Earnings Call: H1 2021

Mar 3, 2021

Good morning, ladies and gentlemen. Thank you for joining us today for the presentation of the African Rainbow Minerals ARM results for the 6 months ended 31 December. Without any further delay, I'm going to hand over to the ARM Executive Chairman, Doctor. Patrice Motsepe to take us through the results. And just want to remind all the webcast participants that you are able to log your question at any point during the presentation and they will be read out and answered as part of the Q and A at the end of presentation. I'd like to now hand over to Doctor. Motepe. A copy of the Thank you so much. I thought I should 1st come wearing my mask and then take it off because so that everybody can see that wearing a mask is very, very important. Let me start by thanking everybody for joining us, Mike and the management team for the excellent work that they do. And welcome everybody who's here from ARM as well as We all have bosses in our lives. I've got Doctor. Precious, Mulemut Seppo is here And some of my other boys who are here. Thank you so much for coming. You have the results with you. I'm going to go Quickly through the presentation and take questions as is usually the case. Headline earnings increased by 1 134% to a record €5,000,000,000 driven mainly by iron ore and PGM operations. Mike will Take us through the operational issues and give more details. And we're excited to declare an interim dividend of ZAR10 which is 100% higher than the corresponding interim period. This is the industry that We've all been part of it. I remember in the '80s when I was specializing in mining law and Went to America and I don't know, went to different parts of the world to see how the mining industry was working. We've learned over the years and there are Times when things are fine and we've got to invest and also look after our shareholders as well as all our other stakeholders, on The communities that live near our operations, the workers as well as the obligations we have to inclusivity And to make sure that the mining industry contributes to a globally competitive industry because For the mining industry in South Africa to continue to be globally competitive is critically, critically important and also to Ensure that we work with all stakeholders, with government to continue to create an environment that is globally competitive. The usual disclaimer. And I'm going to go through some of the more broader issues. And as I said, Mike will deal with the details. Our safety and health record continues to be good. And We have to there's a focus to ensure that the commitment to 0 fatalities becomes a reality. Lost time injury frequency rates down 17%. We had 2 fatalities at Modiqua, and the total recordable Injury frequency rate went down by 17%. And we've been operating in a COVID Ira, and I'm very, very proud that the management team and The approximately 25,000 Mike, 25,000 employees at ARM. Yes, the approximately 25,000 employees at ARM At all of our operations, did an excellent job in Complying with the strict COVID-nineteen protocols and to make sure that we the work environment is safe, is healthy. And we bring COVID under control. And with the vaccines that are going around that will be that are being injected and made available, We think that the mining industry and the economy should go back to normal in the Hopefully, the short to medium term. Headline earnings were up 134%, as I said, R5 billion dollars and ARM Ferrer's headline earnings went up by 60% to R3 billion Segmental EBITDA up by 2 35 percent to 5,100,000,000. Platinum headline earnings up 3 13% to €2,000,000,000 The commitment to be a globally competitive company critically important And also to be able to let our track record speak for itself and a commitment to grow the company As well as for ARM to be a competitive dividend payer with an increase in share price. Interim dividend is 100% up on the similar period last year, ZAR10 per share, And the dividends received from 2 Rivers were up by 3 80 percent, which is 432,000,000. Net cash at 31 December arm. Was up by 29% and it was DKK4.8 billion. Dividends received from SME, DKK1.5 billion. The major challenge with the mining industry It's the imperative of growth. You've got to replace the ore body that we are mining With equally world class and an equally competitive all board. And Mike is really and Sue and Jangisa And Andre and Thandre and the rest of the team have done great work in focusing on the growth of the company, but also to make sure that we build a track record of having been a responsible allocator of capital and more importantly, having the capital allocation results in the creation of value for our shareholders. Testing and screening 85 So 82,000 COVID-nineteen health screening, 4,200 COVID-nineteen tests were conducted. We had approximately 1200 positive cases. But what is encouraging is the 96% to 98% recovery rate. I was listening to Bloomberg this morning, and they were talking about how Africa has relatively come out better. And I remember last year when COVID-nineteen started, we were all worried with the global philanthropists that we work with, but also the global companies because the medical infrastructure in Africa is average to poor in many countries. And we were concerned that COVID-nineteen was going to result in Many of our people losing their lives, but what they are saying is that the problems and the challenges we had with Ebola and malaria as well and various other diseases have prepared us to be in a better position to deal with COVID-nineteen. So we must keep the cost and retain and in fact stick to the strict protocols. 