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Edited Transcript of CAML.L earnings conference call or presentation 17-Sep-19 8:30am GMT

Half Year 2019 Central Asia Metals PLC Earnings Call

Sep 19, 2019 (Thomson StreetEvents) -- Edited Transcript of Central Asia Metals PLC earnings conference call or presentation Tuesday, September 17, 2019 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Gavin Ronald Ferrar

Central Asia Metals plc - CFO & Director

* Nigel Robinson

Central Asia Metals plc - CEO & Director

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Conference Call Participants

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* Alexander Robert Peel Pearce

BMO Capital Markets Equity Research - Research Analyst

* Martin Potts

finnCap Ltd, Research Division - Research Director

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Presentation

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Operator [1]

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Hello and welcome to the Central Asia Metals interim results.

My name is Val, and I will be your coordinator for today's event. (Operator Instructions)

I am now handing you over to your host, Nigel Robinson, to begin today's conference. Thank you.

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Nigel Robinson, Central Asia Metals plc - CEO & Director [2]

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Okay. Thank you. Well, thank you and good morning, ladies and gentlemen. Welcome to Central Asia Metals plc's 2019 interims results.

I'm delighted to be sitting here to present some good numbers to you, I think, on the back of very strong operational performance. And you can see the numbers there that show that we're well on track to meeting our 2019 guidance for the year. We've got some good financial numbers that follow on from that. As a consequence of what are actually quite difficult commodity markets, as we all know, out there, we've managed to maintain good costs control at site, therefore maintaining good, strong EBITDAs. And our EBITDA margin is maintained at 63% year-on-year -- or period-on-period, should I say, which is particularly pleasing for us. Another statistic which we find particularly pleasing on this is the free cash flow which has increased year-on-year by $3 million because, again, of good cost control both on operational costs and on our capital costs. And you can see there the impact in terms of what we're prioritizing at the moment, which is deleveraging the business, paying off the debt and also maintaining good, healthy dividends to our shareholders. And we're announcing this morning what's been already called a tasty dividend of 6.5p to our shareholders.

And finally on this slide, the other point just to raise is that we had a good period. You can never be -- you've always got to be vigilant on this, but we've had a good period in terms of 6 months comparatively with the previous 6 months in 2018 of LTIs, just one LTI in the period, in January, at Sasa.

In terms of delivering shareholder value. This is the third year on the trough that we've paid 6.5p as an interim dividend. That shows consistency, stability of paying money back on a reliable basis to our shareholders. And we've now been paying dividends for 8 years since 2012, and in that time, we've paid back 98p to shareholders, which is about $176 million. It doesn't matter which one of those measures you choose to look at in terms of giving money back and delivering value back to shareholders, be it TSR, be it return on equity, return on capital employed or even the EBITDA margins. They're all positive numbers that we've reliably and consistently delivered back to shareholders.

Those are the headline numbers. I'll now hand over to Gavin, the CFO, to talk in a bit more detail on the finances.

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Gavin Ronald Ferrar, Central Asia Metals plc - CFO & Director [3]

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Thanks, Nigel.

Just to give you a little bit of background to how we got here. I mean the results really reflect a sort of period of declining commodity prices where we've seen copper down 11% and zinc 16% and lead down 20% over the last year [and slightly than ourselves] (inaudible). And I'll go through that in a second, but this is mainly due to macro environment being a little bit negative, turning negative with the U.S.-China trade war going on, plus some sort of [starting no growth] as a result of that and some forward PMI numbers coming out. We've seen a sort of commodity price complex corresponding to that.

We -- in terms of currencies, we've had a little bit of a sort of tailwind from currencies actually both on the Kazakhstan tenge, which has weakened during the period, and that flowed through to operating costs at Kounrad; and with the pound, as due to the Brexit uncertainty, have actually given us a little bit of a boost on the U.K. admin costs. And in terms of inflation in both jurisdictions where we operate in, there's no surprises there, with both Kazakhstan at 5.5% and North Macedonia at 1.2% performing in line with what we expected.

So the other thing. The overall message here is we got consistent operational performance [as] margin percent. And we see cost of sales remaining more or less stable, and the gross revenue line and the EBITDA line are affected by those commodity prices. And we've seen 12% reduction in each of those elements. Now the revenue is made up -- just to give you some background there: 45% of our revenue is coming from copper, 30% from zinc -- sorry, 30% from lead and 25% from zinc. We're also seeing the higher TC environment on the zinc market that's filtering through that gross revenue line as well. We started paying higher TCs in March this year.

