Goldplat (LSE:GDP) — Q4 Results

0:01 Good morning, ladies and gentlemen, and welcome to the GOLDPLAT PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so, and these will be available via your investor meet company dashboard.

0:33 Before we begin, I would like to submit the following poll, and I would now like to hand you over to CEO, Werner Glynnenberg. Good morning, sir. Good morning, Jake, and good morning to the listeners, and Thank you for joining me this morning. As indicated earlier, Jake, I am in the plant this morning, so hopefully there's not a lot of noise coming out of the background. I think to start, I think the presentation that I'm going to present probably some of the listeners and viewers has seen before, but I think I want to specifically try and address this presentation from the perspective of what has been changing over the last year, last quarter, and also what we currently see probably happening in a short, medium, long term. So I think if we start with overview of GOLDPLAT, we indicated that we are a cash generative business and I think over the last year even with all the challenges that we've experienced, we've remained exactly that. It's probably indicated the resilience in our business model and the diversity that we do have in our operations. And we'll talk a bit about the challenges a little bit later In terms of where we operate, we've got plants operating in Africa, in South

2:05 Africa specifically, and in Ghana. And then we source throughout Africa and also in South America, And we've seen the benefit of that during this year. The flow out of South America has been improving, which for me is a positive. And we're also looking at increasing our presence as we indicated to the market in South America. And I'll talk about the plant we're planning to put up there also a bit later. In terms of commodities, we focus on gold and PGMs as you're aware, obviously mainly on gold. I think from looking into the future our focus is to diversify more and more into other commodities, specifically PGMs as a start, but also into coal or where we see there's potentially value to recover from previously mined material.

2:58 And I think the process what we've developed on the gold side probably can be replicated somewhere else and we'll keep the market up to date as that progress. The next one is one that I'm actually quite excited about. Mean, we are a niche operation, we've got an experienced management team. In the last four months we've been joined by a new COO and a CFO that came from industry, not specifically the gold industry. I think through interactions with him, I started to again realize that what we've built here at GOLDPLAT, the team we've got here is actually quite unique, and that is definitely something we can bolt forward on.

3:44 And I'll talk about that also a little bit later into the presentation. If we then look at potentially, well, the biggest opportunity we've got internally in the business, it is our Tidings Facility, which I can now call our old Tidings facility with the commissioning of our new one. The old tailings facility contains a jock compliant resource of roughly 82,000 ounces of gold that was assessed in 2016. After that, we probably put another million tonnes of tailings onto that facility, plusminus, so we expect that ounces to be more. But the positive is, with us moving from this tailings facility, the ability to reprocess, recover value from the old tailings facility is just becoming more and more of a reality.

4:37 So if we just look at some key data of GOLDPLAT, we currently have a market cap of £13,000,000 trading on a share price of roughly 7.7 p, which is unfortunately quite down from where we were more than a year ago at 12 p. And the reason for us coming down, think probably relates mainly to the delays that we've experienced in the GOLDPLACESS and the receivable or approval in Ghana, as well as the electricity issues we've experienced in South Africa. And I think both of those items are stuff that we've got a better handle on. We've got the gold license in place in Ghana now, which is in place for another three years.

5:25 In terms of electricity, in South Africa, we've made a decision to buy generators that should be in place by the second quarter of this financial period. And I think there is obviously good momentum to obviously look at getting the share price moving upwards. And I'll talk around what I see the valuation might or should be. If we look at the board, we've got an experienced board led by Gerald Kemp, the Chairman. He's been in the industry for more than forty years, I guess. What I'm excited about is obviously the executive management team that I've alluded to. Douglas Davidson, Ben Doster has joined us as operating officer and financial officer in the last four months, And they've already been contributing quite a lot in terms of just strengthening the current business and just setting the price.

6:19 So if we look at shareholders, we've got one major shareholder above 3%, which is Martin Oye, who's also on the board, and he owns 28.85%. If we then just look for those that's not familiar with GOLDPLAT PLC and the processes, I don't want to stay too long on this slide, but in essence our clients is blue chip gold producers. The material we source from them is basically by products being generated in their operations and plants in the likes of fine garments, mill liners, woodchurch grease and anything else containing gold or gold bearing. We do the similar types of services on the PGM side. We put it then through our unique processes at our plants in Ghana as well as in South Africa, which got different types of metallurgical recovery units that we can utilize in different ways, and we end up producing gold dore, silver dore, or different types of concentrates that we send to refiners or smelters.