5 of our employees have succumbed to COVID-nineteen, and we express our sincere condolences to Their families and friends through the Minerals Council of South Africa Army supporting government with the national COVID-nineteen vaccine rollout. If you look at some of the companies in the country, Checkers and a few others. They've got a world class system of delivering cold and even frozen products, World class distributive network. And the mining industry has a very proud history in dealing with challenges, whether it's HIV and AIDS, TB, or various other challenges. And this partnership between the Minerals Council And the government as well as the discussions with the private sector arm. And to make sure that there's a unique role for the private sector in the rollout, whether it's a Pfizer vaccine or Various others, but we have the skills and expertise and the resources to make sure that we can Effectively roll out the vaccine in partnership with government, as I said, the mining industry and companies in the private sector like Shoprite Checkers and various others that have got this excellent global the excellent distribution Network in the country. I think Pick N Pay as well in this company where the Rupert's are involved in, which really is an excellent network in the country, and we all should work together. Headline earnings, if you look at the headline earnings for this period in comparison with a similar period, Last year, it was €2,000,000,000 This year, it's €5,000,000,000 The increase in the prices of commodities, It's a period, as I said, when we should really maximize on productivity. And Mike will talk about The issue of costs because there's a focus to make sure that The prices and the increase in the prices do not conceal deficiencies or weaknesses in terms of cost increases. Dividends per share, ZAR10 and ZAR5 for the similar period last period last Reporting period. It's a good story. And it excites me that ARMEN And many of the companies in the mining industry can deliver good results and maintain the global confidence in the mining industry. Headline earnings analysis by operation, The platinum, dollars 1,500,000,000 ferrous, dollars 1,100,000,000 coal, corporate And the slide speaks for itself, but adjusted headline earnings exclude re measurement gains and losses for the period. The table on Slide 36 summarizes these gains and losses for a current and corresponding financial period. The adjusted headline earnings are included for illustrative purposes and are the responsibility of the Board of Directors. They should be considered in addition to And note as a substitute for measures of financial performance, financial position or cash flow reported in accordance with arm. Diversified earnings, this is where the benefit of being diversified comes to the fore. Andraine and Am Ferros have done excellent work in the past and continues to do Excellent work. And I'm proud that Tando and the Platinum team Doing excellent work and Mike is providing excellent leadership. But the importance of diversification that comes to the fore in environments like this. And the one other mineral that we have spoken about previously and that we are looking at very seriously is copper. And we're looking at some opportunities, but you've got to be very careful that particularly when you've got free cash, that the allocation of that free cash is not only responsible but creates significant value For shareholders, the growth projects, current and future growth projects, 2 Rivers Merensky project, additional 182,060 PGMs, 1600 tonnes of nickel and 1300 tonnes of copper per annum. Plant commissioning is in the Q2 of financial year 2023, 2 Rivers plant expansion. There's a MadikwaChrome recovery plant, Black Rock and Gloria. And the slide speaks for itself, but we are we continue to assess and reassess Value enhancing internal and acquisition growth opportunity. And we find that sometimes the best growth opportunities are internal based on the assets that we've acquired many, many years ago. But we're also in discussions to look at what we refer to as acquisition growth opportunities outside. The ARM strategy, We operate our portfolio of assets safely and responsibly. We allocate capital in a manner that creates value. We focus on value enhancing Integrated growth and our primary strategy is to deliver competitive returns and create sustainable value for our shareholders and for all stakeholders. We are owner operator. We've got an entrepreneurial culture. And we invest in our employees and have got obligations and partner with our communities and other stakeholders and put a lot of emphasis on technology and the role that technology can play in the future. I'm going to hand over to Mike Schmidt, our CEO. Thank you. Thank you, please. Thank you. Thank you, ma'am. Good morning, ladies and gentlemen. I'm just going to take my mask off. And I see in attendance, we do have Doctor. Precious Molotzepe and Casey. Doctor. Precious, thank you for your continued support. So the mining industry, I've always said, goes through 2 phases in life, very, very short summers. And I think we end this summer, I hope it's going to be longer than We anticipate however, we had very long winters. And in those long winters, you've always been a very strong supporter of us in terms of supporting in difficult times. And certainly, when things go well, you're out there. And if there's one thing if I may say about There's always your caution on humility because what comes up will always go down and we just need to be mindful of that. But thank you for your attendance this morning. Overall, we're very, very pleased with the results as a