Metals Exploration (LSE:MTL) — Update on Recent Activities

0:00 Good morning, and welcome to the METALS EXPLORATION PLC update on recent activities presentation. Throughout this recorded meeting, investors will be in listen only mode. The company will not be in a position to take questions today due to the current recommended offer for Condor Gold. Before we begin, we'd like to submit the following poll. I'd now like to hand you over Darren Bowden, CEO. Good morning, sir.

0:22 Good morning and thank you very much for that. And good morning to the listeners. I'm glad you're willing to chime in and listen to our update on the recent activities and on some updates on what's going on within METALS EXPLORATION. I'll flick through the slides. Hopefully most of you have a good understanding of who METALS EXPLORATION are, but we will give you a small update on that so that everybody's brought up to speed on the same basis. And then hopefully we can move forward on the exploration activities, the acquisitions and offer we've made for Condor. And, yeah, we'll finish with some of the sustainability and just some of the things we're very proud of in METALS EXPLORATION.

1:07 I will use certain terms within this presentation. METALS EXPLORATION has a subsidiary within The Philippines called FCF Minerals and they operate a mine called Runruno. So those terms will come up and so please just take them all as one because it's really just the subsidiaries of metals I'll be talking about as we go through the presentation. And really, we're just so for people who don't know metals exploration, we're an AIM quoted stock. We produce about 80,000 ounces a year. And year on year, METALS EXPLORATION have been improving its outcomes, its performance, and its overall revenue streams, which has led us to the position we are in today, where we've been able to make the activities or start the M and A processes that we have with Condor.

2:05 So, you know, the turnaround of METALS EXPLORATION started five years ago when myself and the team took over. And we've lifted, you know, production performance from around the 50,000 ounces at about 50% recovery right the way through to 90% recovery in 80,000 ounces, which we are performing at around the 85,000 ounces a year at the moment. And with that, we've been able to reduce our debt, get into a position where we're debt free. There is a small caveat here where we've taken on a small loan from one of our shareholders for this acquisition just to ensure that the acquisition went forward smoothly. And the proposed acquisition of Condit Gold, which includes the India project in Nicaragua, is part of our development strategy.

2:58 And I'll talk about our development strategy as we get into this. The second acquisition, which we did a little bit prior to this, it's a small company, but it's a large prospective exploration tenement. It also fits very well within the strategy and the growth pipeline that we're trying to create in METALS EXPLORATION going forward. We have an extremely well branded company, FCF Minerals, in The Philippines. And we'll talk through our stakeholder and our ESG focus. For us in developing countries, in all countries, our community is one of our key stakeholders. And we very much focus on our safety and our community as we go forward.

3:45 So talking about delivering on our strategy, and there's a couple of slides we'll talk about through here. The acquisition of Condor Gold. And while we've just started that process and the finalisation of that process looks like it'd hopefully be somewhere around mid January. It is really step two or stage two of the process that we've been focused on and the four stages of growth that this company has been going through and that the board is really has the vision to move this company forward. We are cash generative. We have been for a couple of years now. We fully drew down the original debt that was on the company when I started, which gave us the opportunity to be cash generative and to start looking at these acquisitions.

4:34 We continue to focus on other M and A opportunities, but truly we want to bed down what we have now, make sure that the company can move forward on those opportunities before we move to that next stage. We have an extremely strong management team, and I'll talk about the opportunity within Nicaragua because people might think, well, here's a Philippine company or Philippine, you know, centric operation, aim listed company, why would they move to Nicaragua? And there's absolute there's good reasons for that. And I'll talk you through those as we go forward. And really, in all aspects, we've set goals, we've talked to our stakeholders and our shareholders. And we've been working on achieving those goals as we've gone forward.

5:22 So our growth strategy is really four pillars. The first is to achieve the performance of Runaruno as it stands. And we've worked on that for five years. And with the achievement of that performance and look, on the back of that achievement, the growth, with the strong gold price, we've been able to pay down our debt. And we've been in a position to start considering these type of growth strategies. So once we drew down our debt, our four pillars were simple. We get the performance of Ron Bruno into a position where it is not just cash generative, but gives us the basis to grow this company. Our second objective is to replace the cash flow of Runruno with another near construction or construction ready project.

