Capital (LSE:CAPD) — H1 2024 Results

0:00 Good morning, and welcome to the CAPITAL LIMITED investor presentation. Throughout this quarter's presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company can review all the questions submitted today and publish responses when it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Peter Stokes, CEO. Good morning to you, sir.

0:29 Good morning, and thank you. Welcome for to to the conference to discuss the CAPITAL LIMITED h one two thousand and twenty four results. I'll take you through at a high level. Given that the presentation has been up for a week or so, we'll probably focus more on the questions after, but I certainly want to talk through some of the programs we've got underway and some of the things that we are doing in order to continue to drive growth and returns in the business. I'll just flick through the standard disclaimer slide, read that at your own leisure, but nothing untoward in there. On the results, I'll let Rick go through those a bit further into the presentation. Key takeaways really, revenue continues to grow in the business, still have a strong EBITDA in the business, and this year, we're declaring an interim dividend of 1.3¢ per share.

1:26 Really, the key focus for the discussion today is around the highlights of where we've been driving the business over the last while. And I might just go and start down at the Sukari mining contract because I know it's been a discussion for a while. As we talked about in one of our previous investor discussions, the Sukari contract was due to finish in the middle of the year. We received a variation for several more months on that contract and that will now run out at the end of September. We've had a very successful contract with Sukari. We've performed, we've had exceptional safety outcomes, but that will finish that contract. We have extended the drill and blast contract and that will go for another five years from the start of from January 2025, which we're very excited about and continue that long term relationship with the sentiment business, particularly at the Sukari mine.

2:25 We've also been very conscious that the Sukari contract would likely finish on the mining side and have been very proactive in driving growth in the broader business. I'm really pleased with where we've been able to grow into The US with Nevada Gold Bines, the Barrick Newmont joint venture, a very large contract for us. We're in the process of ramping up both the drilling and the assay business that we're doing there. That will constitute 10 drills when fully implemented and we're about halfway through that implementation. When a little bit behind where we wanted to be and hence the transition of the business, we're about a quarter behind on both of those contracts for a number of reasons, but I think I can see clear visibility to first samples through the lab in late September, early October.

3:17 A critical part of our growth with two CRISOS units then being on the ground later in the year and the wet chemistry is planned in the middle of next year. The drilling contract, we've got five of the 10 drills now fully operational and the next drills arriving and being mobilized over the coming weeks. We've also been very successful in winning a number of other key contracts both with current customers and with customers and extending work at a number of our sites. There are a number LIMITAL LIMITAL with Barrick in Zambia. We're back in Zambia after a number of years. It started off with two RC drills there doing deep drilling. We've also won the nine Zarga project with Perseus which will be four drills working there which have just started.

4:08 We've also expanded our operations at Reco Dick and now have six drills on the ground there. And as I said previously, the extension of Sukari Gold mines, diamond drill and blast drilling and a few other ancillary pieces of drilling is a very exciting opportunity for us. I'll talk very briefly about a new investment that we made in our innovation team which was as part of a raise for eco detection, which is a new technology in continuous water detection. And as part of that investment, we have rights for the mining sector, and I'll talk about that a bit further in the presentation. We continue to have an exceptionally strong safety record which underpins winning these major contracts with significant customers like Barrick and Perseus across the region and continuing to get the extension for projects like Sukari.

5:08 On the August 14, the day before we released our results last week, we sold our shareholding in Predictive. That was a we had a 9.6% share in that business. We realized the price of 21¢ giving us a return of $31,000,000. The focus of that money will be to pay down debt. We also have an option on those that will give us the ability to continue to earn should that share price should the company be bought out by either Perseus or another, and we can talk about that in a bit more detail. Just to talk through the growth areas where we've been focused in the business, the North Nevada Gold Mines, the significant contract in Nevada, the joint venture between Barrick and Newmont, which will have initially 10 drills.

6:09 We see a lot of opportunity there for additional drill rigs in that region with the group that we're dealing with in Barrick. They currently operate up to 60 drill rigs, so we see opportunity to continue to grow there. We're building out our labs business there as well as I talked about. The Balinga project in Gabon with Fortescue continues to grow with six drill rigs on the ground now starting to see the sort of productivities that we would like and certainly at the upper end of productivity for some of the diamond drills particularly. LIMITED talked about the requirement there for the specialist deep up reverse circulation drilling that we're doing for Barrick as part of their major expansion of that project. And then the Ninesarga project that we've won with Perseus for diamond drilling and reverse circulation on that new asset they bought from Ork Hawk earlier in the year.