7:25 Now, throughout the story you can then potentially see that we do supply some sort of environmental solution for the mining operations in itself that we remove these byproducts that would have lied on surface at their premises. We're quite proud and we see ourselves from that perspective as a green gold producer. We also spent time to make sure the gold or the material we source is responsible. We follow the London Bullion Market Association's responsible gold guidelines and are being audited by Deloitte in this regard every second year. And this is something we just want to build and improve on going forward.

8:15 If we then go and just stand still and look at this from a numbers point of view, and as I'm mentioning these numbers, I just want you to obviously consider this in line with what our current market capitalization is, which is £13,000,000 If we then move on, I've already explained that we've got operations in Ghana and South Africa. On this slide I'm just indicating the operating profits achieved. Obviously this is still unaudited numbers for the last financial period, which was $3,200,000 in South Africa and 2,700,000 in Ghana. So if we quickly look at gold recovery, South Africa, in terms of where the key focus is, the key focus remains on sourcing of material.

9:04 On the low grade material side, we have over the last eighteen months secured close to five years with the material. But that basically forms onethree of our production in South Africa. The other twothree is supported by relationships and contractors in place with current mining operations. And that's where our big focus is on to make sure that we can maintain and sustain that going forward and just improve visibility around that. There's still one major producer in South Africa that we're not contracted with, and that is where we see big potential and opportunity going forward.

9:49 If we look at diversifying and growth of the business in South Africa, that we believe lies in looking at other elements, specifically PGMs that we have been busy with in the last five years. But we're also looking a bit wider, looking at other commodities like coal. As indicated, we have invested into a coal technology company, and we're currently still going through test work to determine methods and process to recover value from coal fines that's being produced and left behind by historical mining operations or that's currently being produced by current coal processing wash plants. And we are excited about those prospects, and we'll update the market as we move along.

10:41 As I've indicated in the first slide, we are the biggest opportunity internally for GOLDPLAT lies in our tailings facility. Now what needs to happen, I know I've had a few questions from shareholders before we see value coming from this TSF. Now the first one is that we need to move off the old TSF at the start, which will happen over the next six to eight, nine months as we fully commission the new tailings facility. At the same time, we need to get final approvals in terms of water use licenses for certain areas where the pipeline will cross.

11:27 A big part of the pipeline that we're going to require approvals has been received, but there's still a portion where we're just waiting for final approval. In terms of time lines there, obviously, the visibility is limited, But I don't expect that there's a reason that it should take an extremely long time. Now while we're busy with that, we're also then engaging with DRD to get final commercials finalized so that we've got a better indication of what the value for GOLDPLAT will be in the future. And as those becomes more apparent and clear, we can then start giving the market a bit more clarity in terms of what's the total value we can expect from the tailings facility.

12:15 Obviously, the value of the gold contained in that facility is significant, but it all comes down to the percentage of the gold that we will recover as well as what the cost of that will be at the end of the day. Now the new tailings facility I've spoken about that's being commissioned at the beginning of this month will give us approximately six years, maybe slightly more, depending on how we deposit in the future capacity. So I think the visibility in terms of the business has increased over the last four months in terms of supply of material as well as ability to deposit, with a key focus still remaining on securing bioproducts and wood chips from current mining operations.

13:10 In Ghana, it looks actually quite similar. If we think about the focus, the focus remains on sourcing material out of West Africa and obviously into South America.

13:21 In Ghana, we, in the past, haven't invested that amount of capital. It wasn't required. We are planning and actually really busy investing some capital in the small flotation operation there to be able to extract more value from the material we get from current mining clients. So it is just trying to find ways and processes to maximize recovery on all the material we do receive. On the sourcing side, we are seeing progress in West Africa, exciting things in Ivory Coast specifically. And hopefully, we might be receiving material out of that country in the near future. Mali, we've received material in the future, and there's still a lot of potential there.

14:11 And we'll keep the market updated as we see those materials starting to flow. If we look at growth in Ghana, I think growth in Ghana is mainly aimed at increasing the amount of supply that we can get from clients all over Africa and into South America. I also see growth for Ghana coming from establishing a plant in South America. We've identified a site, and we are taking it slow. We have indicated to the market that we plan to invest. But we're not rushing that investment at this point in time. The idea is to really grow as we see the opportunities and really inform the market as things progress.