6:15 And that is now Condor Gold under this acquisition strategy. And Condor is it is construction ready. All permits are in place. And the opportunity to move that to an operating mine pre closure of Runruno is critical and is within the target of the strategy. Our third strategy our third pillar in this strategy is looking for a three to five year plan for the RunRuno infrastructure and the RunRuno assets. We're very focused on taking those assets, re utilising that capital to the best of its ability in another project. This will give us a timeframe that will reduce timeframe for the recapitalization of new project.

7:06 And it will ensure that the capital value of those assets is realized into the future. We have a number of targets within The Philippines, which we would like to do that. And we're working on those targets. Some are within YMC, the ABRA project. But we are more than willing to look for growth strategies outside of The Philippines, Asia centric, so that these assets can be deployed somewhere else. And then our fourth pillar is looking for that large growth strategy, looking for that asset that can turn this company into a small to medium gold producer into one of those large producers. And we do believe that the YMC project, the ABRA project within YMC absolutely provides that opportunity.

7:56 Some of the targets we have there are significant, and we're very much looking forward to moving forward drilling and exploring those targets for that growth pipeline into the future.

8:11 So the acquisition of Condor Gold. Just to give you an idea, Condor Gold is a Nicaraguan asset. It's about two to two and a half hours outside of the capital of Managua. It is a significant opportunity in terms of the size of the tenement holding. There are a number of deposits that have already been recognised by Condor over the last fifteen years. The key asset in that project is Landia. But there are others, Las Americas, Matisis and many others that fall within the resource profile of about 2,300,000 ounces, which has been announced and provided to the market by Condor.

9:00 We very much like the asset for the simple reason that it is a construction ready asset. The Nicaraguan government is proactive in the mining spheres. So geopolitically, it is a proactive area for mining. And Condor have a very good relationship, which they've built over the last fifteen years. Myself, I have seventeen years in South America. I've worked in countries such as Colombia, Dominican Republic, Honduras, Mexico, all around Nicaragua. I've actually got key contacts in Nicaragua myself. And the team that I would bring to the Nicaraguan assets are team is the team that's worked with me in those in those areas in South America or fluent in Spanish and have significant experience in these greenfields and growth assets into production.

9:57 So we have the right team, we have the right experience, and the benefit of taking on this type of project is we de risk that country profile. And you say it's another developing country. And yes, it is. But the size of our company and the type of performance we are looking for, the risk reward for spreading our base to multiple countries derisks the overall profile of the company, but provides a significant upside in terms of the growth strategy. So Condor made complete sense to us. It made very much sense to our shareholders and our board. And the acquisition is moving forward under the basis that I will explain to you. So we've made an offer to Condor, which is the we're looking at a shares and cash offer as the starting point. And the shares and cash offer 70% shares, 30% cash. It's about a four to one share swap with about a 30% cash carry for those shares in Condor, which equates to about well, equates to exactly a $33.33 P share price for Condor. Condor's currently trading about 29.

11:14 And when we started this process, was around about '21. So it was a significant uplift in the initial instance on the initial offer to Condor at 33P. But we thought that and with discussions with the Condor management, Condor board, they felt that there was a future for Condor that they should be recognised for given that they take fifteen years to put this asset in place. And we felt that that was something we could include in the offer. So we have a deferred payment as part of this offer. It's called a CVR and it's contingent value right. And that continued value right has two phases.

12:00 The first phase is a guaranteed payment on production after the first gold pour of 14,400,000 ounces, $14,400,000 US. And that is associated with 800,000 ounces of discovered increased resources within the tenement holding. We've guaranteed that payment. So that equates to about half of 11.1p increase in that offer to Condor. The second half is a proviso on another 800,000 ounces discovery over five years. So we have an agreed program of exploration in terms of total meters.

12:47 And once we've discovered the first 800,000 ounces, if we discover another 800,000 ounces above the initial resource statement of 2,300,000, then there is a further $14,400,000 US payment. That equates, all of that equates to $18 an ounce. Now, if we look at the reality of that, we're talking about 1,600,000 ounces more on top of the current resources for $18 an ounce. It's actually quite a people might say in terms of their share price, that's a significant number. In terms of the value that that adds to both companies, to both sets of shareholders, it's significant in terms of the value rather than the cost.

