ACG Acquisition H1 2025 Earnings Call Transcript

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Provided by Quartr
September 16, 2025

Key Takeaways

  • Positive Sentiment: ACG has fully financed its £200 million sulphide expansion with a bond issuance, remains on time and budget, and expects to ramp up to 20–25 kt of copper-equivalent output annually, boosting average EBITDA to around £115 million.
  • Positive Sentiment: In H1, the mine produced 22,000 ounces of gold, achieved a 13 percent reduction in AISC to first-quartile costs, and maintains guidance of 36,000–38,000 ounces for the full year amid strong gold prices.
  • Positive Sentiment: With £160 million in cash, net debt of £46 million and trading at just 3× free cash flow versus peers at 8× (and at half NAV), the company highlights significant upside from its current valuation discount.
  • Neutral Sentiment: ACG has recorded zero lost-time incidents over the past 800 days, underscoring a robust safety record as operations scale up.
  • Neutral Sentiment: The company is in multiple early-stage M&A discussions across the Thasian, Central Asian, African and South American copper belts to add satellite oxide and sulphide assets, though no deals are finalized.
AI Generated. May Contain Errors.
Earnings Conference Call
ACG Acquisition H1 2025
00:00 / 00:00

There are 3 speakers on the call.

Operator

Good afternoon and welcome to the ACG Metals Limited interim results investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and they can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses when it is appropriate to do so. Before we begin, I would like to submit the following poll. I would now like to hand you over to the management team of ACG Metals Limited, Artem Volynets and Patrick Henze. Good afternoon.

Speaker 2

Thank you so much and welcome everyone. I appreciate you taking time to listen to us. Today, it's Patrick and I presenting. I'm Artem, I'm Founder and CEO of ACG Metals Limited, and Patrick is Chief Financial Officer. Happy to give you more background on ourselves, but the purpose of this call is to talk about our H1 performance. Just to remind everyone what ACG Metals Limited is, it's a company which essentially is just a year and two weeks old. Over that time, we have grown to a stable cash producer with a healthy balance sheet, a net debt of £46 million, £160 million cash on balance, halfway through transitioning from production of gold to production of copper. Last year, $90 million in free cash flow. This year, between £65 million and £75 million, according to our guidance of 36,000 to 38,000 ounces of production.

Speaker 2

Once we complete our sulphide expansion, we shall be producing around 20,000 to 25,000 tonnes of copper equivalent per year. Our key asset, a starter asset, is a high-grade, low-cost open-pit polymetallic mine in Turkey, currently producing gold with a first quartile cost positioning, moving into production of copper, which will improve our EBITDA to about £115 million on average at consensus pricing. Gediktepe, our asset on the western side of Turkey, is a very high-grade mine, as you can see here, and that certainly helps with the cost management, but it's also open pit. We have an excellent operating team on site, which have managed to reduce costs in the first half of this year, as Patrick will explain. Given our cost positioning, production of gold, moving into production of copper, we are very highly cash generative.

Speaker 2

Even after the recent share run, we're still trading at a significant discount to peers when it comes to the cash flow multiples. Essentially, we are producing more cash per as it relates to the market cap than any other copper company listed on the London Stock Exchange. There is still a very significant upside from our current levels. As I said, yes, we had a good share run as we have started to introduce this story to a broader group of investors over the last three months. An upside from these levels is still very significant. We're trading below three times free cash flow. The peers in our group are trading at eight. We are trading at half price to NAV. The multiple is more attributable to a developer. We are actually generating revenues and cash now.

Speaker 2

As we re-rate to peers, as further liquidity comes into shares, we shall see that gap closed in the coming months. From the operational standpoint, what is most important to me personally is the fact that we haven't had any accidents over the last 800 days. We are LTI-free, which is a very, very good achievement on the team on the site and a demonstration of the strong policies that we set at the asset. I'll pass over to Patrick to talk about the operational financial achievements of the first half of this year.

Speaker 1

Thanks, Artem. Yeah, I can just repeat what Artem said, but I think we're really, really proud of the LTI-free days. Since the mine inception, there was no LTI, and it's continuing despite a lot more workers on the construction site being on site. We have about 250 to 270 on our existing site, plus about 400 construction workers now, and there's still zero LTI. On the gold production in the first half, from the ops results, you've seen it. We produced about 22,000 ounces of gold. We had obviously a very strong gold price environment already in the first half year with a real-ass price of close to $3,000 and silver at $32. Most importantly, we really were able to reduce the cost, especially also the AISC versus the inflationary environment that you see in Turkey. That's a big achievement by the team.