15:03 If we look at the financial results, this obviously refers to a year ago's results, which is the last audited results, 06/30/2022. So I'd rather would like to focus on specific items. I mean, you can see last year, we were trading at four to five PE. So if we take the current share price, that's probably closer to three price earnings ratio. So I think the company in terms of performance and what we've indicated the sustainable performance over the last five years is valued quite low. If we then look at the balance sheet, we will see that the company has got a lot of value locked up in net working capital, almost two thirds, if not 80% of our current market cap is locked up in net working capital. So the current valuation of the company or the market cap of EUR 13,000,000, I think, is supported well, whether it's through net working capital or through current production and performance.

16:18 If we then look at where the focus is going forward, I just want to maybe talk a bit about where we were the last year, the challenges we've got and where we see the growth is coming from over the next period. I mean, firstly, over the last four months, we've experienced issues where we've delivered a lot of material, a lot of our production to smelters, where the outturn was delayed, meaning that cash was locked up in debtors for a considerable amount of time. And some of that was still the case by year end, and we probably only see that coming through towards the beginning of the second quarter.

17:04 We had challenges to export material out of Ghana due to our gold license, which resulted in a lot of lockup of inventory in Ghana. And you'll also see when the financial results comes out, we have a lot of material that is selling in inventory, which has actually already been on water and on its way to the smelters, but we couldn't realize that sale as yet. And that we will see coming through in the first quarter of twenty twenty four and will support production and margins for the first half of the year for Ghana. We had the electricity supply issues in South Africa, and maybe I'll talk a bit more about that during the Q and A session.

17:54 Now with that, I think, as indicated in the beginning, we've dealt with the gold licensing issue. We're still dealing with electricity problems in South Africa. We're currently losing roughly 25% of our production time due to electricity supply concerns. But we are walking on a path where we're going to take control through the implementation of generators South Africa towards October. So that will give us a bit more control of our current operations. I think for me, personally, is important if I look at the operation is that we have been able to generate cash positive returns in the last twelve months.

18:45 We achieved EUR 6,000,000 operating profit in the two production entities, even though we had all of this concern. So for me, there's a lot of resilience. And I think we value our current operation. And with the new management team with Douglas and Brenda that's joined us, the focus will remain on strengthening our current operation and really build that to make sure that our services is of excellence. We believe if we solidify the current operations, ensure sustainability, from there, we will then get our strategic relationships and partnerships we're looking for.

19:31 And that will then be the foundation where we can grow from. And that growth will come from the TSF reprocessing. And then we start looking at third parties, where we talk about, well, reprocessing of other types of material, building plants that can handle coal or PGMs and stuff like that. So really, at this point in time, I believe the company is providing good returns. In 2022, we provided a return of invested capital of over 30%. In the last financial period, our return on invested capital will also be probably a good number. And I think we need to look after that as a start. As we see working capital being unlocked, obviously, there will be a lot of cash value sitting in the business. And then we can decide how we're going to invest that, and whether we can return that to shareholders, on which way we're going to return that to shareholders and what we're going to invest into the current business as well as future opportunities.

20:41 And based on the availability of cash, I believe there's probably an argument for all of what I've mentioned over the next twelve months. Yes. So from a strategic focus point of view, as indicated, we're focusing on building and securing the current operations, which is the sustainability of sourcing material, which is the first point. If we then look at as well as continuing our market efforts into West Africa and South America, I've spoken about the commodity diversity, the reprocessing of the TSF as well as then the key partnerships we see coming from our service delivery in our current operations.

21:33 Jake, I think from a presentation point of view, that's it. I'm happy to go to Q and A now. Perfect, Werner. And thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that's situated on the right hand corner of your screen. But just while the company takes a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Verna, we obviously did receive a number of pre submitted questions ahead of today's event and as you can see there in the Q and A tab, we've also received a number of questions throughout your presentation this morning as well. So firstly, thank you to all of those on the call for taking the time to submit their questions. And Verna, if I may just hand back to you just to read out those questions and give those responses where it's appropriate to do so, and then I'll pick up from you at the end.

