of tonnage. Again, it's not an incline, it's a vertical shaft. You can see here how it will look. And just to give you an illustration of the amount of rebars and how this will look, it's a lot of steel and cement that will go into the top part before you reach the solid rock deeper. So this is mainly from the top where you have the overburden. But once you hit competent and solid rock, it will not be this kind of structure. Let's look at some of the production and sales development we've had and also how we are getting paid. So you can see the development here. We had a very good Q4. Actually, it was a remarkable good. We hit a very gold rich pocket at that point much earlier than we expected and probably also outside of the resource model. Then we had some issues in the Q1 and beginning of Q2, but we saw that from May and June things started to pick up and really become efficient. And if you look at Q3 here as an estimate, we're estimating at least 20 tons, 20 kilos to be produced. And that's based on us reaching a minimum target of five kilos now in September. We do hope slash believe that that is possible to get more than that five kilos also. We will see in the next couple of weeks. That will also drive our gold sales for the third quarter to the highest ever. Of course, it's affected by both the increase in volume and the increase in gold price. So if you look at the right hand side here, you will see what you can find on the web page of the National Bank in Ethiopia. This is being updated every day. This is what you'll get paid if you deliver gold to the National Bank of Ethiopia. They are pretty competitive. They do give you more or less the spot price that is in dollars, but paid in BIR, local currency. So far we've delivered everything to the national bank. We are getting local currency, BIR, paid and that's fine so far. We do have a lot of expenses in local currency and we also now have the opportunity, which was very difficult before, to actually convert local BIR into dollars and pay suppliers out of the country. So it's really a big big improvement in the foreign currency situation in Ethiopia these days. But you can see here, when you read about the all-time high, $3,800 per ounce, that's based on the gold spot price on the LBMA Good Delivery Standard, which has a minimum of 99.5% purity. We are, of course, not delivering DORE bars from site at that kind of purity. That's what you get after shipping it to a refinery such as MKS PAMP in Switzerland. What we are getting out of the DORE bars and the smelting at site has been more in the range of 80 to plus 90% purity. We are working now every day to improve that purity and get better payments from what we deliver. Important to note here that once you deliver or if you deliver more than 10 kilos at a time, you will also get a 15% premium. So we are trying to now plan for selling in batches of more than 10 kilos every time so we get that 15% extra. That is also why there is not always a correlation, exact correlation between what is produced and what is sold on the monthly or quarterly basis. And here you see where you can find the daily rates if you want to have a look and see what's being offered every day. Also to illustrate the gold loan versus the free cash flow from the mine. I've had a few questions and most people think that the increase in the dollar or the gold price really gives us a very very expensive and large gold loan in dollars. Which is true, it increases with the value of the gold. So you can see here in the beginning I think we actually took the loan at 1750 USD per ounce and I've just given an illustration from 2000 dollars up to 5000 dollars here. The good thing is that this is a natural hedge between the resource and the gold loan. If the gold loan increases in value, the value of the deposit and the cash flow from the deposit increases much, much more. So it's a natural hedge. It's the way it's planned. And you can see here, there is no reason to fear the increase in gold price On the opposite, the higher, the better. So this is just an illustration with rough estimates. It's not directly related to the Segelle deposit, but it will give you an idea. So I've said that here, the gold loan around 10,000 ounces. Let's say we produce 60,000 ounces and estimating a total cash cost or a total cost of operations at $1,500 per ounce. And you can see here that the higher gold price, the better for the project. Let's just go through the latest financial restructuring that we've done. EIH, of course, historic milestone for Ethiopia and for ACOBO. The first international investment, I think, in 100 years out of Ethiopia. And I'm proud on behalf of the team and myself that Ethiopia actually decided to invest in our company. It's a private placement, $3 million. Everything goes into the company. They were issued 15 million shares at 0.2 US dollars per share. They ended up then with an ownership of close to 7.4% before we converted the loans. And after the conversion, they will have an ownership of 6.5%. Also very important for us was the restructuring of the monetary metals loan. They're definitely a very strong partner for us, not only in this funding here, but on the operations side, stakeholder engagement. They have a huge network and they're supporting us in every way they can. They are really a good partner to work with. And you can see here, we managed to get the interest down from 30 to 22. It's still a good sizeable interest, but it's manageable and it's all now part of the new shaft and the cash flow from that. So it's all been modeled together to see that this goes through. We now for the current period, we have an interest free period from August to February next year. Then we will start repayments. We have a repayment scheme that starts slowly and then ramps up later so that we will have the most possible flexibility in the beginning when we ramp up and start the vertical shaft. We do not want that to create any issues in the beginning. They got some more warrants. They previously had 2%. That was increased to 3%. And the strike of that warrant is the same as the price in the private placement against EIH. So 0.2 USD. And you can see here the loan can increase to maximum of 10,490 ounces before default. We will not get close to that. We will probably peak around 9,500. And then with the repayment from March next year, then it will start going down. Also from our supporting long-term shareholders, we have now converted the two loans they've granted us previously. You can see some of the details here and the number of new shares from that and also the total number of new shares in the company after both the EIH transaction and the conversion of the loans. So do we now continue to search for money? Do we want to raise more? What's the cash situation? Well, the company is in a good situation these days with the current cash flow coming out, the strong gold price. We're in a very good situation with the money we raised from EIH. We will be able