The -- as I said, the prices achieved are slightly different to what we actually saw on period-on-period with actually copper prices received go down by 7%, lead by 22% and zinc by 18%, whereas volumes have actually moved up on the whole. Copper has gone up 7% and zinc has gone up 5%, and lead has remained more or less flat over that period. As I said, costs of sales are down slightly. That is mainly due to reduced depreciation charges. We've had a few assets that had run-off early in their depreciation time lines, particularly at Sasa. We've also seen some concession fees, which are the royalties we pay to the government, reduced as a result, as I already say, of lower commodity prices. And there have been a few wins on things like electricity at both sites and then, of course, as I mentioned before, the tenge in Kazakhstan.

The admin expenses have gone down a lot period-on-period. Now in the first half of 2018, there was an additional option award [by the 2] management and certain other key members of staff, and that resulted in a higher sort of charge against those options. We've also changed the way the options are priced when we issued new options in April this year. So rather than an annual vesting over 3 years for the option awards, we now vest all in 3 years' time so the charge applied against those options is lower (inaudible). Naturally what's driving the large proportion of that administrative expense pool is also some element of currency in there as well.

But I think what stands out really is the EPS which is only down 6% in the context of the 12% drop in revenue and EBITDA. And that's really, as Nigel said before, the real tight cost control we've been exercising over the last 6 months.

Talking about those costs. We've seen Kounrad reporting $0.51 a pound, which is down a couple of cents period-on-period. This is primarily, again as I said, Kazakhstan tenge devaluation. Plus, there's been some firm cost control, I think, at the site there. We have seen in aggregate some things -- well, some things going up, some things going down, but in aggregate we've actually seen a slight increase in costs mainly due to tenge and electricity costs. And Sasa, on the other hand, has gone up $0.03. And that's almost entirely attributable to the TCs that we're now paying at a higher level since they reset in March. Again, on-site costs in aggregate remain more or less flat, with wins and losses across the piece.

The group C1 costs, we've seen a significant increase there. And that's again largely due to the relative movements of lead, zinc and copper, where we convert our lead and zinc into copper units to calculate that number. And there's also that $0.03 of TCs flowing through to that number as well on the zinc side.

Presenting our fully inclusive cash costs. We basically do this by adding CapEx, the royalties we pay to the government, loan interest and corporate overheads to give you an idea of how we perform against our peers. Now the capital expenditure, you'll see, has dropped $0.10 half-on-half, and that's mainly due to costs associated with our tailings -- new tailings facility TSF 4. That was in a sort of real meat of construction back in half 1 '18. Now we do expect there's a little bit more on TSF 4 coming through towards the end of the year, but effectively that's what's really driving that decrease there. And corporate overheads, we've spoken about already. And the rest of it is really again balancing out that conversion of zinc and lead into copper to get to those.

Just to give you a little more detail on the CapEx. And the Sasa CapEx of $4.4 million includes underground development which you expect from an underground mine, $1.2 million. We've invested in our processing facilities as well, where we've spent about $300,000 on a new secondary crusher. And we've also sort of redid the flow sheets a little bit, and you'll see the recoveries in zinc as a result of those tweaks. Plus, we're looking to sort of improve zinc -- less zinc recording to the lead circuit by including another secondary grinding mill in that circuit as well. We spent some money on mining equipment, safety equipment, obviously at the forefront of our minds: new rescue packs for everyone, new (inaudible) underground mine rescue team as well. But again the big number is really related to that TSF 4, with CapEx of $1.1 million in there as well.

Kounrad costs, low as we expect, again just standard sustaining CapEx on SX-EW, houses and also on irrigation pipes coming through. We expect guidance to be hit by the end of the year, $10 million to $12 million. So there is a little bit of CapEx lag in these numbers as well we expect to flow through in half 2.

We ended the period with a strong balance sheet. We had, as I said, $30 million in the bank. Net debt is down to just over $100 million. If you're not an accountant: That's actually less than $100 million because the restricted cash of $4.2 million is there primarily to fund the next [period of] debt service. So we have to put $4.2 million in the bank every month to fund the next month's $3.2 million payment, plus interest. We've got gross debt of $126.4 million, which means we repaid $19.2 million over the period, which goes to effectively moving that [EV] balance from the debt side of the balance sheet at the equity side, which is good news for all our shareholders.

