Chrysos Corp Ltd
ASX:C79
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
4.67
8.57
|
| Price Target |
|
We'll email you a reminder when the closing price reaches AUD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
You don't have any saved screeners yet
Thank you for standing by, and welcome to the Chrysos Corporation Limited Q1 FY '25 Quarterly Conference Call. [Operator Instructions]
I would now like to hand the conference over to Mr. Dirk Treasure, CEO. Please go ahead.
Thank you, Amy, for the introduction. Good morning, shareholders, and welcome to our September quarter 4C investor update. As usual, I'm joined here by Brett Coventry, our Chief Financial Officer. And together, Brett, and I will be running through an operational and financial report for the quarter. After the presentation, Brett and I will also be available for Q&A.
Slide 3, please, operator. Chrysos has had continued growth in revenue, up 54% year-on-year and 2% quarter-on-quarter. A substantial component of our revenue is increasingly coming from outside Australia, with our EMEA revenue up 82% year-on-year, and our Americas revenue up 237% year-on-year. These regions each offer substantial future growth for Chrysos.
We've achieved another quarter of record sample volumes as the global rollout of our PhotonAssay technology continues, with more and more miners using our technology around the world. This is our 23rd consecutive quarter of record PhotonAssay sample volumes, illustrating continued strong demand for our technology.
We remain in a strong cash position with $47.5 million in the bank and our $95 million green loan with CBA currently undrawn. This nets us $143 million to invest in future growth.
We closed the quarter with 31 operating PhotonAssay units, including 2 that were deployed during the quarter. One of these units was our first installation to the Newmont-Barrick Nevada Gold Mines joint venture, representing also our first deployment into the U.S.A. and our first of 3 deployments planned for this operation.
Equally exciting for Chrysos, the other installation completed during the quarter was for Barrick's North Mara operation in Tanzania, where this unit is now being operated by one of the world's most prominent laboratory companies, SGS.
Our focus remains on building out our pipeline of deployment opportunities, and we've secured 4 new lease agreements during the quarter, bringing our total number of contracted units to 54.
Next slide, please, operator.
Thanks, Dirk. It's great to see the unit deployed at Nevada Gold Mines and the additional 4 contracts across Africa. Our growth continues across the globe with deployment ongoing in Alaska. The lab there will support 2 major miners, a further contribution to the strong growth expected across the Americas region.
We have added a business development team member in Latin America and across the globe continue to focus on our customer diversification to accelerate installations. We've spoken in previous quarters that we have units ready to deploy. At the moment, we have 13 units that have passed factory acceptance test, and we look forward to deploying these units with a long-term goal of reducing this to a handful of units available on an ongoing basis.
Next slide, please. Revenue growth continued this quarter to $13.7 million. As we consider the regions, we see Australia, as we talked about in previous quarters, remains flat across the industry despite record gold prices. Our EMEA and Americas regions demonstrated strong growth with continued adoption of PhotonAssay technology. These 2 markets with Lat Am forming part of the Americas represent near-term growth opportunities.
I also wanted to note the further good quarter of cash collections across the globe with $14.6 million collected, an uplift on previous quarters and more closely aligning to revenues. Overall, a positive operational cash flow of $3.7 million, and collections remain a strong focus.
Thank you. Next slide, please.
Thank you, Brett. The next few slides highlight the way that we can operate in the industry and why we've been so successful in PhotonAssay's global adoption by major miners around the world. We work closely with miners and laboratory companies to tailor a solution that works for our customers. You can see on the slide that we operate under one of 4 different contract models. From a return on investment point of view, each of these models is around the same value to Chrysos, so they offer different risk, return and control models to both the laboratories and the miners.
On the left is our hub labs. This is where we have leased the units to a laboratory company, generally in a prolific gold mining region. This laboratory then services multiple miners in that region and is typically aiming for a higher volume of samples to maximize their profitability, and this flows directly through to Chrysos. Chrysos' revenue from these operations is secured by the minimum monthly assay payments, but there is substantial upside potential related to movements in the gold exploration market.
The other 3 models are various mine site models. In all of these cases, this refers to a unit that is deployed at or near to a mine site, which is where an operating mine really gets the most value from our technology. Our engagement around each of these models is a little different.