13:37 So we should look at this as a 1,600,000 ounce benefit to METALS EXPLORATION and to the future shareholders, both Condor and METALS within that growth strategy. Because that takes an existing mine of ten years through to fifteen or twenty years, and that type of value, you know, at $18 an ounce is cheap value for all of us. And the benefit is for everybody. So if we look at that, that adds to a maximum contingent payment of 11.1 P, adding to a total payment for Condor, 33 upfront, an initial guarantee to 14,400,000 or around about 5.5 P, and then another 5.5 P if more accounts are discovered above that.

14:26 So in the end, this deal Condor, the Condor board, the MTL board unanimously recognised the benefit of this deal to both companies and voted in favour of moving this deal forward. And on the back of that, shareholders sorry, the Board of Directors in both companies, which are the major shareholders, both in Condor and in METALS EXPLORATION, signed irrevocable undertakings to vote for this deal as it moves forward. So we all look forward to it. There's about six months worth of paperwork weeks worth of paperwork my language six weeks worth of paperwork all the way throughout to mid January, maybe a little later, where this will go to finalisation of the scheme document and the two companies will be once the offer is fully accepted, the two companies will come together.

15:27 So the RunRuno turnaround success story, just for people who are new to RunRuno, if there's any shareholders of Condor or outside prospective retail buyers who want to understand where we come from. I also want to make just a quick note. There's a lot of slides we would have loved to include in this presentation. But given the period we're in within the offer period and under the takeover code, there's a lot of things we can't prospectively say that we would like to about our future and how we would like to deal with not just the assets that we would take on as part of the acquisition, but our current assets. So please watch this space because this news flow has only just started. And mid to late January, we'll do this again. And we'll present a lot more information on the basis and the numbers around where we feel this company can go with all these assets and with how we're building these assets in the future. But looking at production, we have a forecast for 2024.

16:28 This forecast we've put out in guidance only recently in September, adding 2,500 ounces. We have improving recovery. We have improving cash flow. So things are looking good. We had an excellent year in 2023 with 88.7 recovery and very strong cash flows. So the operational performance of Runruno is significant. It is sustainable. And it goes right the way through to 2027. We will start to run down at the back end of 2026 and Q1 twenty twenty seven run Reno, which is the FCF asset under METALS EXPLORATION will end its mine life. Now there are other opportunities we are looking at to try and extend that and I'll talk through those as we get there. We're having a significant community and socio economic programs within the community.

17:18 And a lot of those will be sustainable into the future to assist our communities as we go forward. And as the mine runs down into care and maintenance and the rehabilitation and review period. And as I should have mentioned in the first slide, we're probably if you look around the world, a company that can achieve 24,000,000 man hours without a lost time incident, that equates to eight years of operation without a lost time incident is significant in anyone's forum. And we're very proud of the team that we've got and the culture that we've built around safety.

18:01 Our processing facility, I won't go too much into this, but, you know, our current recovery, as I said, is improving as we're going forward. We should we'll have results out at the end of the year. So we'll be able to present those in January. But we're very happy with the results we're achieving this year. It is an interesting plant because it includes a circuit called a BIOX circuit for anyone who hasn't been a part of our story as we've gone forward. That's a bio leach. So it used biological technology to leach the sulfides out of the ore. So the gold is can be presented to a CIL leach, which is a cyanide leach, which is a very standard process. So BiOX technology is used in around five to six plants in the world.

18:51 And it's taken us a while to understand it, to develop the intellectual property around it, and to ensure that that can perform to the desired capacities and dispense standards that it now does. The benefit of this is there is a lot of ore bodies in the world which are refractory ore bodies, I. E. That require this type of oxidation process. But there's not a lot of companies that can run it. We have the IP to do so. So we have an opportunity to look at certain ore bodies that a lot of other people would probably not, or that are undervalued by the other people because we can run this technology efficiently and effectively. That opens up a lot of doors to us. So this plant designed at 1.7, we run about 2.1.

19:36 We believe we could probably get a bit more out of it, but we run right now at about 2,100,000 tonnes, which is about a 20% increase on its original design capacity. Our rehabilitation. I've been asked a few times about our end of life costs because rehabilitation is a key aspect of every business in the mining industry, where once you go into closure, you've got a significant cost at the back end. We have completed nearly all of our rehab in a progressive fashion. So when we get to end of mine life, 90% of the rehab, which would have cost us at end of life, has already been completed. And that includes the largest cost, which is the residual storage impoundment.

