ACG Metals Ltd (LSE:ACG, OTC:ACGAF) earlier this week highlighted progress on its Enriched Ore Treatment Project, which could add up to $300 million in free cash flow and significantly boost net asset value.
The company recently completed a $15 million oversubscribed capital raise. ACG said this follows the release of a scoping study for a low-cost processing plan using off-the-shelf SART (Sulphidisation, Acidification, Recycling, and Thickening) technology.
The company said the waste material targeted by the project contains 2% copper and has already been mined and stored on site at the Gediktepe project in Turkey. This eliminates mining costs, leaving only a processing cost of approximately $15 per tonne.
With a total capital investment of $39 million spread over two phases, it expects to generate up to $300 million in free cash flow, ACG highlighted.
CEO Artem Volynets joined the Proactive studio to tell us more, here we take a closer look at what was said.
I'm joined by Artem Volynets, he's the Chairman and CEO of ACG Metals. Artem, very good to speak with you again. Congratulations on that over-subscribed $15 million placing. What does this strong investor demand tell you about confidence in ACG’s strategy and growth outlook?
Artem Volynets: Thank you, Stephen. Good to be back here. The $15 million oversubscribed raise is really secondary news compared to the announcement we made yesterday. It’s not a surprise that we had an oversubscribed placement because we’ve developed the technology and announced a scoping study on how to treat waste with very small CapEx — $39 million spread over two phases, $29 million first, then another $10 million in two years. This generates $300 million in free cash flow and adds $200 million in net asset value, which is a 60% increase.
The reason the economics are so outstanding is simple: we process waste. The Gediktepe deposit has an oxide layer on top — that’s where we get gold and silver — and underneath is the sulfide layer, where we are building a flotation plant to produce copper and zinc concentrates. Between these two layers is enriched ore, which we mine out to get to the sulfide layer. This enriched ore, which is around 2% copper, is stored on site as waste.
With a little investment, we use SART — Sulphidisation, Acidification, Recycling, and Thickening — a widely used, off-the-shelf technology to process this high-grade waste. There are no mining costs; it's already mined. We only incur processing costs of about $15 per tonne, which adds significant NAV and cash flow to the company.
Proactive: How low risk is the Enriched Ore Treatment Project technically, Artem?
Artem Volynets: It’s off-the-shelf technology. There are plants in Turkey using the same process. We're working with the same engineering firm that built a similar plant 15 years ago nearby. We have a great technical team, and our numbers are based on consensus pricing, which is 25% below current spot prices. If we used spot prices, NAV could be closer to $300 million. The CapEx includes 25% contingency, so we’re confident in execution.
This will begin generating cash flows by the end of next year, right after the oxide ore is exhausted. The market responded very positively — we raised funds at a premium to the 10, 20, and 30-day average share prices. This places us back to where we were in June in terms of trading multiples. At that point, we were at 0.5 price-to-NAV and under three times free cash flow. We’re now back at 0.5 price-to-NAV and 2.6 times free cash flow. There is significant upside for us and our new investors.
Proactive: Artem, looking ahead, what are the key milestones investors should watch for as you move from financing to permitting and construction of Phase 1 next year?
Artem Volynets: As you said, the next major milestone is achieving commercial production from the sulfide layer — producing copper and zinc concentrates — which is on track for June next year. We will continue to optimise operations at Gediktepe, which is becoming a world-class producing asset. We’re always looking at M&A, but as this project shows, the best M&A can be internal — using the same mine, de-risked, and capital efficient. We’ll return to market when those processes mature.