to deliver on the gold and on the vertical shaft and continue our operations. Of course, some of my job is to continue focusing on improving our capital structure and getting flexibility. We will see if things can happen going forward. There is nothing really in process these days, but that's always something we will work on to see if we can improve the way our capital base is structured. Looking at the current mining operations, we are really doing consistent mining these days. Very happy to see that. We are blasting consistently and we are really doing good on the mining side. The tonnage is coming up. And right now we're actually focusing on blending the high grade and the low grade. It is better for the processing plant to keep a consistent grade instead of very high, very low or medium. So part of the job now is to stockpile and to start blending. Just to give you an illustration of where we're working right now in the mine, on the right hand side you can see the different blocks and the areas we're working in. And of course it ranges as you can see from the yellow parts here 0.94 up to some 360 closer to the left hand side. So that's of course extremely rich. So all of this needs blending to end around the 20 gram per ton, which is what we're aiming at. We're also developing new underground areas all the time and especially the eastern winds. We will extend that to access deeper ore and again increasing the possibility to blend and get a more consistent grade out of the plant, which is the best for the plant. If you look at the processing plant status, you have here a picture of the new shaking table. This is just a test and you can really see the gold here, this nice color coming out and it tells us that it's working and it's processing a very good grade. We've done a lot of cleanup now with Johnny coming to site. We found a lot of gold sitting in the plant that's been recovering now and it will be part of the smelting for September. We converted everything to pure gravity so no more chemicals in use. Again, we have then two new shaking tables. This is one, and there's one just beside it. They will be able to accommodate all the tonnage coming out from the new shaft. And that's what we'll focus on in the beginning. And at some point later, we will evaluate if we want to start the CIL part of the plant or not. That's still to be decided. They're also optimizing their smelting techniques so that we consistently get high-grade door bars that we can deliver to the national bank. And as I said earlier, the September batch is now being processed and smelting is planned over the next couple of weeks. We expect or target at least five kilos and we'll see how much more, if more, we can get out of it. ESG, health and safety, a big part of our focus. You can see here some training on life support. We're also doing normal things every day, checking the waste waters, checking noise in the air, being compliant. We have a good relationship with the Ethiopian environmental agency and they've done an audit they had some minor corrective actions they've been implemented and it's all looking good health and safety also very important we have our own clinic and we now have Leon a senior paramedic at site from Sutton who is really making big changes to the way we focus on health and safety with training, PPE compliance and also you can see here we're preparing a civil unrest plan. Even though the area is very quiet, we are preparing and we are not naive in that way. Gold has a tendency to attract people. On the exploration side, this is really Yeah, it's close to my heart. This is where we started and this is really where the upside lies going forward. The Segella mine is now running, is producing, is generating cash and it will continue to do it at an even higher level once the shaft is up and running. And we will now again refocused back on the exploration. A lot of work has been done by the team. They have focused on more mapping, doing magnetic surveying, soil sampling, trenching and rock samples. You can see here some of the work. We've also renewed our explorations license with the Ministry of Mines. But maybe the most important thing is the first point here. During all of this work, we have seen gold observed in the surface quartz vein system. And we've seen also this going all the way down to the northern part of Gjoru. This, again, verifies a lot of the ideas and the ambitions we've had. It's not to say that this is a big economic viable deposit, but it gives us really strong indication that this now needs to be checked out further. So this will be very important work for us going forward. I will get back to that a bit later. actually here. So the focus going forward now is just to keep track on the vertical shaft development, make sure nothing slips and get that going. We are in good progress there. We need to ensure the consistent mining. That's what will keep the basis now for our cash flow and make sure we keep the cash we have and maybe also increase it. Again, optimizing recovery and gold purity is very, very important so we don't miss out on what we're taking out of the mine. And we will expand the mine to new areas. On the exploration side, we will continue exploring with trenching and sampling and surface mapping. We are now going to recruit a new national exploration manager so that we can strengthen the technical capability of the team. But not only that, but also for us to understand what the national community is more looking for so we can be more savvy and more straight on the target of where to find the next interesting plot to start drilling or start working on. So in that regard, we need to refine the exploration strategy, and we really need to work on the project development phase. There are three areas, or four areas, we would like to then look at. One is, of course, around existing Segele, where we still believe there will be more to be found. The next one is to work on the strike that you saw in the other picture, going across the whole license area. Then, as you can see here on the corporate and financial part, we want to secure the GLO license that's been pending now for more than a year. We are now in good dialogue with Minister of Mines to get that awarded. And with those three in place, we have really a good setup to build a strong funnel going forward. But that needs also good planning and good project execution. And it does not necessarily mean that we will start drilling immediately. It probably means that we will start with some more high-level mapping to understand the wider area better. And then from there, going down more into the details. And finally, once you really define the target, you will start drilling. Looking at the corporate side, we are now working to open an offshore bank account that will facilitate international payments. I'm very happy to see and report that the Ethiopian government and the national bank, they are now really delivering on all their promises. This is not an easy