Okay, I think we'll just get started as people come through.
All right. Good morning, everyone, and thank you so much for joining us. A very warm welcome to our shareholders and also to the investors who are new to the West Wits story. I'm Jess Fertig, and I look after the investor relations for the company. I'm delighted to be joined by Rudi Deysel, who is the CEO and Managing Director of the company.
Today's session is really about understanding how Qala Shallows ramps up. We've received a lot of very thoughtful questions recently about production. As we know, and Rudi will chat about during this webinar, building an underground mine isn't a straight line, and development comes first, followed by ounces later. Over the next sort of 25 minutes or so, Rudi will explain why the production profile looks the way that it does.
For everyone today, you can submit some questions. We do have an online chat forum. Thank you to everyone who has already submitted questions. We have actually collated those in today's discussion.
Rudi, welcome. Thank you so much for your time. I know that you are busy, and you are in Sydney for the Gold Conference this week. We've had a lot of questions about production lately. What do you most want investors to understand today?
Yeah. Good morning, Jess. Good morning to everybody. Nice to be here in Sydney, in Australia. Thank you very much for the opportunity.
Yeah, look, I think the main thing that everybody needs to understand, we are building an underground gold mine. We are building a mine that will produce, at steady state, 70,000 ounces per year. The build-up is not a straight line. It's mainly driven by the infrastructure that's required to get to that steady state. We are developing declines that you use to get from surface to underground workings, and you do open up levels, which will then be the main vein that will actually bring out this ore from this stoping blocks, which is the main mining areas. Our focus is to get those developments in good, high standard quality, so that it can stand up for the life of mine of this project, which is 17 years. We need to make sure that they are done properly and sustainable. That's the main focus for us now.
Yeah, brilliant, Rudi. It seems that investors kind of expect that output will climb steadily towards that 70,000 ounce production rate. Why doesn't it work that way?
Yeah, look, once again, I've used it a few times, but mining is not a cheese factory. It's not just pouring out as it comes. Once again, mining is hard work, and you need to set up these things. In a perfect world, you will have that straight line build-up. We do open up the mine as per plan. Everything is as per design, as it's been in the feasibility study. The progress is excellent. We've already developed over a kilometer of tunnels underground, and that's quite a lot of development in less than a year. So, yeah, the project is really going excellent and following the plan that we set out when we started with this project in the definitive feasibility study.
Yeah. Fantastic, Rudi. Now, in addition to obviously all those infrastructure milestones that you have to build in the underground mine, it's never just easygoing, as you mentioned. The past few months have tested the operation a little bit from a couple of safety pauses to working through some challenging ground. What has the team learned in this quarter, and how has it strengthened the path forward?
Yeah, look, once again, if you build a new mine, there's so many variables that's got an influence on a mine. You are going into unknown rock areas. Especially if you're so close to surface, that upper levels are very oxidized and soft, so you need to put in support in there. Sometimes you go through ground that isn't as great as expected. But once again, there's engineering solutions to those. You go through, put in sets, you do concrete support, which do slow down the typical advance rates in those tunnels. But once again, the team dealt with it excellently. As you go deeper, out of that oxidized areas that's close to surface, which is by the way, also influenced by weather patterns. We did have a lot of rain during the summer.
That was one of the aspects we had to deal with that had an influence on the unfortunate incident that we had on the mine. That just got the team to focus much more on safety. We are a company which feels that safety is absolutely first. Our people are more important than anything else. We do not want anybody to get injured at all. So, we have an absolute policy of zero harm, in terms of safety. We have a system where we really encourage the employees to report unsafe conditions as well as do stoppages. If a place is unsafe, and I mean, it is in the law, in the Mine Health and Safety Act of South Africa as well, in Section 23, which says that no employee must enter any unsafe areas.
Those are, for instance, the stoppages that we encourage them to do. So you stop, you make safe, and you proceed further. That process is through, and that is what we call our leading indicators. Over time, you would actually see that those stoppages and leading indicators reduces month by month, which obviously accelerate the productivity in how we operate. Then obviously your advance rates, that also increases.
Yeah. Fantastic, Rudi. Now just talking about productivity, a lot of investors are asking about ounces produced on a quarterly basis. Will they get any updates on that? You are talking about we are not looking at ounces. What metrics can investors look at?