management team. The performance and results of the company are good. The doubling of the interim dividend is being well received in the market and certainly it's in line with our capital allocation principles, which balance giving money back to shareholders well deserved but also mindful of growth as alluded to by our Executive Chairman. A very big thank you and really a sincere appreciation to every one of our employees. Without them, this would not be possible. We've come through a challenging COVID period and the way they've responded and saved lives has been exceptional To the management teams, to the leadership, thank you. I would want to express our Congratulations and thanks to our partners, our Executive Chairman and our Board. Thank you for the support and confidence that you've shown this management team to deliver what I believe is a great set of results. The operations function on key three principles and that is, I believe, our success. We maintain a safe, productive working environment, key. We continue to drive productivity and efficiency. Our core focus is on costs and the grade of the mine. I'm going to elaborate a little bit about cost because I think that is probably one of the areas that needs a lot of attention. We're also very mindful in the use of appropriate technology and mechanization to improve our profitability and the sustainability of our business, and our focus is undoubtedly on value enhancing accretive growth. And I think the previous slide, which Patrice alluded to, those 4 projects, most of them internal, will add significant value to the bottom line in the next couple of years. But we're also very mindful of our ESG ARMs GE requirements and obligations, and a key focus going forward is on renewables because of the cost of energy to remain competitive. If I move on to the headline earnings position, It's self evident all the operations have done exceptionally well. I'm going to move on to the EBITDA. So there's a positive trend year on year on margins. Iron ore remains exceptionally robust, And we also see an exceptional PGM price recovery, and we think it's quite sustainable for a number of years. Arm. Strong iron ore prices was undoubtedly the main driver for the increase in profits. So volumes are in line with the allocated rail capacity, which was also constrained by COVID. The production volumes were, however, impacted over this reporting period primarily due to COVID And not only at the operations, but in terms of Portnet and Transnet, we did have a number of challenges in getting that back to capacity. I'm very pleased overall all the parties have come to the table and things are going pretty well. The unit costs on BlackRock will improve over time. Once the underground ore handling systems are in place. This will increase volumes and undoubtedly have a big impact on reducing our unit costs. A little bit about the Iron Ore division, Kumaani mine, steady state doing 14,000,000 tonnes banum, It's a 25 year life of mine. It's well positioned on the global cost curve and has world class safety standards and management teams in place. Biersuk, we said it's got about a 7 year life yet. It provides about 3,500,000 tonnes per annum And we are looking at enhancing that life by additional studies with surrounding satellite ore bodies and retreating low grade stocks to increase the life of mine. Also exceptionally world class standards in terms of All ESG requirements, Patin, particularly the safety compliance, I think, Andre, they've gone now 9 years, 15 years, apology, fatal free and had an entire year without a single loss on injury, probably unheard of in the industry as it stands. But production volumes were impacted over this period. So whilst we had good stocks, where our sales volumes were all right. We did have a challenge with regards to COVID and getting and producing. So our production volumes are down 20% and commensurate with that, you would find that your unit costs of production are not where we'd like them to do. We want to get them below mining inflation that I have no doubt as we're seeing now as we're lifting up volumes that those unit costs will come back to some level of normality. Arm. On the manganese side, other than the price which affected up volume constraints, There were logistical constraints, but we also had manganese prices coming down substantially, but we see in the current Couple of weeks, we're seeing a good improvement in manganese, and I'll touch on alloys in a minute. Maybe a little bit on the project. So a couple of years ago, we announced what we call a modernization and upgrade or expansion of the project today and that was DKK10 1,000,000,000, It's more than 90% complete as we stand. And once the underground silos and the ore handling systems are in place, The mine will realize the commensurate efficiency, productivity and volume increases, which will put us in a very positive position going forward. This will also allow the mine, which 2 years ago was selling 3,000,000 tonnes up to 3.7 Comfortable be up to 4,000,000 next year and allow us to get to 5,000,000 tonnes per annum. Very, very good project. I think we're going to see good returns coming from there. In terms of the alloy business, alloy has been under a lot of Strain with regards to pressure supply and particularly the raw material and the input costs have been very, very high. And with COVID, the demand came down. So we actually had an extended shut on some of these business to curtail production to preserve costs. That being said, both Keita and Sakura continue to deliver world class operational efficiencies. There are a number of interventions in place currently to