ACG Metals Ltd (LSE:ACG, OTC:ACGAF) chairman and CEO Artem Volynets talked with Proactive about the company's financial performance, project progress, and strategic outlook as it transitions from a gold producer to a polymetallic business focused on copper and zinc.
Volynets reported $36 million in EBITDA and $31 million in operational cash flow for the first half of the year, driven by lower all-in sustaining costs, which fell 13% to just over $1,000 per ounce. He noted, “You understand what kind of margins we are making when the gold is $3,600 dollars per ounce, which is good.”
The company is currently advancing its Gediktepe sulfide expansion project in Turkey, with Volynets stating it is “on time and on budget,” with full commercial production targeted before mid-2025. Key equipment has begun arriving, and concrete and steel works are underway.
The balance sheet remains strong, with $160 million in cash and only $70 million in capex remaining for the expansion. The recent listing on the OTCQX market in the US and increased research coverage has boosted liquidity by 300%.
While copper is central to future plans, ACG Metals will continue to generate gold revenues, expecting 15,000 to 20,000 ounces of gold production annually as part of the copper concentrate at Gediktepe.
Volynets said the company is “just beginning” to be rerated by the market, reflecting its strong fundamentals and strategic execution.
Proactive: Artem, very good to speak with you. You reported $36 million in EBITDA and strong cash flow. What were the key drivers behind your first half performance?
Artem Volynets: The strong cash flow numbers and EBITDA — $36 million, as you mentioned — and cash flow from operations, $31 million, were driven by our focus on cost management. We managed to reduce all-in sustaining costs in H1 by 13%, to just over $1,000 per ounce.
So you understand what kind of margins we are making when the gold is $3,600 per ounce, which is good. That was a key driver of continuous cash flow generation. We also produced and sold more gold ounces than last year. We sold 23,000 ounces. Given our guidance for the year — 36 to 38,000 — we are making very good progress to meet at least this guidance.
Proactive: The Gediktepe sulfide expansion is on time and on budget. What progress has been made on site and what milestones should investors expect next?
Artem Volynets: Yes, indeed. We have spent roughly half of the $146 million fixed-price contract. We're roughly halfway through — on track to commission and reach full commercial production before the middle of next year. All the key pieces of equipment have been ordered and started to arrive on site. Concrete and steel works have commenced.
We are more than 55% done with engineering. Recruitment is at 52%. Construction is about 22%. So we are progressing on time and on budget. It's a relatively simple brownfield expansion project. We do not anticipate any surprises. Once we commence production, we shall be producing about 20 to 25,000 tonnes of copper equivalent.
Proactive: You've also refinanced debt over the first half of the $200 million bond and simplified the capital structure. How does this position ACG for growth and reduce the risk for shareholders?
Artem Volynets: I don't see any risk for shareholders. We have a very conservative balance sheet with $160 million of cash on balance — more than enough to complete our sulfide expansion project, with approximately $70 million CapEx remaining. At the same time, we continue to produce gold and generate significant cash flows due to our low-cost position. So: healthy balance sheet, simple capital structure, high cash flow generation. This is as good as it gets.
I think our shareholders have been happily enjoying a rerating in our shares, but we are just beginning. What you see in terms of share price on your screens is just the beginning of the story for ACG.
Proactive: You're also expanding your shareholder base. You recently started trading on the OTCQX in the United States. What impact do you expect this will have on liquidity and your investor base?
Artem Volynets: It's not one single step that has an impact on liquidity. It’s a combination of steps and our continuous effort to market the story and bring it to the attention of a broader group of investors. Listing over-the-counter in New York is just one more step — but it certainly helped.
We are pleased to say that since we started our investor engagement efforts in mid-June — when Canaccord and Berenberg published their first research reports — we’ve been joined by Cantor Fitzgerald in the States, which recently also initiated coverage. Since that start, liquidity in shares has increased by about 300%, which is good to see. But again, this is just the start. We are still trading at below three times free cash flow. We generated a lot of cash flow and we expect ACG to continue to re-rate.
Proactive: With gold and silver performing strongly, but copper central to your growth plans, how do you see ACG balancing near-term production with long-term strategy?
Artem Volynets: That's exactly what we are doing. We are currently producing gold and transitioning to the production of copper concentrate and zinc concentrate. But gold will continue to be a significant addition to our revenues at the Gediktepe mine in Turkey. As part of the copper concentrate, we'll continue to produce about 15 to 20,000 ounces of gold — which, given the current gold price, is a very healthy addition.
As we move forward, we will focus on being a copper producer, but we certainly don't mind having additional gold production. We also see interest in polymetallic targets for future acquisitions.
Proactive: Artem, I hope you'll continue to keep us updated with your progress. Thank you very much for speaking with us today.