In the second model, we leased the unit to a laboratory company for a specific mining operation. For context, this is the way that we operate for Barrick, where either MSA or SGS have contracted with Chrysos directly and then provide a broader service to the miner inclusive of PhotonAssay. This allows us to leverage the laboratory company's presence in the market, easing Chrysos' market entry, and often, this provides the simplest option for the mine.
In the third model, we engaged with the miner directly where the PhotonAssay lease sits with the miner and the miner operates the unit and their complete laboratory. This method offers a lot of opportunity for Chrysos because it allows us to work directly with the miner regarding the value proposition of PhotonAssay to their broader operation. This is our method of operation at Ravenswood Gold.
Lastly, in our fourth model, we're in various discussions where we would lease the unit directly to the miner. They would then contract a laboratory company to operate the unit. This provides full transparency of cost through to the miner and means that our direct counterparty is the actual beneficiary of the technology. It also fosters direct engagement between Chrysos and the miner like in the third model.
Our ability to operate under each of these different models allows us to be very transparent when it comes to key contract terms, both across laboratory companies and to the miners directly. This empowers the miner to choose the best option for their specific site.
Slide 7, please, operator. I won't go through the slide in detail, but suffice to say that under the various operating models that I've run through in the previous slide, we see a massive opportunity in the PhotonAssay value proposition, which goes substantially beyond simply replacing an existing analytical technique.
Our increasing proportion of mine site deployments supported by our recent deployments to Barrick's North Mara and NGM sites continues to provide Chrysos with better access to the geologists, metallurgists and mining engineers that run these sites, allowing us to continue to hone PhotonAssay's performance and maximize the value proposition for these sites. In collaboration with Ravenswood, we'll soon be releasing some videos about how PhotonAssay has been a game changer for that operation.
Slide 8, please, operator. The value proposition and our tailored solution for miners is supporting our penetration into the industry. The chart on the left here is a new visual, which illustrates our current penetration into the mining industry. Mindful that we've only had PhotonAssay operating for 6 years in an industry that is conservative and often slow to adopt new technology, we consider this to be a huge achievement, and it showcases us the near-term future potential. Each slice represents one of the largest 15 gold mining companies via production around the world.
The yellow slices indicate those companies that actively use PhotonAssay across one or multiple sites, and that's either directly or via one of our laboratory partners. Every one of these companies offers potential future growth, where we are not yet running all of their samples because each of these operators is a multi-mine operator.
The blue slices represent those companies where we've completed one or more paid feasibility or implementation studies. And for some of the larger companies, this often spans multiple deposits and ranges through exploration geology, production geology and metallurgical analysis. These companies at each near-term conversation -- near-term conversion opportunities where we remain in active discussions regarding either technical or commercial aspects of PhotonAssay and all of these studies have successfully illustrated PhotonAssay's applicability to displace existing analytical techniques.
Lastly, the gray slices represent future potential. A little further information on this. Two of these companies are currently in active dialogue with Chrysos regarding PhotonAssay and the other 2, we paused our engagement due to geopolitical constraints.
On the right-hand side is a chart illustrating our ongoing sample volume growth. I mentioned earlier that this quarter represents our 23rd consecutive quarter of record sample volumes, and this is in spite of a gold exploration market that has largely moved downward or sideways over the past few years.
Slide 9, please, operator. Very briefly on this slide, I'm pleased to announce that we remain on track for FY '25 guidance, which was a revenue range of $60 million to $70 million and an EBITDA range of $9 million to $19 million. As you would expect, as a global business, we continue to monitor global currency changes, and this quarter, there was minimal impact on our financial metrics.
Slide 10, please, operator. Summarizing the quarter. We've had continued top line growth with revenue up 54% year-on-year. We've had our 23rd consecutive quarter of record sample volumes, which were up 30% year-on-year. We've signed 4 additional contracts during the quarter, building out the depth and diversity of our pipeline.
As part of this, we've expanded our relationship with SGS, which is now successfully operating Barrick's North Mara mine site lab. This positions us with 3 of the world's 4 biggest laboratory companies operating PhotonAssay units on an international basis, being Intertek in Australia and Ghana, ALS in Australia and Canada and now SGS in Australia and Tanzania. This complements our relationships with MSA and Britannia, who continue to broaden their PhotonAssay offerings around the world.