7:02 And then the RecoDick drill contract where we've started initially with two drills that's grown to four and we've now got another two drills about to mobilise with further opportunities to keep growing that contract.

7:20 As we transition the business over the last year, we continue to drive strong growth in our business and we're continuing to develop

7:40 business across both Africa and now The US. Ladies and gentlemen, I do believe we've just lost Peter. Do bear with us while we just reconnect him.

8:26 Sorry. I must have dropped out there for a minute. Enable us to continue to build our business, and we will growing both the labs business and building on the tier one assets that we have around the world. This over the last well, our ROCE reflects some of the major investments that we've made, including around a $100,000,000 into Gabon, The USA and the MSA Labs business. And they continue to provide meaningful earning contributions for us. Returns from H2 will ramp up as The US and Gabon and Reco did come online. And we continue to focus on long life, high rocky projects, particularly with blue chip mining companies around the world. And we're continuing to deliver consistent returns in the business with the business continuing to drive around 20%, which we expect in the second year. The ramp up in the first year has reduced the ROCE that we've had in the first half.

9:32 We're continuing to invest in our employees and equipment, delivering high top tier service offering and really differentiating ourselves from our peers. We've continued to improve our utilization into the last quarter and beyond as we were transitioning some of our drill rigs from West Africa to East. Over the first quarter or so, the utilization was a bit lower, but we expect that to continue back to our target 75% during the second half. Safety records continues to set a differentiated level from our peers. And we've had reached a number of key milestones in our business at Gaita in Tanzania. We've been operating for an extended period now with a very long safety LTI free period.

10:24 Mawanza Yard in Tanzania is now fifteen years of safety, of LTI free operation as well. Just for those who aren't too familiar with the business, the five pillars of the business, I'll talk through those over the following slides, and they're easy reference here to go back to after.

10:50 Firstly, the drilling, which is the core of the business and where we've started, continues to drive a strong RPORE, just over $200,000 in H1. That'll continue to increase as we drive the growth of the business in The U. S. Utilizations continue to improve as well into Q2, and we see that continuing to improve as we go into the third quarter of this year. I talked about the two contracts that we've won in addition to the growth that we've got in our key operations as well in the Valley Gold Mines, Reco, Deak and Belinga Fortescue. Into the second half of the year, we'll mobilize approximately nine additional drills, a couple of blast hole drills into Sukari and then the remaining drills into The US and some new drills into the African business as replacements for some of the equipment that's reached its end of life.

11:51 I think importantly, one of the other areas that really differentiates us from other drillers is that we're some 90% mine site drilling, which underpins a very steady revenue stream in our business. We are much less susceptible to the ups and downs of the cycle. I think that's a really important part that enables us to deliver consistent, high returns to our shareholders. Our mining business, will continue to, selectively focus on mining contracts. I think one of the things the Sukari contract, while it's been incredibly successful, requires very large capital. Our intention is to sell that fleet at the end of the contract and we'll put that into the market later in the year when we demobilize from that mining contract.

12:46 We've grown our mining fleet down in Gabon with Fortescue. The fleet at the moment is more focused on the drill pad preparation with six drill rigs running down there. That's become a large piece of the operation that we need to drive as well as building roads and other local infrastructure to enable the drilling operation to really accelerate over the coming months. The laboratories business continues on a strong growth trajectory. We have 11 Chrysos units now rolled out with another four units due by the end of this year, reaching a total of 15 of the 21. We expect the other six units to be rolled out during next year.

13:31 Slightly behind where we originally planned, but the growth in Nevada which is both a CRISOS unit two CRISOS units plus a large wet chemistry lab has pushed out the need for additional CRISOS units somewhat, but we still see a lot of opportunity for that business to grow. We've now continued to build out our customer portfolio. We're doing samples across a number of sites with Barrick, with Perseus. We're doing B2Gold as well, Kinross, Northern Star, Endeavour, Agnico, Eagle, really the

14:06 blue chip miners are continuing to move towards the CHRISOS technology. I think one of the things, one of the reasons this is a bit slower than we originally planned, the testing of the units in comparison to fire assay, the mining companies really need to align what they do through fire assay for their resources and into CHRISOS, there's not a question about the technology, it's more about being able to align the sample methods given one's nearly is around half a kilo and one's 50 grams or less. And so there's a reconciliation process, but we've found as the miners adopt the technology and great examples of places like Kibali that the fire assays dropped off very quickly and we continue to move almost exclusively to Chrysos for that organisation.