Speaker 1

When we look at the stats, and that's just a hint to the comparison versus last year, I think we're up on the production side. We're up on the gold price. Obviously, the market helped. If you look at the buys, we are guiding to 36,000 to 38,000 ounces for the full year. We have a bit to go, but we already delivered more than expected in the first half. Obviously, the current gold price is significantly higher than the real-ass price we had in the first half as well. On the cost side, the significant improvements we talked about already. Looking at the sulphide expansion, obviously the most important project for us at the moment, as you know, we've fully financed that already in January.

Speaker 1

The $200 million bond that we raised covers this project, the old financing that we refinanced, plus a buffer, and everything is going to budget and to plan. You see some pictures here from the site works. First concrete pour happened. First steel works are already in progress. We even had the first equipment pieces already sent to site. Basically, Q3 and Q4 will be mainly dictated by getting the equipment on site and starting the assembly. Coming to the financials, we're looking at the income statement of the first half that we just published on Monday, yesterday. You see the revenues of $70 million versus cost of sales, etc., coming to an EBITDA of $36 million, which is a pretty healthy margin for the whole group. That's obviously including all corporate DNA, etc. Then a profit after tax of $16 million.

Speaker 1

That's a very good achievement versus where we were half a year and a year ago. At the balance sheet, it's a really healthy balance sheet. We have total assets of $396 million, just below $400 million. Total equity of more than $90 million already now. Obviously, the bond plus the coupon that we were paying only after the half-year results, that's still included here. It has been paid in July, as we announced to the market. Overall, the net debt ratio to the EBITDA, as well as to our cash flows, is really healthy. It's just getting a bit healthier because we are benefiting from the increased gold prices now on the market as well. Looking at the cash flow statement, you know, we started in 2024 with a $10 million balance on our balance sheet.

Speaker 1

We raised a $200 million bond, but also we really delivered some operating cash flow from the site, from the ops side. We were able to repay the heritage loans from the sponsors, but also from the acquisition. We were able to invest more than $30 million already in the project. That's been really tightly managed by our project director on site. We see that a lot of the CapEx spend will come in the second half of the year, but it's been really on progress. When equipment pieces get delivered, etc., when the final tick-the-boxes happen, there will be the final payments. We're keeping it really tight until we pay the contractors for really delivery and performance. Ultimately, we had $160 million in cash still on the balance sheet for June 30.

Speaker 1

That's providing us with a significant buffer to finalize the construction and be ready for the next stage of this project, transitioning to copper. Looking at the cash cost curve, we noted that we were a 13% reduction on the AISC. That actually puts us right now on the global gold cost curve in the first quartile, really well within the first quartile, meaning that a lot of other projects would run out of business before it would affect us. We're well positioned here. When we look at 2027, that's the first full year of copper and zinc concentrate production. Even there, we will be a first quartile asset, again providing us for a very significant benefit versus our competitors. In the team, we did this analysis just looking at all industries, given we get a lot of interest from generalist investors.

Speaker 1

If you look at other industries, you'll see that the EBITDA margins are significantly less than in the mining sector, in the gold mining sector, but also ACG, given its low cost in Turkey, plus obviously the market environment we faced in the last year, we see a really excessive EBITDA margin versus others on site level. The PE mismatch is still there despite our recent share run. We are still trading at four times PE, which is significantly below the other industry standards, as well as our own industry on average. Artem?

Speaker 2

On a strategy, it's all very simple. Find a good asset, do a good deal, raise funding, invest and improve as we're currently doing with Gediktepe, repay debt if any taken, and repeat the cycle, returning excess cash to the shareholders. It sounds simple. In reality, it's all about execution, and we have the team now to execute. The Gediktepe asset is on time, on budget for the gold to copper transition. Remind you, even if you're going to produce copper and zinc concentrate, we'll still be producing about 15,000 to 20,000 ounces of gold in the copper concentrate. We'll continue to be a copper-gold producer, essentially.

Speaker 2

As we look forward, we are looking to add other assets to our portfolio in active M&A discussions on a number of targets across the Thasian copper belt, but also we have the opportunities in Central Asia, African copper belt, and South American copper belt. In M&A, nothing is done until it's done. I will prefer to discuss M&A when we announce a specific transaction. My own personal experience on that is very simple. You need to work on three to five to get one done. Given the fact that we're working on about 10, we have confidence that some of them will come across the finish line. Thank you very much. I think we're pretty clear on our vision to build a much bigger company. First, we'll come re-rating of the current business, and then we'll have value creation from the next acquisition.

Speaker 2

Let me pause here and go to the questions. Unless, Patrick, you want to add anything?

Speaker 1

No, no, thanks.

