Central Asia Metals Regulatory News (CAML)

9 January 2020

CENTRAL ASIA METALS PLC

('CAML' or the 'Company')

2019 Operations Update

Central Asia Metals plc (AIM: CAML) today provides a Q4 and full year 2019 operations update for the Kounrad dump leach, solvent extraction and electro-winning ('SX-EW') copper recovery plant in Kazakhstan ('Kounrad') and the Sasa zinc-lead mine in North Macedonia ('Sasa').

Operational highlights

- 2019 copper production exceeded guidance at Kounrad

o 13,771 tonnes produced

- 2019 zinc and lead production from Sasa at the top end of the guidance range

o Zinc in concentrate production, 23,369 tonnes

o Lead in concentrate production, 29,201 tonnes

Corporate highlights

- Cash in the bank on 31 December 2019, $32.4 million

- Gross debt as at 31 December 2019, $108.8 million, a reduction of $36.1 million during 2019

- Nick Clarke transitions to Non-Executive Chairman

2020 production guidance

- Copper, 12,500 to 13,500 tonnes

- Zinc in concentrate, 23,000 to 25,000 tonnes

- Lead in concentrate, 30,000 to 32,000 tonnes

CAML production summary

Nigel Robinson, Chief Executive Officer, commented:

"I am pleased to report another strong year of production for CAML with guidance exceeded for copper and production delivered at the top end of the guidance range for zinc and lead.

"Importantly, our safety performance improved year on year with lost time injuries recorded at both of our sites reducing from eight in 2018 to one in 2019. 

"We also continued to de-leverage, repaying gross debt of $36.1 million during the course of the year.

"2019 was a productive year at Sasa and I am pleased with the improvements that we have made on site, including the installation of our new tertiary crusher, which will facilitate increased throughput and has allowed us to increase our production guidance for 2020. It is the intention to transition to cut and fill mining in the next few years, and this will result in another busy year of technical studies while we finalise our plans and report these to the market during 2020.

"Our 2019 annual results are scheduled to be released on 1 April 2020, when our final dividend for 2019 will also be announced.

"I would like to take this opportunity to thank Nick Clarke for his support and for his dedication as an executive of the Company, and I look forward to continuing to work with him in his new role as our Non-Executive Chairman." 

Kounrad

Kounrad Q4 2019 copper production of 3,138 tonnes brings output for 2019 to 13,771 tonnes. Total Kounrad copper production since operations commenced in 2012 is now 96,245 tonnes. Total copper recovered from the Western Dumps in 2019 was 9,323 tonnes, equating to approximately 68% of the amount plated.

All preparations for the winter period were completed in October and steady state operations continued to the end of 2019.

Copper sales during Q4 2019 were 3,525 tonnes, bringing the total for 2019 to 13,600 tonnes.

Sasa

Production and sales

In Q4 2019, mined and processed ore totalled 210,446 tonnes and 205,714 tonnes respectively, bringing the total for 2019 to 817,714 tonnes of ore mined and 820,491 tonnes of ore processed. The average head grades for the quarter were 3.23% zinc and 3.83% lead, and for 2019 were on average 3.29% and 3.77% respectively. The average 2019 metallurgical recoveries were 86.5% for zinc and 94.5% for lead, an increase on those achieved in 2018.

Sasa produces a zinc concentrate and a separate lead concentrate. In Q4 2019, 11,414 tonnes of concentrate containing 49.6% zinc and 10,401 tonnes of concentrate containing 71.9% lead were produced. Total production for 2019 was 47,104 tonnes of zinc concentrate at an average grade of 49.6% and 40,366 tonnes of lead concentrate at an average grade of 72.3%.

Sasa typically receives from smelters approximately 84% of the value of its zinc in concentrate and approximately 95% of the value of its lead in concentrate. Accordingly, Q4 2019 payable production of zinc was 4,753 tonnes and of lead was 7,109 tonnes, bringing total 2019 payable production to 19,601 tonnes of zinc and 27,741 tonnes of lead. Given that deliveries from Sasa to the smelters occur on a regular basis, payable base metal in concentrate sales for the year were similar to production at 19,697 tonnes of zinc and 27,875 tonnes of lead.

During 2019, Sasa sold 346,258 ounces of payable silver to Osisko Gold Royalties, in accordance with its streaming agreement.

Life of Mine review

During 2019, the CAML operations team, supported by external consultants where appropriate, materially completed its 'Life of Mine' review, the purpose of which was two-fold. First was to identify areas for improvement that could be implemented on site to optimise productivity, and many such initiatives have been actioned during the year.