14:58 It continues to deliver the faster turnaround, the ESG benefits and also process optimisation for this technology with non destructive analysis and we're looking at further automation of the technology to ensure it's as efficient as possible.

15:19 The labs business now has a footprint of 33 laboratories including our seven franchises. We have a CRISOS network across the key gold belts both in Canada, now in the main gold area in The United States as well in Nevada. With those units, the first unit is now on the ground, and the second and third ones will be there later in the year. And then also across Africa in both the Beremi and Gold Belt and also in the Lake Victoria Gold Fields where a number of our large customers are as well. And our franchise network continues to feed samples into our multi element lab in Langley. And we are using both the CRISOS units work well to provide us drilling opportunities as do the drilling opportunities provide us laboratory volumes going through those. And a good example is the new contracts that we have both with Barrick but also with a number of other customers where we do both drilling like Perseus where we drill and also do laboratory samples.

16:31 Our investments have really delivered significant return, I think the sale of the predictive discovery last week really materialized what we've been talking about. We were able to achieve $31,000,000 which will leave a remaining around $20,000,000 in our portfolio, the bulk of which is the really exciting WIA contract down in Namibia. I think the timing of the predictive sale certainly was in line with what we'd said in the full year results when the site had gone to start doing its mine permitting is when it makes sense for CAPITAL to exit. It's generally a different ownership structure, different requirements, and we've realized that, you know, a lot of the value. I think the great part of the deal that we've been able to do with Perseus is that there is further upside through a call option and profit share arrangement that we have with Perseus or should a third party take over, there's also upside provided that happens before the December 31 next year.

17:43 Going forward, the bulk of the predictive funds will go to pay down debt in the business and we'll continue to look for further investment opportunities like we have done with Predictive and Weir and others start small on those opportunities and and see where they go. I think that we've proven in historically that we've been able to deliver exceptional returns as indicated in the blue bubble on the top with a 2.8 times return total return versus our net investment of 17,600,000 to date in the program. In our innovation part of the business, we've always focused on bringing new technologies or new methods to drive innovation around what we're doing either at the drill bit or in our operations more broadly.

18:37 In our well force business, we value add to the holes that we are drilling, whether that's through geophysics by doing directional drilling and or for deep holes and or other value add of orientation of core or cameras down holes and things. I think our training institute in Tanzania continues to grow, which is a fantastic partnership we have with a local organisation to build skills in our sector. We're driving safety improvement programs. We're training our operators from our business and others on specific programs like working at heights and in confined spaces and are now starting to explore trade skills for individuals, particularly in Tanzania to start, but see opportunities in a number of the other African countries that we work in.

19:30 We're continuing to look for opportunities with our mine power solution, which is a clever technology that balances the use of solar and diesel, particularly for startup operations, whether that's a camp or mine sites building before they build their permanent infrastructure. And the most recent investment is in echo detection, which I'll go to the next slide to talk about. We made a strategic investment of $7,000,000 in June this year for a 22% of the business. Echo detection, we're looking for a 10,000,000 Aussie raise, and we decided to take the whole amount. In return, we have exclusivity for all of the mining industry globally.

20:17 So we see a lot of opportunities for us to on both our mining companies and particularly the early stage of mining when you want a baseline

20:26 water quality ongoing for mining operations where you want to check downstream to make sure there's nothing getting into local water streams or groundwater. And also, I think for inputs into mining operation, quality of water into the plant and into drinking water and the like for operations. I think the technology has a very broad application, particularly in water treatment and

20:55 water provision across the world and also into other treatment plants for sewerage and other things so that water can be tested before it's put back into mainstream water for either underground or into rivers and the like so that the company is doing that can be assured that the quality of the water is at the levels it needs to be. We expect to start trials with a number of our mining companies into this half and are in the process of getting a number of units ready to ship to our operations in Tanzania to start some trials in the next few months. On that note, I'll hand over to Rick to go through the financials. Thanks, Peter, and good morning, everybody.