The quarter has also seen us complete the first deployment into the Nevada Gold Mines operation, which is jointly owned by Barrick and Newmont, the world's 2 biggest gold mining companies. We've concluded the quarter with 31 PhotonAssay units deployed around the world, following the addition of 2 new units during the quarter. And finally, we remain well funded for future growth with over $140 million available for further investment into PhotonAssay units, mindful that we're operating cash flow positive.
I'll pause there, and we can move to questions.
[Operator Instructions] Your first question comes from Jules Cooper, Shaw and Partners Limited.
One for you first, if I could, Brett. The payments outside of CapEx in the quarter were a little bit higher than the fourth quarter exit rate of last year. And I was just wondering whether there are any sort of annual payments or seasonal fluctuations that we should be aware of there.
Thanks, Jules. Yes, there are some seasonal payments in this last quarter. So annual bonuses and incentives fall into that quarter as well as some lumpy annual payments around things like insurance as well, so we'd expect that rate to tick back in the next quarters, but certainly, July will be a seasonal bump there.
Can you maybe give us some sort of sense for what the magnitude of those sort of one-offs -- not one-off, but seasonal payments are in the first quarter? Is that possible?
Without having the exact numbers to hand, we're talking in the $1 million to $1.5 million across those couple of different items.
Excellent. All right. And one for you, Dirk. Great to see you deploying a unit in Alaska. I guess if we haven't had any further contracted units, should we assume that, that unit is being deployed for one of your existing customers? And are you able to share who that might be that's putting that unit to work in Alaska?
Yes, absolutely. Look, happy to, and thanks for the question. So that is with MSA. So it's one of the MSA units, not one of the new units, and we have flagged that that's for a couple of major operators in Alaska. So without us disclosing it, feel free to go and Google the big miners in Alaska.
No problems. We will.
The next question is from Liam Hegarty-Cremer at Morgans Financial.
I just had one on capacity for the units. From what I gather having talked to a couple of operators, it sort of year-on-year volumes are increasing by generally more volumes, but also more machines. Could you talk to the life cycle big picture you're seeing in that ramp-up in terms of volumes per machine? And maybe if you're operating at, call it, 95% utilization or uptime, is there more to come in terms of per unit volumes for the first operators or the oldest operators using photon or have the oldest operators reach their ceiling, so to speak?
Yes. Look, great question. Thanks a lot, Liam. Capacity of the unit is fairly fixed. I mean, we're comfortable that we can run about 40,000 assays per month per unit at capacity. There is a lot of aspects that come into that depending on who we've deployed to, where it is around the world, whether it's a laboratory or a mine site. So let's run into that for a second.
We remain dominated at the moment on our deployment base being to hub laboratories, being that first business model that I talked through on the earlier slide. That is somewhere where we are at the mercy of market dynamics. We have a minimum monthly assay payment that guarantees revenue to Chrysos, but there is substantial upside opportunity there. So where we've got, say, laboratory companies in Australia against the backdrop of the ABS statistics showing gold exploration spends down somewhere in the order of 40%, you could imagine that the volumes going through those labs may not be as strong as they could be. So certainly, there's potential for those to ramp up as the industry turns.
The other side of the business where we're deploying to miners is a little bit more understood from the mining side where you've got these companies planning out, say, the next 7 years of production or of their grade control and explorations, really. So we've got a bit more certainty around those. What we do in those circumstances is we work quite closely with the geos, the mets, the mining engineers on what is the upside value proposition of having better information to run your mine.
So for example, where we're working with Ravenswood. And again, I flagged earlier that, we'll have some videos come out in collaboration with Ravenswood shortly, but that will be talking about how they've added value, which has actually then resulted in an increase in sample volumes over that time as we broaden the application of PhotonAssay as well. So hub labs exposed to what's going on in the industry, miners really working closely on the value proposition and the ability to grow sample volume over time.
Okay. So there's no sort of rule of thumb big picture that we can use in terms of leveling up to that 40,000 a month capacity number for any new given customer. It's just a different per -- or is there a rule of thumb we can use?
Look, we haven't really provided the specific transparency on it, but I'd guide you back to what we've been doing around the half year and full year, which we'll continue to do, which is around the revenue per unit. So we structure our models around sort of risk and return, such that the revenue per unit is roughly the same but with upside from those hub labs.
Yes. And I think I flagged in a previous discussion that if a hub lab is committed, let's say, 50% capacity and then suddenly, they're running at 100%, you're talking a value uplift -- a revenue uplift somewhere in the order of 70% to 80%.
