Capital Limited

Good morning and welcome to the Capital Limited Q1 2026 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. Just simply type in your questions and press send. Before we begin, I would like to submit the following poll. I would now like to hand you over to Chairman Jamie Boynton. Good morning to you.

Good morning and thank you for the introduction and thank you everyone for dialing in today. I've got Ryan Tennis with me on the call and he'll be managing the Q&A session a little later. He's the head of IR based in London. I'm dialing in today from Hong Kong. Obviously the purpose of the call is to run through the first quarter trading update which we released a little over a week ago on the 21st of April and it was a record quarter for the group and we'll spend about 10 to 15 minutes going through the slide deck and then we'll move into a Q&A session. I'll kick off. Just taking you directly to slide three, again, for those of you that are new to Capital on today's call, we have three operating businesses, specifically Capital Drilling, Capital Mining and MSA Labs. The drilling business is the longest established, the original business of Capital from 2005. We operate a fleet of about 137 rigs across Africa, the Middle East and North America. with a full range of drilling services from exploration through to production. Capital mining, a more recent initiative. We started the mining business in 2019. We moved that into a scale operation in 2020. That offers load and haul services predominantly and we're currently operating two contracts, one in Egypt and one in Pakistan. The third operating business is MSA Labs, which operates a network of laboratories across Africa, the Middle East and the Americas, 33 laboratories at last count, a very high growth business. And that business has been with us now for about five or six years as well. Broadly speaking, you're looking at revenue splits between the three operating businesses of about 60% comes from our drilling business, which is quite steady growth. Our mining business represents currently about 20% of our revenue, and MSA Labs is a further 20% of our revenue. Then we also have the investment arm, Capital DI, which has been particularly successful, utilising our distribution network and our network on the ground, particularly in Africa and the Middle East, to identify early stage opportunities. We've had some fantastic success with that business. And then to round out the portfolio, we have Capital Innovation, Capital Innovation is our internal arm that is scoped with identifying, testing and commercialising new technology and bringing it onto our platform. We've had a number of success stories there, most prominent with MSA Labs and the photon assay technology. We're a premium provider to the mining industry. We pride ourselves on our modern fleet, so we're very proud of the investment that we make in our assets, the highest of quality assets. We have a demonstrable track record of renewals. Typically, contract durations for our drilling business, by way of example, range between three and five years. And there are a number of sites where we've now been operating for 20 years plus. We have industry-leading health and safety standards. And this premium offering that we provide to the mining industry is reflected in the client base that we've attracted to our business with some of the biggest gold mining and mining companies in general in the world utilising our services. Map of established operations, the business started life in Africa. has expanded into the Middle East and, in more recent times, into the Americas. I won't speak to all of the numbers, but it's a broad footprint. In terms of revenues, you're talking 80% to 85% coming out of Africa in the Middle East, while America's operation is a lot newer in its growth trajectory. So talking to the revenues, Couple of things to bring out. So we released our first quarter numbers on the 21st, as I said in the introduction. Our headline revenue was $101.7 million, which is up 42% on the first quarter of last year. We had $62.8 million coming from our drilling business, which showed 9% growth. We had $18 million coming out of our mining business, which was off almost negligible base, shall we say, in the first quarter of last year. And our laboratory business generated revenue of $20.9 million, which is up 55% on the first quarter of last year. So across all units, all operating businesses, it was an outstanding performance. Obviously, 2025, the top right chart, just draw your attention to that, was a transition year, impacted by the cessation of two of our mining contracts in the fourth quarter of 2024. Now, we started the first, redeployed that equipment and started the first of our current two mining contracts in the second quarter of last year. So as you can see in the bottom right, as that mining revenue came back into our business, we resumed growth. More recently, we started our second mining contract, the Sakari Gold Mine. It's the second time We've been contracted there. We worked there from January 2021 through to 2024, and now we've just been re-contracted to do another waste-stripping operation. And those two contracts kicking in along with the growth, particularly in the lab business, has driven a record first quarter of revenue for the company. And top right, you can see our revenue guidance. which I'll go into in the outlook statement, but after a flat year of revenue in 2025, we're back on a very strong growth trajectory in 2026. Following on from that is obviously we're getting an inflection in the group's operating margins and an inflection in the group's return on capital. Obviously the mining equipment is a fairly substantive capital base, so to get that back in the field and generating revenue and returns is obviously having a big impact there. But certainly, again, I'll cover more in the outlook statement. We're back on a very positive trajectory and the first quarter was very pleasing for our performance. A little more on the capital DI, which is our mining venture capital fund, where the portfolio as at the 31st of