improve the situation, and I'm pleased to say we're also seeing A recovery in not only in the manganese ore price, but the alloy price has gone up in Recent reach by as much as about 25%, Andre. So all good for the next 6 months, I think very, very positive message. Platinum, well, platinum is really, I think, is coming to the party, but it was a little bit trailing behind us, but We'll get to him in a few seconds. The increase in profit is driven primarily by the increase in PGM prices, but Volumes were an important contributor to Livers has really come to the party. The big cost increase for Madika was primarily Due to our COVID closure, it's a labor intensive with lots of people on the mine within close proximity of the communities And we had to be mindful, respectful that safety and the interests of our people come first. Added to that, we had the unfortunate two fatalities, Back to back fatalities, which really shook all of us. And then we had a 2 week delay in operations due to industrial action. I believe it's all behind us. I look at the last 2 months, Medico is doing exceptionally well. I think all of us can look forward to a really good set of results in the next 6 months. Turova is in the process of ramping up. I'll touch on that going forward. And obviously, commensurate with that, we will see a reduction in costs coming from Two Rivers as early as the next 6 months as we ramp up production and keep going. TRP, I want to just Spend a few minutes on that. He's busy with the plant expansion currently. That will increase our ounces by 50,000 ounces per annum by 2022. We also have, as you've seen, announced the Merensky project, which is 180,000 ounces at steady state and We start processing that by 2023 with a rapid ramp up to steady state by as early as 2024. We're dovetailing that. We've got sufficient power. We've got sufficient water. The tailings dam, those were the 3 constraints. Prices have supported us. We've announced the project will have superior returns. It will be positioned on the lower end of the cost curve And undoubtedly will help get Turov as a whole down the cost curve. Madikwa is currently accelerating its development and that will improve the ounce profile from an annualized basis of 320,000,000 pushing us up to over 400,000 ounces by 2024. We're also in the Sage are building a chrome plant, which will be commissioned, Tandu, the end of this year. And certainly, we will ramp that up within 12 months to steady state, doing 280,000 tonnes of chrome. That's a byproduct, comes literally for free. It really will serve us exceptionally well. I think the message I'm spending here is that if we look at the combined approach that ARM has moved on, it's growing organically, It's dovetailing off the assets it knows, using its own people and it comes very, very cost effectively with huge margins and position us well in terms of growth going forward. We are in the process of evaluating a number of other options, But they have to follow due course. We cannot announce anything until it's signed on the bottom line. So I mean, I did touch a little bit on the growth, and I just want to say that if you look at the combined growth over the next 3 years, we will be doing another 300,000 ounces of PGMs by 2024. If you take that currently on an attributable basis, we have SEK 350,000,000, we're just about doubling the ounces on But we're moving from as an operation from 650 to over 1,000,000 ounces of PGMs within the next 4 years. That's going to realize. It's coming. I'm very proud of what we're going to achieve and I have no doubt that we will deliver on those on time, within budget and with the resultant impact on our business. BlackRock, I've alluded to it. We announced that CHF10 1,000,000,000 we're already touching CHF4 1,000,000,000 within the next couple of years as the market allows us, We can get those operations up to 5,000,000 tonnes per annum. So significant growth within the group. In Comati, we've been cautioning the market a long time that The open pit has come to the end of its economic life. We will curtail all operations by the end of March and continue with care and maintenance and then we're under discussion with our partners as to the way forward with M'Kamati. There's a lot of moving parts, a lot of things happening there, but for now, it's really care and maintenance. Excuse me, it's done exceptionally well in the ramp down. Many, many operations struggle in the industry once they announce closure to keep people focused, motivated and to keep your costs down. And you'll see in these results is that in this period of closure, we significantly reduced the costs and improves the profitability way beyond a lot of people's expectation. And I'm sure the market is going to be pretty surprised and presently surprised with the outcome of what we have achieved. In essence, that the profits that we've summed out of this will go far away in terms of maintaining our care and maintenance. We also are well provided in terms of the NIMA requirements and the accounting has all been provided for. So being an exceptionally good outcome in terms of going down to Cairn maintenance. The ARM Coal Business. Thermal coal prices have remained largely depressed in the first half of twenty twenty one, And there's also been a decreased demand out of China and particularly out of India. So with that in line, we also extended the closure of those mines over December, where we normally close for 2 weeks. We extended closure for 4 weeks just to preserve Based on the lack of demand, things are picking up now, pleased to say. The mines are in a position. They have ramped up. They've overcome most of the