task to do. We might be one of the first companies to actually open an offshore account in Ethiopia and it's work in progress as we speak. So that will really help on facilitating all international transactions. Again, securing this GLO exploration license is important for us and we're also now working to close the export permit so that we'll have that in place once the shaft is up and running. So all of these items here I believe we will sort out very soon and it will really have a big effect on the company, not only on the way we're working every day, but also as a way of showing to the world that Ethiopia is serious about supporting their mining industry. And as you can see, and as I talked about, we're trying to strengthen our financial position by running a cash flow positive operation. So main focus going forward. What does that mean? Well, we'll continue stable and now a very risk reduced operation. We will advance the vertical shaft and we will unlock value from both existing and new exploration areas. Financial performance overview. We're improving now quarter by quarter. Third quarter will be even better. We'll see a first profitable or at least a positive EBITDA. So it's definitely going in the right direction. And the equity debt development is what it is. That will improve as the cash flow improves. So I would say we're at the turning point now and up until the end of the year. That has really not any effect on us as a company. We are going concern and we are paying all our invoices and more. We are treating everything in a manner that we pay our royalties, we pay our taxes, we pay our suppliers and that's important for us as a company doing mining. Not much change in the corporate structure except that you can see here on the top shareholder list that we have welcome the Ethiopian Investment Holding. They're now on the third place here with the 7.38%. They will, as I said, go down to 6.8, no 6.5. And then there will be some changes in all the others here when the convertible loan shares are issued. That's happening more or less as we speak. Apart from that, nothing has changed on the corporate structure. And on the left-hand side bottom, you can see that the company had 9,240 ounces in gold loan from monetary metals. We expect that to increase to around 9,500 before the repayment then starts hitting in. I think I will leave this for now. Reach out if you want to have a discussion on the more detailed part of the financial statements. Looks like we're now on the Q&A session. I have received some questions by email. I will then have to put on my glasses to read. So what forms the decision for where to drill samples in new areas? So going back to what I just said, we now need to get a new exploration manager with international experience who can go through all the documents, all the data, and really make a new plan based on the more modern way of developing the exploration work. I'm looking forward to that. It will really be important for us to start that. Again, the several exploration areas, they show very promising results. If production from these discoveries starts up, will tonnage be transferred to the main plant with trucks or will it require a new plant? Well, this is not a very big license. You can drive two hours across. At least we expect that the closest part, a ginger bill on that area, will definitely easily be sent through the existing plant. There is no need to build a new plant. However, if we should, which we hope, discover a million ounce deposit here or more, and it's a lower grade deposit, it will require a very different kind of plant. But I can say if we reach that, we have done what we need to do and we will be able to take that also to the next level. So that's really the ambition we have right now. Any incoming interest from bigger gold producer majors? It's still early days. I'm saying these days that we now need to prove the new shaft, get up to the next level. We'll produce up to 50 kilos a month and then that will really change the whole industry. the whole view on the company, not only from us internally, but also externally. So by the end of the year, we will have a lot better visibility on that side. It's really not something we're focusing on right now. We're focusing on really getting the cash flow up and continue consistent mining and delivering on the shaft. Beyond the US, 3 million in capital from EIH. What more do they provide as a partnership? Well, first of all, they're a shareholder like every other shareholder in Akobo Minerals. That's important to note. Secondly, of course, they're the sovereign fund of Ethiopia. They have... big political capital. We will not abuse that in any way. If we need some kind of help and support that we feel they can give, we will ask for it. But we would also like to continue developing this on our own, knowing that we have a strong partner. So one thing I can mention is that we are working on establishing a project together, looking at this aggregator model that I have talked about before. That would be a great thing to do together with them. They have experience working on aggregated models within the coffee sector, within the flower sector. So they can bring a lot of knowledge into that project and how we can get all the local artisanal miners to deliver gold to our plants, making it better for everyone. So that's probably where we will start with a more closer partnership working together. And when can we expect some sort of resource update? Again, going back, we need to refine our structure on the development side, on the exploration side. And once we have that strategy in place, it will be easier to answer that kind of question. But if we do this the right way and really narrow ourselves down to a few targets, I think this can be done in a Yeah, maybe by the mid next year, if we can get the project up and running now. There is some worry about delays in the vertical shaft, given the history. As I said on the first page, this is not comparable to what we've done so far. We're getting two containers in, we're getting a vertical our sink shaft team in from Zimbabwe who do this every day. So I'm quite sure that we will have a very different control on this project going forward. We're also, as I said, done with the rainy season for this year. Yeah, there are some questions here how we are going to treat potential cash surplus going forward once we have repaid the debt to Monetary Metals. That's a bit too early to say. We will of course reinvest some. I'm sure there will be some dividends, but that's for the shareholders and the board to decide upon when that time comes. Yeah. So I think that's it for today. No more questions. Feel free to reach out if you have anything you would like to discuss or ask about. Closing remark, it's never been this good. It's looking better than ever. I think we will now continue to improve, continue to deliver and move into the next phase of this company. So thank you for listening and We'll see you soon.