March was down marginally on the 31st of December 2025 impacted as were all equity portfolios by the activities in the Middle East. The portfolio itself has had an outstanding performance. It's generated a cumulative return of over 60% since we commenced its investing activity back in 2019. We've been very successful in identifying through our networks and our operating capability a number of early stage opportunities that are going through the development path with mines to be developed in the future. I think it's actually a pretty outstanding success rate in terms of identifying the right assets that have got the potential to turn into substantive long-life gold mines. A slide on the macro. Obviously, extremely supportive conditions in the markets in which we operate. The principal commodities exposure. for capital is gold followed by copper and obviously I think everyone's acutely aware of what the gold price is and how it's performed over the last 18 months or so. Bottom left is very important for us because there's been an absolute surge in the level of capital markets activity which brings a lot of demand to the service providers. Our capital markets activity tends to be concentrated in the smaller cap of the mid demand profile of the industry, it really drives demand for laboratory services and drilling services in particular. Top right, we've obviously had this slide in our packs before, is talking to the market conditions. And I think the point that we always reference is that if you look back at the last cycle peak, it was 2012, so that's quite a long time between brings, so to speak. It's 14 years now. and we still haven't seen the spending levels get back to those levels, despite gold trading at historic highs, despite capital market activity being at historic highs, particularly on the ASX. So, again, they're highly supportive indicators for the demand profile, and, again, I'll cover in the outlook, but certainly we think we've got a number of very strong years of demand ahead of us. Here we just highlight capital's valuation gap against our peers. We, on a blended basis, we're trading with our investment portfolio about 2.8 times EBITDA, based on consensus for FY26. And you can see that places us at a discount against our drilling peers, our mining peers, and most substantially against our lab peers. The lab companies themselves trade at quite distinctly different margins the drilling peers and mining peers, predominantly because they are lighter, capital lighter businesses. And what was particularly pleasing about our MSA Labs is incredibly strong revenue growth in 2025, which drove the inflection for the business from the investment cycle and loss-making investment cycle into profitability in the second half. And this year, expecting continued growth in that business and continued progress. hopeful that that will start to reflect in our sum of the parts valuation. Guidance and outlook. This is reiterating previous guidance where group revenue of between $410 and $440 million. The first quarter results put us on track with that. The MSA labs we've guided 85 to 95 million, which is up from, I think, about 73 last year, and a capex number of 55 to 65. We have announced a number of multiple significant long-term high-quality contracts, so keeping with the thematic of the business looking for long-term contracts with Tier 1 or Tier 2 plus assets. And we've made announcements across all of our operating including five-year grade control drilling contract at the Kone mine in Ivory Coast with Montage, a laboratory contract also with Montage at the Kone mine in Ivory Coast. We've announced a new lab build at Newfoundland, underpinned by Equinox in Canada, and that has actually now started receiving samples And then on the mining side we announced the contract I previously referenced, a second waste mining contract with Anglo Gold Charity at the Sicari gold mine in Egypt. So we're seeing demand as strong as we have seen it in the past decade. Inquiries across all of our business units. starting to see as a result of that some rate increases coming into the market as what has been a somewhat oversupplied market in the last few years, that demand is really taking up that supply and I think we're moving into a supply-constrained market. And just to remind people, when we raised capital late last year, the premise of that was that we saw a very strong pipeline ahead of us and we saw that this would become a supply-constrained market, and we took action to really give ourselves the capacity to purchase equipment to manage this demand that we've started to actually see come through in our announcements. I just draw your attention to this chart. I find this particularly interesting with reference to the previous cycle boom, which was, as I said, you know, the peak or the, you know, the concluding years of the previous cycle, 2011-12. But you can see the previous peak, the sector that we faced, the mining sector, was still there. It's just the amount of free cash flow, which is unprecedented in this sector. So our clients are experiencing absolute record operating margins, record cash flows, and we are starting to see the impact of that come through significant increases in their budgets, significant increases in tendering activities. As I alluded to earlier, we feel very confident about the outlook for the next few years based on this demand profile. The investment case, it's an integrated business model. We supply the full range of services. So our model is to establish ourselves as the beachhead of an operating mine site and deliver multiple services to that customer. It's a tier one client portfolio. We've got a very strong history of generating above sector returns and margins. And as I showed in that slide earlier, we're moving back into that phase of our growth profile, certainly strategically positioned across the mining cycle with early stage exposure right through to production. And as per the earlier slide, looking at us against our peer significant valuation upside on a peer comp basis. So it's on that basis I'll hand over to Ryan for the Q&A.