challenges. Prices have picked up, so I'm looking forward to a better set of results over the next 6 months. We also did struggle a bit with logistics and Transnet and the port, but I believe that's all behind us as we stand. So overall, I think the coal business will pick up in the last couple of months. With that, that concludes my presentation, and then we're going to hand over to Sue to do the financials. Thank you, Mr. Chen. Thank you, Mike. Thank you, Chairman. So this slide is a graphical representation of our consolidated statement of cash flows, wherein it basically depicts all the cash flows from our operations and investments and how that cash was deployed or allocated throughout the business. So during the 6 months ended 31 December, 2020, the most notable cash inflows comprised ARM, managed operations generating cash of BRL 2,000,000,000. We received dividends of BRL2 1,000,000,000 from our joint venture in Asman sorry, of BRL1.5 billion. There were net transfers of RMB850 1,000,000. These financial assets are cash and cash equivalents that had been invested in fixed deposits with maturities longer than 3 months. During the period, the review period, these financial assets matured and have now subsequently formed part of our cash and cash equivalents as at December 2020. Notable cash outflows in the business during the period included taxation paid of 800,000,000, capital expenditure of 843,000,000 and dividends paid to ARM shareholders of 1,400,000,000, which brings us to a cash and cash equivalents balance of 6,500,000,000 as at end of December 2020. Just to note that this cash and cash equivalents balance excludes cash and cash equivalents at ARM Ferris. This slide seeks to show the improvement in our net cash to equity ratio. During the 6 months ended, ARM's cash and cash equivalents and net cash increased by RMB1.1 billion. This is mostly attributable to the financial assets, which I just referred to, which matured during the period and now form part of cash and cash equivalents. Total borrowings of DKK2 1,000,000,000 remain mostly flat. These total borrowings, 55% of them are interest free, being the ARM Coal and Modigwa partner loans. 45% of the total borrowings are interest bearing with the majority being the ARM BBEE Trust, loan owing to Harmony. The increase in net cash, therefore, led to an improvement in our net cash to equity ratio from 11% at June 2020 to 12.6% as of end of 31 December 2020. If we add back the partner loans, the RMB E Trust loan, the financial assets as well, we get to an adjusted net cash balance of 6,900,000,000, which is slightly up from the balance as at 30 June 2020 of 6,700,000,000. Please note again that these cash and cash equivalents balances exclude those balances that sit at ARM Ferris. In terms of our segmental capital expenditure, during the review period, segmental capital expenditure amounted to 1,900,000,000 and included 271,000,000 capitalized waste stripping costs at the iron ore operations. We expect total segmental capital expenditure for the financial year to be in line with the board approved budget of 3,600,000,000. Just some notable things to consider in terms of our segment capital expenditure. As Mike has mentioned, due to the COVID-nineteen lockdown measures, the Black Rock and Gloria projects were delayed by 6 months. However, that capital expenditure is still going to come through. So RMB1.4 billion will be spent over the next 18 months on these two projects with revisited completion dates being May July 2020, respectively. At the last reporting period, we spent a bit of time on this ARM core receivable matter, which led to the qualification of the loans and long term receivables line arm. So an update. So since then, the management team has done a lot of work In trying to get to the bottom of where this unvalidated receivable we called it at the time, where it came from. That investigation has subsequently been completed and has been agreed between ARM Coal, the JGV Mine as well as Glencore. So what came out of the investigation is basically that Receivable is indeed a receivable. And what another thing that came out is just basically that it needed to be reclassified between trade and other receivables as well as long term borrowings. Because of that, we then had to restate our prior periods, but this only affected our statement of financial position. Because of the qualification of that line item in the previous in our previous financial statements. JSE listing requirements require us to with this set of financials to go out with a review opinion at the least, which we have done and have completed. The review opinion can be found on our website. And I am happy to say that it is an unmodified review opinion, meaning that we can therefore move on from the ARMCO receivable matter. And then this slide is just a summary of remeasurement gains and losses. I know a few of our analysts normally like to see it, but we've just included it, but it forms part of our financials as well. And that's it for me. Thank you very much. Thank you, Chairman. Thank you, Mike and That concludes the presentation part and we will move over now to the Q and A session. I have received a few questions on the webcast, which I will read and the management team will then be available to answer. I've received the first one and he sent a few other questions. I'm going to read them together. Is from Tim Clark from SBG Securities. Tim says, congratulations on the results and particularly the dividend. Please share your view of the potential for Modikwa to expand given the strong demand and large resource space at Modikwa. It does not seem to be on your partner's