20:24 That facility at end of mine life is completed and doesn't require any rehabilitation whatsoever. So, you know, we're very proud of this. We've won multiple awards in country for this. And it is a standard we have set that is not just beyond local standards, beyond international standards.

20:47 Beyond that, the recognition, not just locally but internationally, for FCF Minerals is critical for our brand and for our brand locally to make sure that we achieve the vision that we set ourselves five years ago, which is to be the most admired gold company within The Philippines. We believe we've achieved that. How can I say that? The highest award you can achieve in The Philippines is a President's Award. We've now won that three years in a row. We're one of the only mining companies that's ever done this. We were nominated for the first time ever in The Philippines history to represent Philippines in the ASEAN awards in both mining and mineral processing. We're runner-up and second runner-up in both of those categories.

21:33 We are one of the best branded and the most recognised companies for responsible and sustainable mining in The Philippines and in the ASEAN region. Add to this, we've won the safety award numerous times over the last five years. And we also win the tree planting and forestry awards as well nearly every year, given the fact that we plant over a million trees a year. So the company is doing I'm very proud of the team. And I'm very proud of the achievements that they've achieved over the last five years.

22:11 So our recent acquisition of the YMC Group. The YMC Group is an exploration tenement, an exploration company, and it holds tenements in the Abra District of The Philippines. The Abra District is an extension of what's called the Cordillera. The Cordillera is a gold copper rich province. There's probably been about in history about 40,000,000 ounces extracted from this Cordillera area. There's deposit such as far southeast, which is a Tier one asset that's been discovered and targeted by many majors within this area. And we're an extension to this province, further north of most of the previous discoveries.

23:00 It's 16,000 hectares. It's about 20 kilometres. And really the ground is incredible from what we see. The prospectivity, the types of mineralisations we're seeing. It's copper gold rich, and we're very much looking forward to starting some of the drilling programs over some of the drill targets that we have found within this area. This acquisition was approved by the board in December 2023 and passed through final shareholder approval in late August of this year. Again, 600,000 and 41,000,000 shares in METALS. It was a quite a nice, simple acquisition for the company for that growth pipeline, matching those pillars and that strategy for us go forward. And we're very much looking forward to starting exploration in this area.

23:59 So if we look at the Aboriginal targets, and there's also a near mine target within Murumurunu I want to talk about, Really, our strategy is to review all these different priorities as we go forward. But just to give you an idea, and you're looking at a simple graphic on the top right hand corner. And that graphic is showing you what a porphyry style mineralization looks like. And the porphyry style mineralization actually starts with layers. And it is very interesting because you don't need to see copper all the time to understand that it's porphyry because each of the different layers in a porphyry are based on different thermal, it's basically a thermocline with different temperatures of zonation where different metals drop out of the intrusers that bring all of that mineralization up. And we've got two key targets within our porphyry profile that we've currently recognised within the ABBA region.

25:05 One is called Doublingay. Doublingay is actually higher up in the system. It's in the litho arsenic zone, which sits a little bit above the copper zone. And we've got Manikabel, which I've spoken about a number of times. And Menike Bell sits right within the copper zone of the porphyry target. Priority three, and in no means a lower priority, but basically if we step down in terms of size and expectation is DUPAX. DUPAX is a priority which is actually only 20 kilometres from Nounruno. So if Dupax actually does prove to be economic and shows the mineralization, we're hoping it does, it actually could be the first extension to the Ranuno Plate, giving us three to five more years of operations in Runruno, enhancing our cash flow and moving us forward.

26:05 So if I look at Manicabel, as I mentioned, Manicabel is within the copper zone of what is a porphyry target. It's also within a mag low. It's different. So you can get porphyries that are mag low or mag high. Mag low is where the high magnetic such as pyrites iron rich, magnetites iron rich are replaced by copper. And in this case, we have a very strong mag low, which oversees a very high grade copper target. And went to high grade. Normally when you're looking at these types of soil geochemistries, if you've got a soil geochemistry that's around 200 to 300 parts per million, it's a very strong anomaly.