22:28 Thank you. Okay. Thank you, Jake. I'll go through the questions from the top. The first one is around when is the approval for the pipeline due? And once it is received, an agreement with DRD will be the metrics of gold production to be released. I think the question is more sort of gauging time lines and value that we're going to see coming from the TSF, as indicated. That's not clear. But I think the important thing is there's movement. There's progress on all these items. There's activities that's happening. So we're definitely moving closer to a point where we can share this with investors, although probably the response at this point in time is similar than previous.

23:22 It shouldn't be seen that there's no progress happening on this front. So how much more does it cost with generators rather than with mines and electricity?

23:36 Obviously, generating your own power through diesel generators does cost significantly more than electricity. I think for me, the generators, firstly, is a way of taking control and creating flexibility. The way we run and operate it will depend on how and where we see the value. The idea is not to run them if we have supply from the main electricity. But when there is issues being experienced, we then have the option to use them. And we can decide what plants do we run, what plants don't we run. So I think based on our assessment, it does definitely give us a lot more visibility and certainty for the next twelve months.

24:24 There's a question around what else what is the infrastructure problems referred to? I assume this referred to the infrastructure problems around electricity. Currently, we're experiencing electricity shortages for two reasons. The one is because of load shedding, as we call it, where electricity is cut to control the constraints on the network by Eskom. The other problems we do experience is where cables is either stolen or there's problems on the lines experiencing themselves, which is then causing electricity cuts at the plant. What is the intention of profits from the sale of material to DRD? How much will be retained and how much will be paid in dividends is the potential coal project to be financed from this source?

25:22 I think I mean, obviously, we need to still get to a point where we've got clarity in terms of what is the value we're going to get from DRD before we can indicate it to the market what is the strategy in terms of the funds that is to be received from that. I read also into this question, is there a risk that all the value being received from the tailings facility will be invested into other potential projects? I think in the end, Us directors, it's important to look at the best way of employing the capital in the company for the shareholders. And if there is no real opportunities that we see that justifies investments, obviously, we'll look at returning debt to shareholders in the future.

26:14 Okay. I think on that question, the company has, for the past three years, suggested it wishes to provide shareholders with value and return on investment. And in this question, it basically indicates that no dividend has been forthcoming. I think if we look at where we are, the group has been performing well over the last three years. We have been generating profits. I think a lot of those profits has been unfortunately locked up in cash flow as we grew. And we are continuously assessing what is the best to do with the value we have been generating, and we will continue to do so. So if we see excess cash, we will then decide in which basis do we return that to shareholders if we don't have any other opportunities.

27:08 Obviously, we do have the DRD project potentially coming up in the near future that might need some capital, and we might want to retain some cash to be able to fund that. Okay. More questions asked in terms of the same nature. K. Would you consider investment into solar to mitigate downtime?

27:48 I think in regards to solar, obviously, we don't have we've got a small footprint and a small plant here in South Africa. In regards to solar, solar works when you've got a base load. So you need to have electricity supply to be able to run solar. If you have a total cut in electricity, as we're experiencing from the municipality or due to cable theft, then even if you have solar, you will not be able to run the plant. So that's the reason why solar has not been considered, although, I mean, it will always remain the preference if it's feasible. You've bought back shares at this level in the past. Will you consider to do this again?

28:35 As already indicated, I mean, from our perspective, we need to look at the best value for our shareholders at a specific point in time. We've gone through a six month period where we had money locked up at smelters. We had inventory locked up in Ghana. And we're now going through a period where we're sort of unlocking that value. And as we're seeing that happening, we will need to consider what to do with potential cash balances we've got. Obviously, I've indicated throughout the presentation, I believe the current valuation of our business is probably lower than intrinsic value, and that definitely gives a reason for market for share buybacks if we feel it's appropriate.

29:28 Could we go through Slide six again where the audio cut out for the first time? Let's handle all the questions, and then we can see if we can go back to Slide six, and I can just deal with that. And more questions around electricity, I think it's already been addressed. There's a question about coal and whether this is step away from core activity. Would it not be better to focus on metals? I think in terms of this question, we can obviously answer and evaluate it from different points of view.