The second part of the rationale for the Life of Mine study was to ascertain whether the operation should continue utilising the current sub-level caving mining methodology at the Svinja Reka orebody, or whether a change to cut and fill mining would be more appropriate. Cut and fill stoping is a more selective form of ore extraction, whereby voids created by mining are typically filled using a paste comprised, in part, of process plant tailings, and therefore has the additional benefit of reducing the tailings storage facilities required over the life of the mine.

During Q4 2019, a new crusher and screen were installed, adding a third crushing stage to the processing circuit that will alleviate pressure on the existing mills and is expected to allow for increased future annual plant throughput up to 850,000 tonnes.

A full audit of Sasa's underground mobile fleet has been undertaken with regards to overall availability, utilisation, suitability and cost. The analysis indicated that the ageing underground fleet is becoming less cost effective to run. A decision was made during Q4 2019 to undergo a phased process of replacing the current underground mobile plant with a new optimised fleet.

The initial component of this replacement process will include the purchase of six new units in 2020, and three additional units will also be purchased each year in 2021, 2022 and 2023.

During 2019, Sasa began building a wireless underground network, which will allow for increased monitoring and communication of machines and, in Q1 2020, the Company will introduce the use of data analytics in order to better monitor availability and utilisation.

Regarding Sasa's mining method, pre-feasibility studies have been undertaken and, on this basis, the CAML Board has decided in principle to transition to cut and fill stoping at Svinja Reka. There are several reasons for this:

- Cut and fill is generally regarded as a safer mining method than sub-level caving

- Cut and fill is a more flexible mining method better suited to the geometry of the three Svinja Reka orebodies and is therefore expected to result in higher recovery and reduced dilution of ore. This should lead to

o higher zinc and lead reserve grades

o increased metal production over the life of the mine

- It is currently estimated that over 60% of Sasa tailings production would be placed underground as this forms part of the 'paste' fill of the mined voids

o Underground storage of tailings is widely viewed as a more environmentally acceptable solution to traditional surface tailings dams

o In Sasa's case, this approach could also mean that the construction of future downstream tailings storage facilities is not required, thereby saving significant capital expenditure over the life of the mine, and avoiding potential purchases of nearby dwellings. The construction of Tailings Storage Facility 4 ('TSF4'), was completed during 2019 with a capacity of six to seven years. Capital expenditure for TSF4 totalled $16 million (pre and post CAML ownership)

- Recent geotechnical studies at Sasa have demonstrated that geological stresses will increase with depth and additional pillars of ore would need to be left in-situ if Sasa continues its current sub-level caving mining method. The need for increased supporting pillars, resulting in lower recovery of ore, would be eliminated due to the use of backfill within voids in the cut and fill mining method

- It has always been assumed that long-term production from the Golema Reka resource area would be undertaken using the cut and fill mining method. Therefore, construction of a paste plant, which would have been required in the future, has simply been accelerated

CAML will now complete detailed engineering studies and update the mineral resource estimate and ore reserve for Svinja Reka. It is anticipated that this work will be completed during H2 2020.

While detailed capital and operating cost expectations have yet to be finalised, the capital expenditure required to construct a paste plant should be spread over two years from 2021 onwards and is expected to be more than offset by the savings in not constructing further downstream tailings facilities over the life of the mine. CAML does not expect to incur any material capital expenditure for this transition during 2020.

2020 guidance

CAML is targeting 2020 Kounrad copper production of between 12,500 and 13,500 tonnes of cathode, of which approximately 75% is to be leached from the Western Dumps.

At Sasa, CAML expects 2020 underground ore production of between 825,000 and 850,000 tonnes. This should result in zinc in concentrate of between 23,000 and 25,000 tonnes and lead in concentrate of between 30,000 and 32,000 tonnes.

Given the fleet replacement programme underway at Sasa, CAML expects Group 2020 capital expenditure to be between $12 million and $14 million.

Cash and gross debt

As of 31 December 2019, CAML had cash in the bank of $32.4 million and gross debt of $108.8 million.

Change in role of CAML Chairman

Effective from 1 January 2020, Nick Clarke has assumed the role of Non-Executive Chairman. Nick remains committed to CAML, although has now taken a step back from the day-to-day management of the business, which is undertaken by CEO, Nigel Robinson, and CFO, Gavin Ferrar.

For further information contact:

Note to editors:

Central Asia Metals, an AIM-listed UK company based in London, owns 100% of the Kounrad SX-EW copper project in central Kazakhstan and 100% of the Sasa zinc-lead mine in North Macedonia.

For further information, please visit: www.centralasiametals.com and https://twitter.com/CamlMetals