26:58 We've got 3,000 parts per million, which is 0.3%, which is mineable grade in a lot of most cases for a large copper porphyry. And in terms of size, a sizable copper porphyry can be 600 to 800 metres. The actual zone of anomaly here is two and a half kilometres by one and a half with the core being over one and a half kilometres by seven to eight by 800 metres. So the size and the scale and the grade of what we're seeing here is significant in anyone's terms. And we're really looking forward to starting the drilling program here. What we're seeing is this is gold poor, copper rich. So there's no gold to say in this ore body, and it will be a pure copper target in Manikabel.

27:48 We have mapped the porphyry on surface. So it is standing up that that porphyry does exist because each of the stream beds that cross this porphyry as we look north to south along the porphyry, each of the stream beds, the porphyry is exposed for the whole length of the stream bed. It's a very exciting target for me. I like this one a lot. Domonget is also very interesting. As I said, it's a little higher up in the porphyry system. It's interesting in two ways. It's a mag high. So we're sitting here looking at a mag low in Menike Bell, but Dumela is mag high. The interesting thing, mag highs from a porphyry point of view normally come gold bridge. And what we're seeing is a lot of high grade gold on surface. We've had gold assays up to 30 grams a tonne on surface near this.

28:48 If you can see the arsenic anomalies, there's two significant arsenic anomalies. We don't know if they're separate or they have a central core to them. But the grades of these arsenic anomalies, normally you're looking at about 15 parts per million as an anomaly for arsenic in this type of zonation. We're seeing 150 to 200. Again, significant grades. It doesn't tell you that the copper is going to be there, but it tells you that this is a significant target from a porphyry point of view. The just on your screen, if you look to the right, the target on the right is 600 to 800 metres in diameter.

29:34 And as you can see, the target on the left, which seems to wrap around a mag low, is over a kilometre long. It has there's also quite a strong copper anomaly on surface with the gold we see on that side. So also really nice target. We're really looking forward to getting in and drilling this target as well. And the last one I want to talk about quickly was DUPAX. DUPAX is

30:05 what is termed a VMS, which is a volcanic mass of sulfide. So it's a sulfide ore body, which works for our plant as well. And it has an extension in the main area. There's two smaller areas off to the side. The main area that you can see is about 700 metres long by about a 100 metres wide on surface. We've had gold grades up to 15 grams, copper grades up to 7%, a very nice target, only 20 kilometres from mine. It's drill ready. And we're just working through some of the aspects of the permitting with the MGB, which is the Mines Bureau here to start the drilling in Dupax as well. All of these targets are permitted for drilling.

30:53 However, as always in these situations, there's more than one entity we have to have agreement with. And we're working through the other government entities that we require approval from to finalise and start the drilling in all of these cases. However, very exciting for the company. It provides us with that five to ten year growth platform in YMC and ABRA and in DUPAX. Hopefully it can be the extension to the Runruno mine life, giving us time to bring on one of those other ore bodies where the RunRuneau infrastructure can move to ABRA if possible.

31:37 I just want to highlight the last of the things that we do very well, our sustainability programs, our spend in this area. We have a significant interaction and engagement with communities. Our team is very strong in this area and we have an extremely strong social licence. And I'm very proud of the work they do. We invest about 1.5% of our operating costs a year. In 2023, that was about $1,400,000 into social programs. And, you know, we've established ourselves as one of the premier companies within this country, within this sector for responsible mining.

32:24 Also, I'd also like to say that the other aspect of Run Rail, we're one of the first to bring women into operate equipment. We now have over 28% of the workforce is female operating from equipment operators all the way through to our legal counsel. The Filipino workforce is strong, where over 98% of our workforce is Filipino. There's only 11 of us on-site or running around here, helping out where the rest of the work and the job is done by the local contingent of Filipinos who do a fantastic job. So very proud of them, very proud of the work they do. So thank you everyone. That's the update. And I look forward to talking to you in the near future once the acquisition has been finalized.

33:21 Fantastic. Thank you very much indeed for updating investors today. Please ask investors also to close the session. You may automatically be redirected to provide your feedback in order the management team can better understand your views and expectations. So take a few moments to complete, and I'm sure it's greatly valued by the company. On behalf of the management team of METALS EXPLORATION PLC, we'd like to thank you for attending today's presentation. That concludes today's session, and good morning to you all. Thank you.