21:43 So just to touch on the on the financials, obviously, wouldn't present them, at nausea, but cover cover off a couple of important points. So the EBITDA and the EBITDA margin, as Peter has provided context for, off half on half, impacted by the ramp ups across, USA, Gabon, and across the laps the broader laps business. But I think one of the things I wanted to to to, I guess, emphasize is is our as a expectation on on margin going forward. So we're maintaining our target margin on an adjusted EBITDA of 25 to to 30% or albeit at the lower end of of that of that range. I think as we see the business move forward and and evolve, as Peter has has talked to, the the new contracts that that across primarily USA and and Gabon will will serve to offset some of the impact of of losing economies of scale at Sukari to reduce our presence on that site at the end of the mining contract.

22:50 But also, those new contracts will serve to to offset the lower adjusted EBITDA margins that the lapsed business will will earn. Now those lower margins in the lapsed business, as we've talked to before, 15 to 20% adjusted EBITDA, They're less dilutive or or they're not we're not expecting them to be dilutive at the EBIT level. So clearly a function of a of a of a capital light model in in MSA. Let's look at the net debt waterfall. Obviously, this is presented at the half pre the proceeds from from the PDI sale, which will obviously significantly alter the the net debt position. But just to touch on a couple of points, the CapEx I'll come to to talk to on the next slides.

23:38 The investments is is the echo detection investment that we made in the half and resulting in that no net debt at the at the half there of 86,000,000. So if you look at just focusing on the CapEx, so in that first half, 44,000,000 of of what we call the gross CapEx spend. So cash CapEx with the OEM financing and prepayments added together. And that's in line or still you know, we're we're reiterating our guidance on CapEx for the year of 70 to 80,000,000. So, obviously, a touch over the the the midpoint there if you like. So, yeah, reiterating that guidance into into the second half.

24:25 On a net debt perspective, again, table presented pre the PDI sale. So with gross debt there, 126,000,000 at the half. That's reflective of of some of that investment or a lot of investment that's gone into The US, etcetera, in the half to to to help with the growth there. That's pushed our, trailing, net debt to EBITDA ratio up to the point nine times. We, still well within our covenants. So all the covenants on the on the debt facilities are up still have a comfortable margin ahead of them. But what I would say is we're probably marginally ahead of of our sort of conservative position that we we we want to stick to internally. So with the PDI proceeds, we have a a real strong catalyst to delever the balance sheet. And so our intention is to put the $30 or $31,000,000 of proceeds against the against the debt targeting our higher cost debt.

25:23 But straight away, that on a simple math basis puts our net debt to EBITDA ratio at the point six times. And then beyond that, as Peter has has alluded to, we we're actively marketing the Sukari fleet for sale, which will obviously generate proceeds. Timing wise is is up in the air, because we're early on in that process. It may be that packages are sold discreetly as opposed to all the fleet in one go. But as I say, that process has started. Obviously, the contract is is yet to finish. That's due to finish next month. But, yeah, we're we're on our way to to, hopefully realize a a proceeds against that fleet.

26:10 On a dividend basis, we've declared the an interim dividend in line with previous years. I think based on what I've said on the previous page, we are very committed to maintaining a strong balance sheet here. So that's sort of taking precedent in terms of proceeds from PDI, and we'll we'll, certainly, have a a desire to maintain our dividends going forward. Guidance wise, we're reiterating our guidance across the revenue and and CAPITAL as I've previously touched on. I'll hand over to q and a. Perfect. That's great. Thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right corner of your screen. But just while the company take a few moments to read the questions that have been submitted today, I'd like to remind you that the recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard.

27:12 As you can see, we have received a number of questions throughout today's presentation. And, Connor, at this point, if I can just hand over to you to chair the q and a, that'd be great. And then I'll pick up from you at the end. Thanks. Yeah. Look, I'll go through these. If you keep coming in, I'll I'll be able to keep reading them. I guess we'll we'll start with quite a few questions on MSA Labs. We've talked about, Rick mentioned that our target EBITDA margin guidance of 15% to 20%. Could you talk to that, why that guidance level is there? And also when do we expect the business to become profitable? Sure. Connor, just two parts. So one was what the guidance, the target percentage Sure. The 15% And then profitability? Okay. And then when the timing on it? So just a bit of background on the MSA business.

28:01 We run effectively, really, there's two models. There's a model where we do commercial labs and we target a higher return. And in that business, we target an adjusted EBITDA around 20% across those commercial labs. And then we have a slightly lower return for, you know, at which we have 15% adjusted EBITDA, and that adjusted EBITDA flows largely through to EBIT. So you can see while it's a lower EBITDA on both those businesses, it's very low CAPITAL across the MSA business relative to drilling or mining. And so that's the lower targets that we have there, but they do flow through into similar overall EBIT to the broader business around 15% or just under 15%.