Other liabilities was also significantly reduced. That's primarily because we've now finished paying Orion for the Sasa acquisition through $6.5 million of deferred consideration in the -- on the balance sheet at the end of December. And we've seen that reduced this time around where we basically pay that number off.

Last thing I want to talk about is just this excellent cash flow generation Nigel mentioned. I think $35.5 million of cash off a $90 million revenue number is hugely impressive. And that's driven by the $56.1 million operating cash flow number you see on the left-hand side.

The key items here. We've paid off, as I said before, $19.2 million of debt. We paid our final dividend that we'd announced in May of $18.2 million, plus the $6.5 million to Orion and $4.4 million of CapEx. So if you'd strip the Orion number out of it, we've effectively moved $41.5 million of value onto the equity side of the balance sheet there. So I think just that all reinforces this set of results.

And I'll hand back to Nigel to talk you through what's underpinning that.

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Nigel Robinson, Central Asia Metals plc - CEO & Director [4]

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Yes. Thanks, Gavin.

Just moving on. So Gavin has given you a good explanation of our financial performance or financial position and how we, as I said before, create value for shareholders effectively. We have 2 low-cost operations, with long lives remaining on those operations. So that's part of the sustainability picture, but as you all know, there are other stakeholders involved in any business in these days. And we have to look after these, the stakeholders, as well and just as disciplined as we look after the finances.

So we've got the employees side of it, looking after their health and safety on site, looking after their welfare, their training, their development. We've put a lot of effort into that at both sites. Looking after the communities in which a lot of those people live in, [which speaks to the] support at the actual mines in the area. So we should put money back into the communities. The environment, we clearly look after the environment, that's important, where we operate in mining -- in any mining jurisdiction, any mining asset. You've got to look after the local environment and make sure that you put it back into the state that you found it. And finally and just as importantly, the focus on governance, being a company that is disclosing things transparently, managing the risks, adhering to good policies and in terms of we adhere to the QCA code; and also being transparent in the countries we operate, paying back taxes, being fully compliant with the law in those lands and also making sure that we pay our taxes on time. So far, in Kazakhstan and North Macedonia we've paid back $165.8 million, in those countries in which we operate.

Then on health and safety. We have had one incident this year. As I say, one is too many, as far as we're concerned. We aim to have 0, but it's a mining game that we're in. It is inherently dangerous in a few areas, so we're constantly vigilant about making sure that we manage the business, improve safety and learn from any incidents that we do have on site. We have a lot of initiatives going on at Sasa in particular in terms of rescue teams, in terms of underground refuge chambers and also things like new self rescuers for the staff on the site which we've invested some money into.

And the other thing really, which we haven't really advertised that loud there, we think, that management are obsessed in terms of KPMs on health and safety. 25% of the bonuses paid to management is based on health and safety statistics, meeting guidelines in terms of what LTIFR might be for that particular year. So it is a key focus of management, the health and safety and the welfare of its staff.

Looking after the environment, we operate to very high standards here, nothing specific to report. The key thing in terms of environmental issues with -- on site is finishing off the tailings dam, which I'll touch on later, at Sasa, but apart from that, and I think all of you who know us will say, we do look after the environment in the areas in which we operate to a high standard.

Communities again, looking after the communities. We put 0.25% of our revenues back to the communities both at Sasa and at Kounrad. We have an established, what we call foundation at Kounrad, which is effectively money is ring-fenced, and it's run as a separate company, to give money to worthy causes in the area. We're thinking of setting it up as well in Sasa, which we think will be beneficial to Sasa. And one particular project this year, which we finished off in April of this year which we're particularly proud of as a company, was we spent $125,000 on a facility for disabled children in the Balkhash area, which was -- something which is going to be a legacy for many, many years now to support the community and support the people of that area. So we opened it. There was a lot of fanfare about it, but it's something which is a bigger project than we normally invest in, something which we can give back to the community over there for a long time.