The next question comes from Shawn Burns at BB Pty Ltd.
I've got three quick ones, if I could. The first one is when you say you've got 13 units ready to deploy, does that mean that in the next year or so, we will see them come in the deployed count? That's my first question.
Thanks, Shawn. Yes. So look, the 13 units are everything that is post-factory acceptance testing in our manufacturing process but pre-installation. So we define installation effectively as when we're on the ground, we've moved the cabins in place and we start kind of connecting all the electricals and all of these type of things together. So what that means is that those 13 also include anything that's on a truck, in customs, on a boat, out to the various sites as well. So where you can see the kind of upcoming deployments, for example, we flagged previously, Nevada Goldmines taking another 2 units. These aren't necessarily sitting in a warehouse in our manufacturer's facility. So certainly, going forward, we would see those units being to sites.
Okay. That's great. So they're not inventory. They're ready to go. Just the timing issue.
True.
Yes. My second question is in terms of the overhead rate. So just over the -- so this is the ex your cost -- your cash cost ex anything goes in the gross margin. You mentioned before that you expect that [ 0 ] at a rate below unit growth. Do you still stand by that? And is there anything that's going to move that over the next couple of years in terms of any quantum increases that you see over the next couple of years?
Yes. Look, we're certainly growing -- so the overall objective is absolutely to grow revenue per unit reduced cost per unit, which grows that GP line per unit, at the very least, kind of keeping those GP lines relatively constant.
Looking forward into future years, if you consider that we're displacing predominantly fire assay around the world. So fire assay is extraordinarily impacted by inflation. So really, what goes into a fire assay is consumables, energy and labor, each of those things being exposed to inflation in the industry beyond just CPI and this type of thing. So we see upside potential just in the like-for-like costing. Beyond with any technology, as we can continue to prove out the value proposition, you continue to increase the kind of the benefit to the customer, and that allows you to flow through to taking some of that benefit as well.
For context, something like Nevada Gold Mines produces somewhere in the order of $20 million of gold per day. So we've talked about the ability to improve the way that those process plants operate. And if we can eke out an extra 1% recovery improvement, you make the technology more valuable over time, et cetera, et cetera, as well. So we would see upward pricing pressure in the longer term on our price per sample.
Okay. That's good news. But just back on the cost, is that -- I mean you've been at a couple of new areas. I think you said previously when you need to get the service levels up is that the impact of that on the underlying overhead cost base. Is that something that we should see going up at steady clip? Or is that -- or any topic guidance on that would be useful.
Yes. Thanks, Shawn. I think -- and we've stated this previously and there's no changes from our view of this. As we continue to grow across the globe, that gross profit margin obviously sits in those ranges we've talked about. And obviously, we present that on a half yearly basis. Underneath that, the rest of the costs can continue to become increasingly incremental. As we enter a region, we obviously have those setup costs. But once we're there, we've got the benefits of having any administrative support, procurement support, all of those sorts of things, even right through the spares. So the cost below the line continue to become increasingly incremental as we go forward from here.
That's great. My final question just on -- previously, you said the returns on unit deployed the ROI on any unit between 50% and 80%. Do you still stand by that? And is the way for someone outside looking in, the best proxy for that as your gross margin profit on PPE? Is that the best way we -- and I realize there is a lag as you deploy more units, but is that sort of like the end goal that we could see whether that is actually accruing to the company or not?
Yes. So look, still stand behind the ROIC numbers being in that ballpark. With regard to the way that we've kind of guided the financials going forward is pretty much the same numbers, but just presented in a different way, is this return per unit or GP per unit. So obviously, if you took the GP per unit and divided it by the CapEx number, you'll land within that, I think it was 47% to 84% ROIC range. So we're just basically showing those numbers in a slightly different way. So how do we suggest that people look at and value the business is each of these units that cost us in the order of $4 million to deploy is going to be generating revenue for what we expect to be about 20 years with a bit of a refurbishment along the way and in that region of GP per year.
[Operator Instructions] There are no further questions at this time. I'll now hand back to Mr. Treasure for closing remarks.
Thank you, Amy, and thank you, shareholders. I appreciate your continued support, and I look forward to providing our next update, which will correspond with our upcoming Annual General Meeting. Thank you very much.
That does conclude our conference for today. Thank you for participating. You may now disconnect.