30:20 We obviously, at this point in time, as management, see potential value from a resource perspective and availability perspective in terms of reprocessing of the coal, but it doesn't mean we're not looking at other metals potentially in the future. But in saying that, and as per the summary at the end, our focus will remain on our current business. It will remain on gold. It will remain on PGMs. We don't have an idea of moving away from there. We have an idea of solidifying that, strengthening that and using that as a springboard into the future. But we're definitely not moving away from our current business. We're just looking at what we can attach to it in the future.

31:10 There's a question around aluminum and copper, where the aluminum is not better. Obviously, that's a decision from the municipality point of view. Some of the cables being stolen is being replaced by aluminium. But at this point in time, that is done as and when cable is stolen. So Sorry, I'm just reading through the questions. I think there's a question here around return of value over the last ten years of the business. On building mining operations.

32:08 We've moved away from that strategy five years ago. And at that point in time, when we moved away, we were trading at 3P. We've increased that value to 12P, which indicates that, that change away from mining was the right strategy. We are trading now down at 8p, but we still see the value being a lot higher than that. So I still believe that's the right strategy. And I believe we are delivering on the recovery business, and that's what we will continue to do. There's questions about certainty of accounts receivable. Obviously, that's continuously assessed from our perspective. I think there is on all our accounts receivable, we're dealing with large international companies, and we are seeing continuous money flow coming in and going out.

33:08 And that's something we will evaluate on a regular basis to make sure we feel comfortable. We're also trying to spread our material to different smelters to limit our exposure as best as possible into the future. I think there's a question around the fine coal looking at almost like a bankable feasibility study. As indicated, we're still running test work and evaluating how investment will work. So once we've got more detail, we can look at what we can share to the market. What is the recovery rate the DRD are expecting on the TSF?

33:59 David, this is a question that's been asked before. I think we've indicated to the market in the past between 2030% potentially that we can recover from the Tidings facility. But in the end, we have produced the tidings facility over the last twenty years through processing of different types of material. So if you go and look at the TSF, it contains various type of material with different characteristics, and so we expect that the recoveries will vary depending on what we process, when we process it. Jake, is there possibility of going back to to slide six? I'm not sure if the slides are still on the screen.

34:48 Absolutely, sir. In terms of slide six, and I'm not sure if you followed what I've indicated when we went through this slide, I think what is important and relevant for me is that, I mean, at the moment, what we are supplying to industry historically and currently is ability for them to deal with the byproducts they generate, which might have ended up on a heap on surface. We've got the ability to process that, recover more value from that. And then what we don't use will end up on a tidings facility. On our site, we do our sourcing following the London Bullion Market Association's responsible gold guidelines, and we are being audited on that every twenty four months or so.

35:48 This is an area which we want to which we are building more and more strategies around in terms of just improving our own footprint, and we'll keep the market updated in terms of that as we move along. Jake, I think from my side, that's all the questions. I just wanna see if any Perfect. Came in. Okay. I see there's another question that just came in. There's a question around the current share price and arguments around whether we should be sold to a larger party. I think this is a question for me that I'm not going to address at this point in time. I think from our management team, we believe 100% in the business.

36:55 And we believe there's value to grow this business. And most of that value can be achieved through proper strategy internally. And we still see a lot of value going forward. Werner, if I may just jump back in there. Thank you very much indeed for addressing all of those questions that came in from investors this morning. And of course, if there are any further questions that do come through, we'll be able to make these available to you immediately after the presentation has ended, just for you to review, to then add any additional responses, of course, where it's appropriate to do so, and we'll publish all those responses out on the Investor Meet company platform. But Verna, just really looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments to wrap up with, that would be great.

37:47 Okay. Thank you, Jake. Firstly, mean, you to the listeners and thank you for the questions, which came from various parties. I think personally from my side, GOLDPLAT is extremely well placed. We obviously are not unique. As any industry and as any business, we do face a lot of challenges. I think in the last year, we showed a lot of resilience. I'm definitely a lot more optimistic in terms of our own business. And I believe there's a lot of value to be had from sustaining the current operations, and we're seeing opportunities in the market and is looking forward to exploiting that. And while doing so, obviously, sure we look after the shareholders as well.

38:38 Werner, that's great. And thank you very much indeed for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations? This may take a few moments to complete, but I'm sure be greatly valued by the company. On behalf of the management team of GOLDPLAT PLC, we would like to thank you for attending today's presentation. That now concludes today's session, so good morning to you all.