priority list. That's his first question. His second question is, please may we ask for more color on closure procedures at Ngomati results? Results were good and will the closure be self funded or will cash injections be required from the partners? That's the second question. His third question is, please may we have some color on your plan to use renewable power to offset rising energy costs? At which operations is this being considered? And what is the cost? So those are the 3 from Tim. Can I read 2 more questions from Martin Creamer? I don't know whether you can hear me. Mike, you I am in control. And I think Andre and Tundra and Sue and yourself, Jomgisa, just see which of the questions You will ask, proceed. Okay, sir. Perfect. Thank you, Chairman. The next ones come from Martin Prima from Mining Weekly. He says, please provide an update of your green energy plans as well as your research into the development of energy efficient smelting technology? That's his first question. And then his second question is, Please could you provide insight into the planned ZAR5.7 billion expansion at 2 Rivers mine? What is the CapEx for this? And can you comment on the rhodium richness of this mine is his second question. And the third one is, please update us on the amount of capital that ARM intends to invest in South Africa in the next 5 years and the multiplied CapEx when the contribution of the partners is added. And his last one is, for the benefit of the South African people, should ARM, together with the Minerals Council, not put hits together to ensure that the manganese output is managed in the same way as iron ore so as to avoid giving it away because this is a national South African patrimony giveaway prices. And those are the questions from Martin Cramer. Can I suggest that we take those, answer them and one more, okay? So the next set of questions come from Peter Cromridge from Merger Markets. He says ARM has indicated its in copper, would expansion into copper take the form of an acquisitive or an organic growth strategy? Okay, so that's the one. Mike? Okay. Yes, I think the answer from there. Yes, you can. Am I on here? So Tim, thanks for those questions. Yong Geeser will help if I didn't capture all of them. You spoke about Madikwa and Madikwa expansion, it doesn't seem to be on our radar. So currently, Madikwa is running at about 180,000 tonnes per month, 300 and 10,000 ounces on an annualized basis, and we are in the process of ramping that up to 400,000 ounces over the next 3 years. In addition to that, We've also announced the chrome plant, which will push out about 280,000 tonnes of CHROME concentrate on an annualized basis. So is that the end of the road for Modikwa? No, certainly not. It has gone through a long Difficult process in a depressed market and had to be a lot of work had gone into it. I think Madikwe is maturing. We need to cross this first hurdle, which I've just elaborated, and there's absolutely no reason why it could not expand Further, it's well endowed. We're only mining 12 of the 28 kilometers of strike. We've probably got at the current rate of production More than 100 years of resources in place. So that lens I mean, obviously, Says that it has unique opportunities for growth. That excludes the overlying Merenskin at these prices. And with the advent of EVs, very rich in base metals, it is a unique opportunity that also needs consideration. And I think, Doug, we first need to see what we achieved with the Two Rivers Merensky and there's no doubt the lessons learned out of this can be expanded on to Madikwa. So I think Madikwa has a great and rosy future. We're also looking at appropriate technology and mechanization, Knowing that as we get deeper and we need to consider safety and new levels is whether we cannot rather move towards mechanization in those ore bodies going forward. So there's a lot of work, Tim, going on with regards To Madikwa, your next question was in Kemati. So in Kemati, there is no call or need for cash from either of the partners for the next for this closing or interim period. We are looking at various studies and optimized studies around closure rehab, water handling and other alternatives, Providing from an accounts point of view, it's all being provided for, but they would ultimately in the long term closure, depending on where we go, There could be a further there will be a further requirement for cash, but a lot of work is going on in that area for now, Tim. Jim, I believe those were your questions. Yonkersa? His other question was around plans to use renewable power to offset rising energy costs. I thought that was Martin Kremers, but that's fine. They are very much alike, yes. Both teams being the Platinum and Ferris are in discussions and a lot of studies are ongoing. We have not yet landed on anything which I can announce, otherwise I would have announced it. But there's a lot of work Going on in terms of energy efficiency and particularly around renewables. And I know that was Martin asked the question about alternative smelting technology. I think Andre is in a position this time around to tell us We've made significant progress in that regard, but it is still early days. Thank you, Mike. Can I sneak in one way a question that's come in from Tim? He says, Please remind us where the ARM coal debt is, including at PCB. Thank you. I think maybe to if you can help. Yes, from there. Yes, sure. So the ARM coal debt as at 31 December is 1680,000,000. So that increased slightly from the June 2020 year end figure. So we're currently at 1680. Andre? Martin, I think the question that you asked about the smelters, we are as Mike said, we've