Yeah. So in a typical mining environment, you would first do the shaft and infrastructure before you actually bring out any metal at all or produce any ounces at all. The great thing about this project is that we actually do a lot of our infrastructure development on reef. So it is diluted gold that we bring out because it is development waste that comes out with the ore. Once again, the priority and the focus is really that tunnel, that decline, that shaft. It needs to be able to bring in equipment in and out over the life of mine.
So once again, I do not want to say that because it is designed in the project, but that ounces that comes out is almost accidental until you get to that point where you actually got what we call stopes, stope blocks. That's where you actually produce the ore that you will actually put into the plant, and that is the high-grade material.
Currently, as our plan stands, and once again, this is by design as per DFS. The first real stopes, we were able to have a few stoping panels earlier that we saw that opportunity to get quick tons and quick ounces out very early. But our real stoping production is planned to get it by February 2027, which is not far from now. That is when the first real high-grade ore will start coming out, and that's why we put it out in the public as well that our production profile is for 2027, that 10,000-15,000 ounces. That will build up in 2028 to 42,500 ounces as per plan. Ultimately hitting that steady state in 2029, at 70,000 ounces.
Rudi, just carrying on that, what is in place at the moment at the mine to support that step up once the stoping starts?
To get that steady state, you basically need to have three levels. We've already broken into the first level. Then the decline will develop downwards, and then you open up the second level. We talk about half levels, so in effect, it's six half levels that we need to create before we can really have that sustainable steady state production. That will open up over time. Once again, if you look at the buildup, rather than a linear line, it's almost like a hockey stick. You've got very little in the beginning, and then it starts accelerating and increase in that slope of that buildup. That's why you see the profile that we actually got out there in the market, and that shows exactly how that profile is. And if you look at the production profile of the life of mine, that's exactly how it's been set up.
Fantastic, Rudi. Now, just shifting gears a little bit. We've been getting quite a few questions coming through the chat room. And one of them is actually around the Project 200 Scoping Study, which we sort of semi-released to the market. What they're asking is what work is still needed to meet the ASX requirements? In particular, is there any drilling or upgrades to the resource classification?
Yeah.
When can shareholders realistically expect the scoping study announcement?
Yeah. The main purpose of a scoping study, and I don't want to really go too much into the view or do I agree with the view. Once again, there's rules that we need to obey by the ASX. But the purpose of a scoping study is to give you guidance to proceed to the next level of the study, which increases the certainty and the design of the project. Which will take you then to the next phase, which is a pre-feasibility study or a higher level of feasibility study, depending on the type of information that you've got and the engineering that's required to get to that level before you actually start mining.
Now, the scoping study was completed, and it came out with excellent results. That we actually do have a blueprint and a pathway to get to that 200,000 ounces production. It also increases with that increased capacity, the life of mine, which is very positive as well. That is good. The only issue, once again, I don't think that's the purpose of a scoping study, but I don't want to go into that detail. Scoping studies, your level of classifications would normally be less, and that then actually give you the certainty that there's a business case to do more drilling, which will then bring more inferred material into your reserve classifications, which is measured and indicated.
The scoping study and the reason why we didn't bring it out is because we have to have more measured and indicated, especially in the initial phases of this project. Currently, there is optimized work being done because there is some work that we can do on the block model and resources itself, and even on the scheduling of the project itself. We did add some prospecting rights to the project, to the mining right, which actually do have some measured and indicated material. It wasn't at the time available when we did the scoping study, which we are catching up now on, and that will optimize the schedule. That will bring some more indicated and measured into this study, which then will enable us because the ratio of measured and indicated is then much higher, in terms of the inferred that we have, which will then enable us to actually bring it out to the market.
That's the intention now. That work is currently happening. We will bring out that results the moment we can, because obviously it's great news for the company as well. We would like to bring that information out to everybody so that they can see how great investment this project is. This is all part of the process that you need to go through with mines and creating a new project. This project is really constantly showing how good it is and how good an investment it is.
Yeah. Fantastic, Rudi. Now, just on that, we have a question from Nick, who's a shareholder. He's asking, I'm not sure if you can answer this or not, Rudi, but he's asking, "What is the expected cost of further works to be completed to get the PFS out for the Project 200 or the scoping study?
Look, I think in the bigger picture, it is not a lot of money that is required. It is not a lot of cost. We are already spending a lot of money to build this mine and develop this mine. We do have budget in this.