And lastly, on most particular thing with sustainability, developing our people. I mean we've now got over 1,000 people who work for the company. And only about 2% of those are based in the U.K., so we have, as you can imagine, cultural diversity. We have different demands and needs of those people, but we have a kind of singular strategy, if you like, to develop them and train them and get them to our way of operating and being transparent. And most of the staff that we do employ in those areas are local staff. We only have across the patch about 10 what we've called expats, so Westerners who've got specific skills, to go to train the local people and develop those local people such that the assets themselves can be dependent upon locally employed and trained staff.

Coming on to the operations, I'll quickly run through this.

In terms of Sasa, first of all. We've now owned -- sort of the period we're reporting on here, the 6 months period to the end of June 2019. We don't -- as CAML had owned Sasa, should I say, for 20 months. And in that time, Sasa has generated for us $117.4 million of EBITDA. You may recall, when we acquired the asset, we liked its stability. So that's consistent output. And if you look at that table to the right-hand side, you can see we've made some marginal improvements, which I'll come on to in a minute, but generally without a lot of input to change things necessarily, we've had very stable output of both plant feed. One area where we have improved is zinc recovery. You can see we've taken that from what was 84.6% last year, when we had a slight downturn from the previous year, up to 86.7%, getting a better hand on it, employing a metallurgical engineer, using the SMD mill since the -- to the benefit that we thought when we acquired the actual mine. Lead recovery, stable at 94-ish kind of percent, which is pretty good for a mine of this type. And as you see at the bottom there, a good performance on LTIs so far this year.

The outlook for the year, just to remind you, is 22,000 to 24,000 tonnes of zinc in concentrate and 28,000 to 30,000 tonnes of lead in concentrate. We're well on track to deliver that.

One of the improvements I mentioned. We keep talking about this Life of Mine review. Well, that is ongoing. And we'll deliver on that at the end of this year through Scott, our COO, but it's a bit of an all-in comes in crates like mine review. There's lots of smaller implementation of changes that we've actually actioned. We've changed quite a few of the management team. Not a major in number, but we've put in place a new General Director, a new Chief Operating Officer; and various key hires during the course of this year, a group geologist, a group mining engineer, all local people or [Balkans effectively], not Western people, that we've put it on site at Sasa to improve the whole core of that management team. And they've made some good improvements both in the processing and in underground mining improvements. We've improved the mine planning and the grade control. We've put in place 3D mining systems. It's not rocket science. This has been done in Western mines for a long time, but we have 2D systems there and we're changing that. We're looking at automation of the fleet. We're looking at underground Internet basically, to install that so we can improve both safety and productivity. So a number of changes there. And likewise, in the flotation plant we've modernized the laboratory. We're now learning, I think, how to use the SMD mill to get better recoveries. We've improved the mill monitoring and the crushing circuit. We've had a review of that and we're improving the crushing circuit. So small mine modifications that will generally lead to an improving output over the years.

And then the Life of Mine review itself. That will be delivered on towards the end of this year. And that's really a cost-benefit analysis and whether it's worth going through different mining techniques to improve the throughput at the mine and therefore generate better returns for the mine in what is a challenging price environment for zinc and lead. And we have to be cognizant of that and make sure that we get the best bang for our buck when we deliver on that particular Life of Mine [through].

Moving on to the tailings dam, as said before. We've had a review of this done by Golder's. We had that done in February following after the disaster in Brazil. And we're -- as a management team, we're as confident as we can be that we monitor it properly in terms of how it's managed on a day-to-day basis. This is what's known as a downstream facility, which is the more secure, more expensive type version of tailings dams. And the TSF 4 facility, we have now actually finished the construction of that. At the half year that we're reporting to, we haven't quite finished it, but we have now actually finished it. And we're just finishing up on some permits for that. That will give us capacity for the next 6 to 7 years, and thereafter, we're probably going to be looking what drives that tailings as part of the Life of Mine review. It's more environmentally friendly. It may be a little bit more expensive, but we'll do a study on that as part of the Life of Mine review.

So on the tailings story, we're as comfortable as we can be, but again we can never be complacent about these things. And we constantly monitor it.

Moving on to Kounrad, which was the -- our founding project, if you like, very stable, stable output. We are still transitioning over to the West. 70% of our copper in the 6 months just reported came from the Western Dumps, but as you can see, most people in the room know the Kounrad project pretty well. We've owned it and have been operating it now for nearly 8 years. And we are, as I say, transitioning over to Western Dumps.