28:51 The MSA business is still in a growth phase and we expect that during next year, we'll move towards profitability. And certainly towards the end of next year, we expect to be hitting our overall margins as we've rolled out the last of the units and continue to build up the commercial units that we've now put on the ground. Thanks. And just on that, you'd mentioned there and earlier in the presentation that our target of rolling them out next year is a bit of a slip from what we had originally said. What are the implications on the business? And and was that due mostly to the slower adoption from the market? So not really slower adoption, I think. So the big Nevada contract, as I briefly mentioned in my presentation, is about half that is wet chemistry for the business to continue to do some of the traditional methods that they need to do, sort of non fire assay, but other metallurgical samples and the like. And then also that business has it's been a bit slower to roll out there in The US than we'd expected. Some of the permitting, contracting and other things that we needed have meant that that's probably about a quarter behind where we wanted to be. We will our intention is still to have, so 15 units rolled out by the end of this year and the 21, the remaining six of our total commitment during next year. And we've got good visibility on where those additional six units could go.

30:25 Thanks. And one last one on labs. We originally had a a a lab at Marilla in Mali. Can you talk to what what what the units in Mali and grade? We have a commercial lab now in Bamako. So we're now running commercial samples through that and doing testing with a number of mines, but we also are running some samples through there through a for a couple of customers already, and that's in its early stage and and growing that Damico lab. Thanks. Move over maybe to a few finance ones for Rick. Quite a few questions have come in in terms of what what value do you see the Sukari fleet being sold for, and and how how is that relative to the book value that we hold it at?

31:13 Yeah. So so book value at the end of the contract will be in the order of mid twenties million dollars, 25 ish million dollars across the fleet. As for proceeds, look, as I said, we're at the early part of that process. So we are expecting proceeds to be broadly in line with that net book value. But, look, it it does depend on how much of the fleet we decide to sell as opposed to redeploy. And also, you know, the the timing of that, the proceeds coming in, as I I said, we might end up splitting the fleet into discrete packages and selling those off piecemeal, which will obviously take a little bit of time. There's a time and price trade off clearly.

31:59 So so current expectation is hopefully to sell some of that fleet later this year, early next with the rest to follow up to sort of over the course of the first half next year, not slightly longer. Thanks. A couple more from the finance. Firstly, think we took this in h one, but it's been asked why were we holding so much cash at the end of h one in the context of our debt levels? Yeah. So, I mean, contextually, there, obviously, we operate in a number of jurisdictions. We we have our invoicing cycle and and and receiving cash into those jurisdictions before we're able to pull the cash up to the to the central centralized or cash management level.

32:51 And so I think cutting it at the half there, we did have elevated cash levels, reflective of of of collections at the end of June, but also reflective you have seen through the AP, reflective of just the timing of of some of the AP when it fell due, particularly in The US in that in that movement there. So I think 40 at the half is an elevated cash level. We're typically running more into the twenties, '25 maybe as a business. Again, 20 why 25? That is a function of the number of jurisdictions we operate in. We need to keep, obviously, floats within those jurisdictions, and there's a timing component in there around repatriation, etcetera. Thanks. And one more maybe for both of you. What what are what should investors be thinking in terms of sort of a a broad target net debt slash leverage metric?

33:47 Yeah. So I'll Blake, go first. Obviously, the as we talked to in the presentation, the current levels of of net debt to EBITDA are probably beyond our what we see as a conservative level that we want to maintain internally. So as a target, I would say the that sort of point six, net debt to EBITDA, is a is a sort of sensible, level to have in your mind. But let's say we've you know, as we have done in the first half, we have gone beyond that to facilitate growth provided there's a strong payback, ahead of it. So as a as a target, point six ish. But as I say, it's it's flexible as to what growth opportunities we have ahead of us. And I think just building on that, Rick, you know, we're not saying we want to just pay down debt now and not grow.

34:39 You know, we will still, for the right growth opportunities, we'll continue to look for those. I mentioned in the presentation a number of places where we see still great opportunities to keep growing. We'll continue to do that in a structured way. I think this first half is a bit of anomaly in the growth that we've done in five different places at once. I think we've got to consolidate over this half, really get those projects to the profitability levels that we need that we've agreed that we will and continue to drive the MSA businesses back to profitability as well. And then that in the meantime, we'll be generating cash, continuing to pay down debt that gives us the firepower to go and start looking for additional contracts again, you know, over the next number of months.