Yeah.
Money that has been approved by our lenders for growth projects, which we intend to spend on exactly that, to develop and a pathway to grow this project even bigger. 7.24 million ounces is a huge resource, and we are going to add to that as well because there is still a lot of geological work that we can do. That is the beauty of this project is that while we are doing this expansion and development, and we actually got now a mine in construction that will operate and produce gold while we can spend time on developing this project further.
This is actually a great situation to be in. You do not get it with other projects. Once again, I should really think this is a much more positive view on the project than really to be worried about it.
Yeah, absolutely, Rudi. Just on the funding side of things, we had another question from a shareholder asking, "Management is saying that Qala Shallows is fully funded to steady state. How much contingency," the question is, "is built into the current funding to cover ramp-up delays or cost overruns? What circumstances could more equity be needed before the operation is cash flow positive?
Yeah. So look, once again, I just want to reiterate to everybody. We do have a big brother looking over our shoulder to make sure that management actually deliver to what we should do because the banks are very strict on their money, and they want to make sure that we do not waste it, that we hit our targets. For that reason, we have this whole process of what they call a cost to complete test, which includes a lot of audits.
We do report monthly to the funders. Then obviously every quarterly we plan the drawdown, and then you go through a huge process, which is a due diligence process on its own to ensure that firstly, you hit your development targets. You are producing what is required. You are on track in terms of your employees' growth in the project as it gets bigger. We are audited the whole time to ensure that we deliver what we said we are delivering.
Now, in terms of there is always a contingency on top of your funding and on top of the project. In this case, we have got a total package with Absa and Nedbank, our lenders, which is big commercial banks in South Africa, and they also fund the big South African major companies. So, the fact that they support us is a great story.
Now, our total package is about AUD 97 million. All right. Of which AUD 76 million is the senior lenders facility. On top of that, we also have an AUD 13 million working capital facility. We are not even planning on touching that. On top of that, there is also an AUD 8 million cost overrun facility. At this stage, once again, we are not even planning to touch that money. So there is a lot of contingency built up. So the intention is not to go into an equity raise at all. I would not say there will never be an equity raise, but it would not be to fund this project. It might be to fund any growth plans for the project itself. Once again, that is a thing that will be communicated in time through the right channels to everybody so that they understand for what we are using this.
But the project is on plan. We just had our second drawdown, so this is the second time that we got that tick from the banks that they are happy with what we are doing, which should give everybody much more confidence that we are doing the right thing.
Yeah, fantastic, Rudi. Now I have just got a couple of questions from some shareholders on early next year. So one is, will the February stopes that get mined go through the toll treating plant? The second question they asked is, what will the expected diesel use be, and are we on mains power yet?
Yeah. What is that first question on the stopes?
Yeah. Will it-
The question-
The February-
Right, yeah.
Yeah, will it go through toll treating at Sibanye-Stillwater?
No. We are sending, as we speak, ore to Ezulwini plant, which is part of the Sibanye-Stillwater. Those stopes will go through that plant as well. We are a major source to Ezulwini, so it is very important for them. We are part of their life of mine or life of plan as well. All of that material will go through that area. Like I said, as we speak, we have got stockpiles in front of the plant, and the intention is to really increase that monthly production month by month, and that is happening currently as we speak. All right.
Sibanye.
The one thing about Qala Shallows, if you look at a typical underground mine, the amount of diesel that they use is about 20% of the operating unit cost. In our case, we use hydropower, which optimize the type of. For instance, we use water and we use a battery pack, which use normal pressure of water coming in, and it increases that power, and that is what we actually use to drill with and run our machinery, which is much more carbon friendly, and much more cheap in terms of power usage. So our exposure in terms of our unit cost is 8% versus the 20%, which is the normal case.
Once we actually go onto the grid, which is also planned to be completed by the first quarter of February 2027, then that 8% will reduce to 3%. Our diesel exposure is very little than the typical other mines that we've got. On top of that, we already have commercial agreements where we've increased our diesel storage, firstly on the mine itself, so that we do not run out of diesel, as well as our agreements is such that we actually fixed our supply as well for the next six months. Once again, from diesel usage, I don't think anybody needs to worry about that. The mine will proceed and operate as planned.