And that's just some graphical representation of the areas. The Eastern Dumps: As you see, there's about 10,000 tonnes of recoverable copper left in the Eastern Dumps. There's about 155,000 tonnes of recoverable copper at the Western Dumps, so a total of 165,000 tonnes at the current level of output. And the middle chart there just shows you what the planned leaching recovery curves look like and what actually is coming out from the West. And you can see it's more or less in line with what Howard and the engineers expected from those dumps in the West in terms of recovery, the amount of time it might take to get the copper out of those particular dumps.

So in the future, in terms of growth. I have to say our focus very much in the short term at the moment is deleveraging, paying down the debt, maintaining good dividends to shareholders. And from the capital that's not allocated to those 2 particular purposes, we'll try and build up the [treasury] and then look to other opportunities in the future. I mean that doesn't mean to say that we aren't looking now. We do have opportunities come across our desks, and if it's the right one, we'll look at it in a bit more detail, but there's nothing that we're in discussions with people in a serious nature of. I think, given the current environment at the moment, we've got the right strategy to actually deleverage first before we look at acquiring other businesses in the short term. As you can see there, we have undertaken site visits, got NDAs, looked at opportunities. We've got to strike the right balance with that. Our shareholders want us to pay down the debt, pay good dividends back to shareholders and then look at the growth opportunities thereafter.

And just to finalize with summary. We can see the outlook there, but I mean I think the key point to say is that in these fairly challenging commodity price environments at the moment I think we have a strong business model. We've proven to have a strong business model; long-life, low-cost assets. Plus, they're actually delivering in terms of, when the markets are bad, we can still deliver good returns to shareholders and maintain the strength of our balance sheet.

And just to reiterate the guidance there: For copper, it's 12,500 to 13,500 tonnes, zinc 22,000 to 24,000 tonnes. And for lead, it's 28,000 to 30,000 tonnes. And we're well on track to deliver on that. And growth will come at the right time. We're in no rush to grow the business. It will come at the right time with the right opportunity.

On that note, I'll finish the talking about the text now, opening up the floor or the telephone for any questions (inaudible). Any questions from the floor?

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Gavin Ronald Ferrar, Central Asia Metals plc - CFO & Director [5]

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Alex.

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Nigel Robinson, Central Asia Metals plc - CEO & Director [6]

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Alex.

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Questions and Answers

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Alexander Robert Peel Pearce, BMO Capital Markets Equity Research - Research Analyst [1]

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Okay. Great. My first question is on Sasa. You mentioned the crushing circuit (inaudible) maybe if you can talk a little bit more about what improvements those are driving in terms of (inaudible).

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Nigel Robinson, Central Asia Metals plc - CEO & Director [2]

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Okay. The question was that, in the short term, at Sasa we've put some improvements in terms of the crushing circuit and the milling circuit and some mining improvements; and what that might have as an impact on output. I mean it's difficult to say, Alex, in terms of absolute numbers, but we've -- internally we've spoken of magnitude of 850,000 tonnes, for example, that kind of magnitude, not major, major percentage increase in throughput. And that's still what we're looking at. If you look at the metal prices, what we do have to do when we deliver on this particular longer-term Life of Mine review, so the next 5 years plan, is see what kind of grades we can get on lead and zinc from other output of the metals. Ultimately, it's about a cost-benefit analysis. It's not how much throughput in terms of ore or metal. It's what is the value of that in terms of the increased costs potentially and the capital we might have to expend to actually get to that increased output [et cetera]. Another question from [Mark]...

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Gavin Ronald Ferrar, Central Asia Metals plc - CFO & Director [3]

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[Paul].

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Unidentified Participant, [4]

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[Paul].

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Nigel Robinson, Central Asia Metals plc - CEO & Director [5]

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[Paul]. Sorry.

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Unidentified Participant, [6]

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I see on Slide 21, that you're planning some exploration drilling on Sasa. And I was wondering what the budget was for that and for exploration and also wondering why you look to sort of (inaudible).

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Nigel Robinson, Central Asia Metals plc - CEO & Director [7]

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Yes, okay. We've got 2 programs that we're looking at this year. The first one is...

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Gavin Ronald Ferrar, Central Asia Metals plc - CFO & Director [8]

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Yes, just for the guys on the phone: That was a question about the exploration program and referring to Slide 21 of the pack. And the question was what is the budget. And why are we drilling Kozja Reka from surface rather than from underground.