Thanks Jamie. We've had a few questions from some viewers. So could you please provide some commentary on the impact of higher fuel prices that we are experiencing?

It's negligible for us. Fuel as a percentage of revenue is less than 1%. In almost The absolute majority, very high majority of our contracts, they are on a basis that the client is paying for the fuel. So we're seeing very little impact on our profitability by fuel. We did see a small increase in our travel costs, as you would expect. There's been a lot of rerouting of travel for our workforce in recent times. So that has seen a small increase, but again, they're pretty insignificant and certainly not impacting the earnings profile. Thanks. Sorry, my computer has just gone a bit funny on me, but hopefully I'm coming back.

We can still hear you, Jamie. Okay, very good.

And then, Jamie, can you please provide some commentary around our operations at Recodec?

Yeah, obviously there's been a lot of press of late around the Barrick's position on repo. We've been operating that mining contract now since the second quarter of last year. We also carry out water bore activities as well as some exploration drilling. We've had no impact on our performance versus our tender and our budget. It is performing in line. well in line with our expectations. We've had, you know, there are security protocols in place that have had minimal, you know, some impact, but insignificant impact to some of the activities. And we did make, post our initial contract award and announcement, we announced a variation where we actually saw an increase in our scope So overall, our contract is looking like, based on what we initially executed, looking to be a bit larger than we initially anticipated. However, that will probably reflect itself, if anything, in an extension or a longer time period as opposed to a larger value on a month-by-month basis. And as I said earlier, the contract is performing in line with our tender and our budget.

Thanks. And then could you please provide some commentary on the impact of capital on the increasing conflict in Mali?

It's very small for us. We only have one residual drilling job, which is actually due to wind down tomorrow, actually. It's on April 30. We've been redeploying assets regionally in the West African region. So in terms of revenue exposure and people and asset exposure, it's very, very low for us. I'm curious if that might explain some of the recent weakness in our share price and perhaps a previous understanding that we had much bigger exposure there. I would also note, you know, look, it's not a positive situation that's unfolding there, but by the same token, you've seen a number of the companies that operate over there, I've noticed, to Barney and Resolute in the last 48 hours making announcements, where their operations have been unimpacted. And I have to say, for the years that we were operating there in a more substantive capacity, we had very little impact on operations. But as I said in the start of the question, very low level of exposure for capital now.

Thanks. And then a question on the investments. So what is the EV-EBITDA when stripping out the investment portfolio? And secondly, is there a plan to hold these investments long term or do you see some realization?

We would plan to – let me answer the second – actually, Ryan, why don't you answer the first one? What is it?

It's 3.7 times.

3.7 times. Thank you. In terms of the strategy around the investments, we're typically earlier stage than most other resource investors and resource funds in particular. by virtue of the network that we've got on the ground, and particularly the geologist network we've got, we have an edge, I would say, in identifying these opportunities early. But in terms of the profile, it's a very concentrated portfolio. So the way we tend to invest is identifying opportunities that we think are interesting, They typically are quite small entry points when we first get exposed. And then as the geology, the results start to come through, we understand the geology better and decide at that point, do we scale up or do we exit? And that's resulted in quite a concentrated portfolio. The book that we have now is dominated by Weir and Asara. In the case of Weir, I mean, it's going through a DFS stage and we will, continue to support the company, that's going to be a very low-cost, long-life mine. In the case of Asara, look, we're optimistic that there's going to be a substantive increase in their resource base, and I think it's got the potential, it's demonstrating the potential that there could be another gold mine there. So at the moment, you know, our policy, our stance at the moment is to hold these positions because we think there's substantial upside in them.

Thanks, Jamie. And that is all the questions we have today. So thank you all for attending.

That's great, Jamie and Ryan. Thank you very much indeed for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide feedback which will help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation and good morning to you all.