Speaker 2

All right. First question, has any progress made with finding a technical solution for the treatment of the intermediate ore? Yes, thank you very much. That's our top priority. We are essentially mining an old prehistoric volcano where the top layer has been oxidized, and it's easy to process through the existing heap leach facility. The main body of the deposit is sulphide, and you need the flotation process to extract copper concentrate and zinc concentrate, and that we are currently building. In between the oxide and sulphide, there is an intermediate enriched ore, which is currently treated as waste, and we will have $4 million of that waste mined out and stored on our site when we start production from the sulphide. We have been working with our team to develop a technical solution to process this high-grade waste.

Speaker 2

It has the same copper, gold, zinc, and silver metals as the rest of the ore body. We are finalizing our technical solution. We know what it is. We're just doing optimization, you know, for how many years we can process it, what's per year, what the CapEx required, which will be pretty small, what the operating costs are, etc. We're not there yet to make an announcement, but we're making very good progress on this front. I'll read the next question. With copper at the growth priority, can you comment on expected cash costs and margins for copper-zinc concentrate versus current gold-silver operation, and what are the means for EBITDA margin post 2026? Patrick, perhaps that's for you.

Speaker 1

Yeah, sure. Thanks for the question. I think, you know, obviously we've shown the AISC for the copper phase going forward, and maybe some of you may recall the one presentation we've done and published pre-our one raise. What we see is actually not a big deviation from the EBITDA margin. It may be slightly lower because in the copper and the zinc concentrates, you have a couple of more costs of sales, including the TCRCs, etc. Most important is what happens to the free cash flow margin. I think it's pretty interesting if we have a $1.90 per pound all-in sustaining costs on the copper-zinc sulphide production, basically. Currently, we are seeing copper prices at $4.50 or higher even now. It obviously shows that we have a very strong free cash flow margin post that expansion. We are well positioned on the cost curve.

Speaker 1

You know, in Turkey, we see that the depreciating lira has a benefit to us. We're having revenues in dollar. We're having costs in Turkish lira. The inflation is in the big cities, but not really in the rural vicinities where we operate. Hence, we actually see that is another benefit of operating in Turkey and actually keeping our margin stable. We see really positive development for the margins and in actual numbers, as you've seen in the presentation, it's more than $100 million in free cash flow.

Speaker 2

Yeah, thanks, Patrick. I would remind everyone that $100 million free cash flow is average for the life of mine based on consensus pricing, which is as low as today's spot price. On spot, it's likely to be higher by whatever, 10%, 15%, maybe more. Plus, it doesn't include any further improvements that include the treatment of the enriched ore that we discussed. I see a question here. How about your thinking about further operational improvements at Gediktepe beyond sulphide expansion? Number one, obviously, completing sulphide expansion on time and on budget, as we're currently doing. Then fine-tuning it after we start full commercial production to optimize the recoveries, etc. We have the team right for this task. Once you have started the operation, the next task will be to optimize it, continue to reduce costs and improve recoveries, get the optimal ore mix, etc., etc.

Speaker 2

Number two, as I have mentioned already, it's a processing of the enriched ore, which is currently treated as waste, which means $0.00 of potential proceeds from the sales of the metal from that ore is not included in the $100 million free cash flow Patrick mentioned. That will be on top of that. The third element is, while we are processing this enriched ore, identification and discussions with other owners of sulphide oxide properties around us. We're already in three discussions with a view to either buy a property outright, do a tolling process of the oxide ore in our Hiplish facility, or just buy the ore. Those things would also improve the bottom line at the operation. The next two questions relate to the investor marketing and investor relations. Number one, have you seen any interest from investors in the U.S. since the listing?

Speaker 2

Number two, the story sounds great. How come ACG Metals Limited is still trading at discount to peers despite recent share price increase? How will you sell the story to new investors? Those are two parts of the same coin. As you look at our share price, you see it hasn't really moved since the birth of the company on the 3rd of September last year until about mid-June when it started to climb. You also see a concurrent increase in liquidity by about 300% since mid-June. We started our investor marketing in mid-June on a basis of Berenberg and Canaccord publishing their research reports. In August, Cantor Fitzgerald in the States also joined the analyst group that cover our company. That does give us a good basis for additional investor targeting. The question is, have you seen any interest from investors in the U.S. since listing? Yes, we have.

Speaker 2

I've been in New York doing investor roadshows, and I'm pleased to say that some orders have already come through. We are in the beginning of this long road. The reason we are trading at a discount is very simply we are a new kid on the block. The company has been in existence for a year. Unlike many other companies of our size in our sector, we actually generate very significant cash flows. We're fully funded, and we are developing our operations at a record pace. You need time to introduce the story to investors. That's what we've been doing for the last three months. An 80% share price increase over this month is a testimony to the fact that the story does find interest among the investor community. We just started on this road.

Speaker 2

We understand the key task for us is to improve liquidity in shares, and that will pave the way for the further re-rating. We're working hard on that.