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Nigel Robinson, Central Asia Metals plc - CEO & Director [9]

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Yes, thanks Gavin. And the answer to that question is, as I say, 2 drilling programs. The first one is Svinja Reka, where we're currently operating. And the objective of that drilling program -- this is about 3,000, just over 3,000 meters; and will cost, I think, about $250,000 to $300,000. The objective is to convert more of the inferred material into indicated material. If you look in the presentation, there is a table of what our [job resources are]. We're trying to convert each here some of the inferred into indicated. We've got more confidence in it.

The other drilling program which is an ore body, as you can see on Slide 21, which is Kozja Reka, which has been mined previously in the past. That has been mined for some time. And the objective of that drilling program is simply to try and find mineralization there, not taking some inferred to indicated or anything like that. It's simply to find mineralization. We are slightly delayed on that in terms of getting the forestry permits that we need. And the reason we're drilling from the surface is just because of the lay of where the actual ore body is in between Golema Reka and Svinja Reka and in terms of accessing the ore body. It's easier to go from the surface and get a drilling program from there. In fact, we couldn't actually drill it from where we currently operate in Svinja Reka. I think -- I'm looking across at Gavin as a geologist, but I think it will be impossible to be honest with you. And so...

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Gavin Ronald Ferrar, Central Asia Metals plc - CFO & Director [10]

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(inaudible) mentioned here. It's not...

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Nigel Robinson, Central Asia Metals plc - CEO & Director [11]

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Indicated...

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Gavin Ronald Ferrar, Central Asia Metals plc - CFO & Director [12]

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Obvious here, yes...

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Nigel Robinson, Central Asia Metals plc - CEO & Director [13]

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And we are delayed on that program, but we will continue the program through into Q1 if we don't get all the matrix done this year. So we've got some kind of indication as to what's down in Kozja Reka.

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Unidentified Participant, [14]

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And the budget that you have...

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Nigel Robinson, Central Asia Metals plc - CEO & Director [15]

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I think it's about $300,000 as well, so in total it's probably $500,000 to $600,000 in total is what we're expecting to spend.

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Gavin Ronald Ferrar, Central Asia Metals plc - CFO & Director [16]

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Yes. The only thing I'd add, [Paul], is that, that pink area underneath Svinja Reka which says potential areas for exploration. We can't currently -- the easiest way to access that is when the development decline effectively gets and turns a corner so we can get the drills in the right position for that. And that will be when we start adding to the resource inventories, probably be next year.

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Nigel Robinson, Central Asia Metals plc - CEO & Director [17]

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Other questions from the floor?

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Unidentified Participant, [18]

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So on Sasa, that improvement in recovery also. You manage the whole product quality and payability through the improvement of recovery. Or is there a bit of (inaudible) out of that?

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Gavin Ronald Ferrar, Central Asia Metals plc - CFO & Director [19]

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So the question was on product quality due to the improved recoveries at Sasa, on the zinc circuits; and whether we changed any of the payabilities or metrics around the sales, right? The short answer is the improved recoveries is just adding to the amount of metal coming out. The sort of paradox, I guess, are due to concentrates of higher grade. You go in sometimes, and the high -- result is a lower recovery, low or something like it. [But so you're going around.] But no. We're still operating, if you look at that table in the presentation as well, at around 50 -- 48% to 50% zinc in the concentrate. So the salability is still good. There are no deleterious elements coming through as a result of increased recovery. And what we've also seen with that secondary rerun on the lead circuit is we're removing the -- a lot more zinc out of the lead circuit as well. So that is improving the quality of the lead concentrate actually, which is a nice little fringe benefit to the whole thing, but no, the payability is still the same, 84% to 85% on the zinc, [anyway, with deductions]; and 95% on the lead, yes.

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Unidentified Participant, [20]

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Okay. And then on the side of deal flow and growth, are you seeing appreciation of -- it's not the priority right now, but are you seeing in the sale of prevailing spot prices being reflected in Central's deal valuations? Or is that being able to take the price, copper pricing, expectations, for example, as sort of what they look like?