progressed very well with that technology. We've proved that we can do the melting and that project was really, really successful and concluded successfully. The process that we're going now through now is to test the materials of construction. And I guess before mid year this year that we will be in a position to give further updates on that. And then Your question on the green energy, as Mike has said, We've advanced quite far in the Asmang business in terms of using because we are in the Northern Cape, It is an ideal area for sunshine and electricity there. And we're in the process we've done a arm. Conceptual study on that and we're in the process now to start a feasibility study on a hybrid electricity project, which includes Eskom Power, solar PV Power and battery storage facilities and we will notably by the end of this calendar year have a good insight on that in terms of how that can add value and reduce costs for Aspen. Thank you. Thank you, Chair. Just to answer the question for Martin with regard to the rhodium content on Nerensky, It is generally around 3%, just over 3%. And that is actually lower if you were to compare to UD2. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] However, I think it's important to point it out, though, that Merensky comes with a higher low Dondo base metal. As we've indicated on the slides, we expect about 1600 of nickel and 1300 of copper. It also compared to UG2 has a higher content on gold, about 6%. So those metal balancing, I think, gives you also additional diversity in terms of the products that we'll be producing out of Toravis. Thank you, Jim. Are all the questions answered? Martin Krimers once. He asked us, please update us on the amount of capital that intends to invest in SA and the multiplier impact when you consider the contribution from the partners. So 2 will take it. Yes. Yes. I alluded to it When I was going through the slide on the segmental capital expenditure, so for the current financial year that we're in, we're expecting to have spent ARM. But that's just attributable to ARM. Then 3,400,000,000 in the next financial year, 2022 and 2,700,000,000 in 2023. And in the 2021 2022 financial years, Most of that amount will be the same business capital of around 2,400,000,000 each year with the balance being more on expansionary projects. Fantastic. And then the last one for Martin that maybe was a comment more than a question. It was the one where he said for the benefit of the South African people, should ARM and the Minerals Council not put their heads together to ensure that manganese output is managed in the same way as iron ore to avoid giving away what is a national South patrimony giveaway prices. I don't know if Andre wants to go there. Yes. I think as Andre comments, just keep in mind that There's competition as well as antitrust requirements. Whatever we do is within those legal requirements and make sure that there's compliance in that regard. I wanted to start off by saying the iron ore business is not controlled. So it is really not controlled. It is a question of capacity that South Africa has and Transnet is doing a lot of work at this point in time in terms of opening the port of Saldanha, Cape Town, Durban and Port Elizabeth for the manganese ore export. There's a lot of A study is being done on that but we have to realize that the proportion of manganese ore exports That we currently do in South Africa is much lower than what the ore reserves in South Africa is. So we're still lagging in that regard. And I think we will deal with this in a very responsible way. We don't have any organization or any single company in South Africa that can really dominate the manganese ore market. And it's another area that I'm certainly going to venture in, in terms of Trying to manage that or control that. Can I take the next batch? Yes. Okay. One more for Martin about the 5.7 to Rivers. Okay, that one. So Martin, the planning is and the outlook is that 3 to 4 years with no need for either of the partners being ARM or Impala to contribute to that, Albeit that there would be some dividend sacrifice. Fantastic. Thank you. Can I take the next set? So in the next set, there's a few from Patrick Mann, who comes from the Bank of America. He says, what was behind the big increase and management fees for the period. His next question is there were negative working capital flows during the first half, what should we expect in the second half of the financial year? And those are his two questions. If I can please take questions from Deleki, E. Deleki from Maratordi Capital. He says, good morning, Chairman and the team. A massive relations to your team for a sterling performance. Three questions from my side. Number 1, have you ever considered having a secondary listing? In other words, on NYSE, on the London Stock Exchange or Shanghai to raise your international profile and access foreign capital? His second question, could you please comment on your capital allocation priorities going forward? His third question is, has there been any geographical shift with regards to your major shareholders over the past 6 months? And then if I can add to those questions from Brian Morgan from RMB Morgan Stanley. He said, thank you for taking my questions. Could you share your confidence that the Merensky project is viable throughout the pricing cycle? Would it be viable throughout would it have been viable throughout the last 10 years had it been in place? Is his first question. The second one is the manganese recapitalization project was intended to stop the big increases in costs. But now we have double digit increases in unit costs. Could you shed some light