Speaker 1

Yeah, if I may add, we're also building a track record, right? I think our bonds are trading now at $108.75. Our yield to maturity on the bonds has significantly decreased. Investors gain more confidence. They see we're delivering on what we're saying. Our bond presentation was on very conservative assumptions. The analyst reports in the beginning were also on very conservative assumptions. We could show an outperformance with the H1 results now. We're trying to keep on that path and obviously we'll deliver more than what we're saying in the market.

Speaker 2

Thanks, Patrick. Can you actually take the next two questions on the oxide deposits if you can?

Speaker 1

Yeah, there was one. Is this 11, right?

Speaker 2

Yeah, 12 and 13.

Speaker 1

Yeah, 12. Can you set out the next steps and timeline for developing satellite oxide deposits, permits, resource drilling, feasibility studies, etc.? There's another question about the three discussions we're in with owners about other oxide properties. I start with the process, but we have already an exploration asset on the oxide that we own. It's about 100 kilometers away from our Gediktepe mine. We have not really talked about this much. We are initiating an exploration program there. We see really good, interesting data coming there, but it needs further verification. We will update the market as and when proper. That's obviously something that we own already.

Speaker 1

We know the permitting process, the drilling permit, the feasibility process, etc., from other assets that Artem and I worked on in the past, and also with our key shareholder, Lidya, we have a very strong partner in Turkey to really make this process much more efficient. Hence, it is not a 100% priority. We're focusing on the sulphide. We have a focus on the transitional ore, but we are still keeping an eye on this exploration asset as well. When it comes to other assets in the property, we are aware of every tender about a license or an area that is going on in the region. We have a very good geology team as well on the ground, on the site that is aware of these things and will analyze and assess. They can go take samples.

Speaker 1

They can really do proper work in order for us to assess if we should participate in a tender or not. We have all the right precedence to actually look for other properties in the vicinity. The focus is for us on cash, building the sulphide, doing the transitional ore solution, and then we'll look further as and when we can. About the three owners, I don't know if it's three or other, but basically, we are talking to other people within the vicinity, but also a bit further away. Given the gold price and where it's run, there is even economic delivery to our site from a bit further areas. We obviously keep an open mind. We have good ongoing discussions, but in the end, it needs to make sense for us to take that ore, treat it, and then sell it, or actually think about acquiring some deposits.

Speaker 1

It's really an assessment, discussion per discussion. I don't really can comment on the three that you're mentioning, but ultimately, we have multiple and we assess it deal by deal.

Speaker 2

Yeah, I mean, the way to think about it is our number one priority to continue to utilize the oxide plant, which is a Heap Leach and Merrill Crowe facility, is through the treatment of enriched ore. That's step number one. That will give us time to conclude discussions with the owners of oxide properties with whom we are having those discussions to enable a longer-term production of gold and silver doré from the oxide plant. I see the new question, when will gold production from the Heap Leach end in your base case? Do you have stockpiles to add ounces through in 2027? If you look at our competent person report, which was published last year, it's on our website as well. It assumes that the gold production will stop at the end of next year, stop at the end of 2026.

Speaker 2

That's what we say a conservative base case. Once we announce to the market and publish our finding on a potential treatment of the enriched transitional ore, that will add further production to this. Any further discussions with the other oxide deposits nearby will add further ounces. I cannot at this stage comment whether we'll have stockpiles to produce by the end of 2026. It depends on our rate of production. We will have a better view on that when we provide guidance for next year. What I can say for sure is that we are not going to throw away the kit that previous owners invested $90 million in, oxide facility. It can be operated independently of the sulphide facility.

Speaker 2

We have full intention to continue running it and produce gold and silver well beyond the end of 2026, which the current mine plan assumes when we stop doing so. It will continue to do so for years. Any further questions?

Operator

Alright guys, I believe you have addressed all those questions. Artem, Patrick, thank you very much indeed. Of course, the company can review your questions submitted today. We'll publish those responses on the Investor Meet Company platform. Artem, before I redirect investors to provide you with their feedback, which I know is particularly important to the company, could I please just ask you for a few closing comments?

Speaker 2

Thank you very much, and thanks everyone for your attention. Listen, ACG Metals Limited is a very simple story. We're a new kid on the block, and that's the reason that we're still trading below peers. We are producing significantly more cash flows than any of our peers listed in London. We are halfway through our expansion to produce even more cash. That's what the mining company is supposed to do, produce lots of cash, and that's what we are looking to do. Thank you very much for your attention, and look forward to further interactions.

Operator

Fantastic. Artem, Patrick, thank you once again for updating investors today. Could I please ask investors not to close the session, as you'll now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure it will be greatly valued by the company. On behalf of the management team of ACG Metals Limited, we would like to thank you for attending today's presentation, and a good afternoon to you all.

Speaker 2

Thank you.

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