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Gavin Ronald Ferrar, Central Asia Metals plc - CFO & Director [21]

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The question was on deal flow and M&A opportunities and whether we're seeing the sort of depressed commodity prices flowing through to valuations, and the short answer is no, unfortunately. I think people are still clinging to sort of $3-plus copper on their valuations. We are seeing quite a few distressed zinc opportunities, but clearly they're distressed for a reason, so we're steering clear of those. And I think what is encouraging, though, is that we are still seeing flow across the desk. I mean nothing that -- as Nigel said, that has actually got us into full-blown deal mode and all, but it is encouraging that there are new projects and projects coming to the market out there. So once the conditions improve in the market and, I think, we've got a little more confidence on the balance sheet and the shareholders are a little bit more happy with us going out and doing something, we will, hopefully, be in a decent position to start reinvigorating that program.

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Nigel Robinson, Central Asia Metals plc - CEO & Director [22]

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Yes, yes. Nothing to add to that.

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Unidentified Participant, [23]

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Next, the higher iron content at Kounrad. Is that in line with the expected changes [it had]? And does it have an impact on the solution (inaudible) back into (inaudible)?

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Nigel Robinson, Central Asia Metals plc - CEO & Director [24]

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The question is do we have a point about higher iron content on the PLS solution from Kounrad. And does that have an impact on...

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Unidentified Participant, [25]

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On the solution to put back into the...

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Nigel Robinson, Central Asia Metals plc - CEO & Director [26]

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On the solution going back into the circuit. And the short answer to that is we were expecting higher iron content. We're using a little bit more sulfuric acid to bleed it off from the electrolyte as a consequence of that but nothing significant. We're still at very low levels of sulfuric acid. It is manageable. It's something like about 8 grams per liter, I think. Howard and the technical team don't expect it to get to the levels where that would impact on the quality of the copper cathode. And we've not seen any impact on the quality of our copper cathodes at the moment. Martin?

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Martin Potts, finnCap Ltd, Research Division - Research Director [27]

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Yes. Just a quick one really more on this sort of business development stuff. [Due to the effective end of] development finance in any of our certain market (inaudible), are you seeing more sort of earlier-stage exploration projects have been [otherwise] challenging, particularly in the area around Sasa? What's the -- what's (inaudible).

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Nigel Robinson, Central Asia Metals plc - CEO & Director [28]

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I think the question is -- it's with the sort of access to finance being diminished in North America, whether we're seeing more opportunities in development assets and earlier-stage exploration assets not only there but also around the Sasa mine itself. And to answer your question: We have -- we do see a few Canadian developers sort of being [carted around]. Funny, I've seen a few Australian listed companies as well being carted around as well but, frankly, nothing of any huge interest around Sasa or even in Macedonia. I think there is a lot of geological potential there. I mean, for the time being, we're really focused on getting Sasa running exactly where we want it before we sort of branch out from there.

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Gavin Ronald Ferrar, Central Asia Metals plc - CFO & Director [29]

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Yes, that's fair. And I guess our focus is really not that far down the development curve, if I may. What we'd rather do is do what we're doing at the moment. If it was something that is cash flowing, that would probably be preferable to us.

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Nigel Robinson, Central Asia Metals plc - CEO & Director [30]

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Any other questions, [Paul]?

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Unidentified Participant, [31]

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I was wondering what strike price, the silver price (inaudible) to try to buy back (inaudible).

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Nigel Robinson, Central Asia Metals plc - CEO & Director [32]

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Question is what strike price will we consider buying back the Osisko royalty at Sasa mine, where we have a silver stream agreement effectively in place prior to our acquisition.

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Gavin Ronald Ferrar, Central Asia Metals plc - CFO & Director [33]

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I'll say this in jest: about $5.

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Unidentified Participant, [34]

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[If there is] willing to sell...

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Gavin Ronald Ferrar, Central Asia Metals plc - CFO & Director [35]

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Yes, yes.

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Nigel Robinson, Central Asia Metals plc - CEO & Director [36]

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Any other questions from the floor? Any questions from the telephone?

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Operator [37]

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Currently, there are no questions in the queue. (Operator Instructions) There are no questions coming through the line at the moment. (Operator Instructions) There are no questions coming through the line.

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Nigel Robinson, Central Asia Metals plc - CEO & Director [38]

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Okay. Thank you all. On that point then, I'll call the meeting to a halt, and we'll have a chat. Okay. Thank you.

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Gavin Ronald Ferrar, Central Asia Metals plc - CFO & Director [39]

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Thanks, everybody.

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Operator [40]

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Thank you for joining today's call. You may now disconnect your handsets. Hosts, please stay on the line.