Now, Rudi, there's a question from an investor here, and I don't think that they're as familiar with the story, so apologies to shareholders who already know this answer. But basically, what they're asking is when we expect to commission the production plant. As we know, we don't have a production plant, we have an agreement with Sibanye. Maybe you want to just give a bit of information on that agreement and how it all works.
Yeah.
The de-risked sort of nature of this project because of that.
Once again, this project was designed to lower our capital requirements, and because we do have a lot of spare capacity in the region around us. Because this Witwatersran d area, and especially the Central Rand Basin area, are mined out quite a lot. And we've got this virgin block of ground, which is Qala Shallows that we are mining. The opportunity to actually use the spare capacity around us is absolutely there and great for the project in terms of capital spend as well.
So we've got an agreement with Sibanye-Stillwater, with their Ezulwini plant, which is about 40 km away from us. And they've got SAG mills. So in other words, we don't need to crush our material. We can take our run-of-mine material, take it directly to Ezulwini where it is being processed, and then we pay them a cost plus for processing that material, and we get the gold as per the gold price at that stage. That is the model that we have got currently.
In the Project 200, we are looking at different scenarios because ultimately we would either have our own plant, or we can procure other plant, or we can use toll treatment as it is, depending on the commercials and the business case around that. That optionality is always there, still there, and there is a lot of, like I mentioned, plants that want our material because it is high grade or it is run-of-mine material which recovers very well. We are really in a great position.
Yeah, fantastic, Rudi. Now I have got a really interesting question here from a shareholder, and they are asking, "Are the stopes going to be mined by autonomous vehicles, or what is the outlook to integrate technology into the project?
Yeah.
Is there any sort of-
South African ore bodies are relatively steep. We have got, for instance, it is between 30 degrees- 40 degrees in dip. And it is thin tabular. It is not vein mining, it is a reef. That is why we call it a reef. And the grades are very consistent, distributed through that reef ore body, which gives you much confidence in that you will actually achieve your grades much better than typical other ore-free type of ore bodies or vein ore bodies that you get in other areas. That is high confidence and high conversion rate from resource to reserve. The consistency in our ore bodies are great, and that is why historically, the Witwatersrand produced 22% of all gold produced ever. That is a great thing about our ore body.
The problem, though, is because it is so steep, we really struggle to mine it autonomous or with mechanized equipment. There's a lot of work being done on that to do that. We do still mine it conventionally. This is now where we brought in the HPE equipment, which is hydropower, and that's the technology that we bring in to really increase our productivity, which means workers are exposed less time because the penetration rates are much higher in that material, and then as well as energy-saving type of things.
We are big on using technology in Qala Shallows, and that's why we've got this hybrid system of trackless, mechanized development. But the stoping is still conventional, and it's laid out in such way that we actually try to make sure that the people are not exposed to that steepness of the ore bodies. Ultimately, how steep it gets, the more it actually grows to the opportunity to actually utilize mechanized methodologies to mine it, which we are also looking into going into the future.
Absolutely, Rudi. There's so many thoughtful questions coming through. I'm just going to answer two more that are in the chat. Apologies, this shareholder did submit this question, so I'm going to ask it. Thank you so much for reminding me.
So, in the 7th of October announcement, so on the operations update that we put out, management referenced a target of 600 meters of underground development per month during 2027, compared with 200 meters achieved in September 2026. They want us to clarify which month or quarter we can expect to reach that rate, what the key milestones are along the way, and whether achieving 600 meters per month is critical to meeting 2027 production guidance.
Yeah. So once again, those meters are driven by face availability. In other words, how many different tunnels do you have exposed at that point? So, you could see it almost like a tree branches. As a tree grows, it branches out, and you get more ends, and that increase your face availability, and that increases the possibility of your increased meters. All right. So, that's the thing.
The big thing for us is first you want to break into the second level, which we call Level 4. Then you get multiple ends again, which will then once again increase that. So, I think by early, I don't have the plan right in front, but it should be in the first quarter of 2027 when we start opening up that second. The decline is advancing ahead of that to go into the third level, which will get you to that point where you can get that steady state.
That 600 meters, that is when we will be early next year. There is a lot of other opportunities for us as well. The one thing that is great about this mining plan is we have multiple access to the ore body. There is a lot of flexibility in the profile itself, which do give us and do de-risk the production profile as well, which once again, you do not get it in other mines a lot. Because we have got that old area that we could access and which we are already accessed, while we are developing this new decline, which will develop the new brand new mine into the virgin block, which gives us more flexibility. Our exposure to face availability is actually much bigger than what a normal mine should be.