35:28 Thanks. Maybe over to you, Peter, on echo detection. A couple of questions, an interesting one. If echo detection finds or, like, sees a problem with the water, what what does what does the client then do? I mean, maybe it's helpful to give some case studies of of how echo detection has worked in the field. Yeah. So the a a great example is there's a couple of really good case studies. One that comes to mind is around and a non mining application, but I can give you one for mining as well. Abattoirs typically process all the water that they use and store it and test it before they were able to release it. What this technology could then do is enable you to run a continuous testing on the water and either divert it into storage if it's not fit for purpose or straight into, you know, to enable it to be discharged if it is.

36:22 Similarly in the mining operations for us, so we can be giving a mine visibility of where there may be acid leaking from a waste dump or overflow from a storage pond of different types. And so we can give them instantaneously that sort of measure depending on the you know, typically most operations would be testing maybe once a week or and unless there's a major event, we can be testing with these units every hour, providing that forward looking data to customers so that they can be acting. So we the echo detection team would proactively provide that back to the relevant mining operation in this case so that they're getting visibility of data as soon as the test comes through.

37:12 And unlike a sample that would be collected by a human taken to a laboratory, you've got a time lag. We're getting those those samples are being tested continuously, and we can be monitoring whether it's a one off event or it's something that's continuing, and the mind can deal with it as they need to. Thanks. And there's a question on just the distribution arrangement around it. How is that going to apart from just the pure investment part of it, how is it gonna affect our revenue and margin? How is that working in terms of distribution? I I think at at this stage, it's very early days. So we have a a distribution agreement for mining contracts. We're just about to start doing trials.

37:59 It's likely that the models would be on a a lease or a per sample basis that we'd send to mine sites, there'd be a revenue stream. But we haven't really got to a point where we've got a, you know, clear model of how that'll work yet until we really get a good understanding of the size of the market, the adoption rates, and the like, and and also the types of testing that's that would be wanted to be done by the mine. So the units can can potentially have up to have several different test methods within one unit, and that would drive pricing and and complexity of install and things. So and and and equally, whether a unit might have a Starlink on it or a solar panel or those sort of things drive a different cost outcome. But I think there's a revenue stream that will come through a per sample basis or something similar for these units is where we're thinking.

38:53 Thanks. Maybe move one to one in drilling. Could you give us a could you talk about the contract we had in Sudan and the status of the rigs we had there? Yep. So the obviously, with what's happening in Sudan at the moment, that contract is still paused. We've recovered some of the equipment from there. We haven't taken drill rigs out. In a location like that, we would always put older equipment where we're unsure long term where things might be. So we have relatively low equipment. Some of the ancillary equipment were removed and taken to Egypt. At this stage Perseus have put people back on the ground but we don't have clear visibility when drilling might start again. Thanks. Maybe one on direct investments, you know, question is PDI has been clearly very successful.

39:48 Do you plan to allocate some of the funds, to more investments? I think the simple answer is yes, but not specifically from this. We continue to we expect that we'll continue to find great investments like those and like PDI and Weir, and we typically have started these investments with ones or $2,000,000. They're not large investments, so we expect that we'll continue to do that as the method that we go forward. It's worked very well. And I think the knowledge that we have in a couple of our key personnel in the business or directors in our business really gives us a very good insight into some of these opportunities. And I think we'll continue to follow that path, but not specifically put a certain number of dollars away from this payment.

40:40 Thanks. Question, it might be easier to go back to the slide, actually. Question's confusing, but which of our labs are commercial rather than Mindsight Labs? We can just talk to it at the So the mine site labs we have are the Nevada gold mines. The Prince George lab at the moment is doing only mine site with samples coming down from Alaska, but we're about to move it, put a lab into Alaska to do that. We have a mine site lab at Kibali or two at Kibali, two Chrysos units and another one at Bullion Hallu in Tanzania. And then we have the Yamasukra lab. While it's a commercial lab, it has a large contract with a mining company nearby.