Yeah, absolutely. Thank you so much, Rudi . Just one more question from the shareholder. It is an important one and something that we have actually talked a lot about internally and that you actually had a recent interview on Crux Investor, which I am happy to share that link once again when it is ready.
The question is, what are your thoughts on the current share price and what short-term activities to look forward to that we could start to sort of reflect the company's true value? We have spoken a lot about this Rudi, so we are highly undervalued as a company, where we are-
Yeah.
and where we are going to go.
Yeah. The one thing that we are totally undervalued. I mean, our enterprise value per ounce of resource that we've got is currently around AUD 25 per ounce, if I remember correct. Which is totally undervalued if you compare it to other peers.
The one thing that you should remember, and I think, I'm not sure if a lot of the investors are aware of that, there's a lot of work been done over the years. You've got the Lassonde curve, which shows this typical, what happens to a share price over the life of development of mine. We are typically now in that construction phase where you do get more speculative type of investors that are dropping off, and that basically explains why we have this lower value at this point. Then you really get this growth as the mine is building up to steady state and as the construction are completed.
We are exactly following that theoretical curve as it is. You get more institutional or more long-term investors and that's the type of thing which mining requires, are people that invest long term because then, the returns are so much higher for especially those guys that get in early enough when the share price is low.
At this stage, totally undervalued. There's a lot of things that's coming up. We do have obviously the Project 200 Scoping Study. There's a lot of news that will come out on a quarterly basis as per requirements and as what we need to report on the production and the status of the project itself. Then, we've got the exploration program that we want to kick off on the Bird Reef Central, which is also extremely exciting project. It's also very shallow. It's outcrops on surface. We want to bring that uranium from an exploration target into resource JORC compliant. Then, there's also certain gold with that, which is an exciting project for us and part of our growth plan.
There's a lot of news around West Wits Mining and it's coming out and we do bring out a lot of news to all the investors. I think, regarding the share price, that will grow. That's reality. Like I mentioned, we just follow exactly the typical share price with how it would increase with the Lassonde curve. I do believe in that and you could see it's classical.
Yeah, absolutely, Rudi. I am not going to take any more questions from shareholders. Thank you so much, Rudi. I can also attest to the fact that you and management team, Michael Quinert, our Chair, have been traveling all over doing a lot of marketing, to the Asian market in particular. You are obviously in Sydney now for the gold conference, and you will be at London 121 in November as well. So, really reaching out to that sort of broader network. This is a really great time to invest as you mentioned. Low share price and a lot of really important catalysts and milestones for the company coming up.
Just to finish off, Rudi, can you give us sort of three key things that investors can take away from today?
Yeah. I think the first one is, once again, the project is on track. The proof is, once again, look at what our lenders approved our project and how. They are auditing this project, so they make sure that the plan i s great that we have got that. That should give the investors confidence.
Absolutely.
The project is fully on track. We are 61% complete on surface. We intend to have that completed by the third quarter of next year. It is not far away from now. Then, the focus is really for us is to create that infrastructure, open up stopes as quick as possible. This is the thing, the guys need to understand that we are following that top production profile that we set out there. Once again, the other point, everything that we have promised the shareholders, we achieved it. That is the intention. Our transparency to the market is very important. We will stay transparent on that.
Absolutely, Rudi. Just one more thing. As the company sort of advances towards that 70,000 ounce steady state production, investors should really judge the company's progress on development meters and milestones achieved rather than the quarter's ounces. So we are not looking at production value in terms of ounces, but more on meters achieved with that tree branch sort of analogy that you used earlier.
Yeah. Once again, there is clear things that is important, and what the banks are also looking at. Once again, the proof is there. The fact that they approved that second drawdown.
Absolutely, Rudi. Thank you very much. Thank you everyone so much for your thoughtful questions. Any other leftover questions, I will carry them forward to our quarterly webinar, which we will have in a couple weeks time. Rudi, thank you so much. I know you have got to get to a conference. You are presenting later today, which I will be at. There will obviously, of course, be a recording of this for anyone who wants to watch back at any questions, or for any investors who missed this session. Thank you, Rudi, and we will see you later.
Thanks, Jess. Speak later. Bye.