41:29 It's a commercial lab. Generally the other labs are commercial. The franchise labs we don't own. So what happens with those is they prepare samples. They come into our central lab in Langley and we do the specific analysis that's needed to be done and there's effectively a revenue share on those samples that come in. Whereas the commercial CRISSOS units, we run those completely doing prep and doing those samples. We expect that we'll continue to grow more mine site labs over the coming period. There'll be a couple of others that will be dedicated to mining companies going forward. Thanks. The question that's come on just in terms of our guidance. You know, we've talked clearly in our release and presentation that, you know, there's some operational challenges in the first half. What is the confidence level on group guidance and also MSA Labs guidance?

42:29 I I we're still confident to provide guidance in that range for the total year. A number of the contracts that were slow to start are now coming into full run rates, and we've also grown a number of the other early stage contracts of some of those that come online a bit quicker than we were able to achieve in H1. So we're still confident that we'll achieve within that range on revenue. Thanks. And I think one last one unless more come in in the meantime. What what are your thoughts on m and a in the sector? We've obviously seen m and a across mining, but also in the contracting space. DDH one, board long years now gone private. What are your thoughts on M and A in the sector?

43:19 I think there's still opportunity. There are a number of specialist drillers. Obviously, they're very large ones like Bort Longyear and DDH one and and Major. For Arco, similar size to us. I think there's for us, as we bed down our US operations, I do think that we can grow our presence there both organically, but I think there might be some inorganic opportunities as well. I don't you know, I'd be surprised if we bought other businesses in Africa. I think we've got a very large presence there already. It would really be for us to get some further geographic reach in our business. But we at this stage, you know, our focus is on paying down our debt, generating more cash again, and then we can start to look at that when we're in a stronger financial position going forward.

44:14 Thanks. And I got one very last question that's come in on remuneration. Can you talk about the STEP, LTEP and how it's calculated and on what basis any sort of bonus internally is done on. Yep. So the STIP program is based on the results in the year. It's a combination of metrics for across the profitability of the business, the return on capital. We normally have a couple of other specific metrics on growth and then there's a safety metric. The majority of people also have a personal KPI, which is part of that percentage. The LTIP the LTIP is based on a three year trailing with a based on shareholder return.

45:05 I think, Connor, just to add to that because I can see the question. The the zero cost share option concept, I mean, that's a structural point. There's still a there's still a performance, so a broader performance driven metric behind that. So I total shareholder return EPS accretion over that period that drives the drives the the the incentive amount. So so the zero cost option is literally the structure that we have adopted as opposed to it being zero cost share options. Thanks. And I guess last one maybe. So gold's hitting all time highs. Can you talk about the general impact on the sector and potentially just talk about general demand levels, I guess?

45:55 Yeah. I I think so I I think part of what generally, there's strong demand. I think even with the high gold price, high copper at the moment, I think the the juniors are struggling to get funding. So generally, if I look across whether it's Australia or Africa or Canada, and I think that's typically what's driven rates in drilling up in previous cycles. I think the majors are being very disciplined while they're spending large amounts of money, whether that's Barrick, Agnito, or Newmont, or other majors. I do I I think, you know, we're seeing strong demand, but it's not necessarily flowing into rates because we generally do multiyear contracts.

46:40 So we're not in the market on effectively spot rates at a given time. We have longer term contracts that give us this, I guess, stability in our business, good long term returns as opposed to the ups and downs of the cycle. I think that's probably if you look at the utilization of our fleet in the mid-70s again, on '72 on the half, but increasing into this half, I think that demonstrates that there's a strong market out there. But we see some of our bigger competitors who have a much greater exploration focus have a much lower utilization, and it wouldn't be until that utilization really lifted that you'd see rates increase. I think the other thing that while gold is high, the same drill rigs do nickel, iron ore, lithium and other commodities.

47:31 So while those commodities are down, I think it's, you know, the drill rigs and others are available, and so it hasn't seen the same spike of a general increase across all commodities. Okay. Thanks, everyone, for the questions. I think we'll leave it there, I'll pass back to you, Peter, for any closing comments. Thanks, Connor. Thank you very much, everyone, for joining the call this morning. I appreciate you taking the time, and thank you very much for the questions. Look forward to talking to you in our next investor call, and thank you for joining us. Perfect. Peter, Rick, Connor, thank you very much for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected, provide your feedback, and the management team can better understand your views and expectations.

48:20 This won't take a few moments to complete, but I'm sure you'll be greatly valued by the company. On behalf of the management team of CAPITAL LIMITED, we'd like to thank you for attending today's presentation, and good morning to you all.