on this? And his third question is, are you planning to announce the Paris Agreement net 0 carbon emissions target like most of your peers have done? And shall we take those, and then we can move on to the next one. Yes. So we can. Okay. All right. The next And then of course, we're available afterwards. And if we don't answer all the questions, they can contact you directly or Mike and everybody else. How many more questions have you got? I've got another 5 questions. Okay. So let's take those as a last one. Shall we take those? Okay. The next ones are from Tabang, which is 3 questions in one. He says, well done for the excellent results exclamation mark. The Chairman mentioned ARM still being interested in copper. Could we get more color on this? What technology would you be looking to use to process the low grade ore at Beershoek and Kymani? Would it be WIMS or UHDMS? Has there been any progress with regards to the discussions with Kumba, and Sakura has largely been a bad investment. Is management considering disposing its share or does the current price environment not allow that Federation. So that's from Tabang. And then Livoyo Boi from Noah Capital says, congratulations on the great set of results. Can you please give us CapEx numbers for the expansion project in the PGM operations? And then can you give us more detail on the RE project under consideration. I'm not sure what RE refers to. So, Lovio, if you could update the question and give us what RE refers to, so that we can answer that. And the next one is from Felix Ngini from Bloomberg News. Could you please give us more details on plans to venture into copper? How is this likely to be done? Which jurisdictions are you considering? What are your views on copper opportunities in Zambia. And 2 more questions, one from Warren Riley from Bataluru Capital. He says, hi Mike, what does the ramp up of the 2 Rivers Merensky project look like? In other words, how long does it take to hit the 182,000 ounces? Do you have sufficient processing capacity for the additional volumes you will be bringing to the market through 2023? And what is the IRR on the 2 Merensky project and payback period at spot and on your internal assumptions? And one from Peter Cromridge. No, we've read that one. The last one is from Sipelelem Dudu from Excelsior Capital. He says, what is the criteria for ARM M and A activity? Which commodities do you view as attractive? And are these greenfield projects or are they already in production? Those are the last questions. Thank you so much. And I mean, we'll answer those questions. And as I said, Jongisa, you and the team will be available for the rest of the day and any other time thereafter. Is that a detailed conference call in the afternoon today? What ARM conference call in the afternoon today. That will also What time is it? So that is at 2 o'clock. Okay. Thank you so much. Mike? Teresa, first one is really about capital and capital allocation and secondly, listing. I thought maybe it's appropriate if Two touches on capital and capital allocation. And the shareholding shift, Jomgiese. Deal with all your questions and Can I deal with mine? All yours and then we'll deal with all of them. Okay. So I'm going to take them and at random, I'm going to take the questions at random, so they imply. I move on to your questions about the viability of the Merensky And had they been viable over the last 10 years and going forward? And let me touch on that. You spoke a bit about the unit cost, double digit. I'll come to that, but let me if I may just get on to the Merensky, but that's a very good observation in general, Brian. So firstly, Merensky He's applying Borden Pillar method of mining, so it's fully mechanized. So if a person takes today that a conventional mine, Typically like Madikwa runs at about R1800 a tonne. TRP, which is a board and pillar UG2 runs at R900 a tonne, so it's 50% lower than the conventional approach. So the Merensky is always premised and has always been premised on co extraction, sympathetic on concurrent mining of the overlying Merensky. That, by implication, has reduced overheads and due to the shared services structure. That has quite a significant impact on the bottom line. That alone reduces the overhead costs or the costs on mine costs of Merensky a further 20%. Then understanding that the Merensky channel is 3 meters thick, It's a high profile equipment where the UG2 uses medium profile equipment or low profile equipment. So the low profile equipment on the UG2 orebody runs at about 18,000 tonnes a month per fleet and the high profile, which we intend to introduce, delivers about 25,000 tonnes of per month per fleet. So that's a 40% improvement on the output, Productivity efficiency and volumes relating to comparing that to the UG2. And then geotechnically or structurally, the Merensky is far less complex and stable in the UG2. It also has a homogeneous hanging wall with the result in that the support costs compared to UG2 arm are substantially lower, the support requirements. That also adds to reducing the costs. So you have much higher labor efficiencies. So in general, your operating costs on Merensky is 60% lower than conventional and 20% lower than the current UG2 base. So then if you add that up, the rand per ounce, Although it's a low grade of 2.9 and the UT2 is sitting at 3.5, the cost per ounce are very similar based on the cost profile. And hence, it gets us down the cost curve. Your other question, well, why didn't you do it 10 years ago? Well, Certainly, the prices didn't support this. But most importantly, Brian, is that we did not have power, We did not have water and we didn't have tailings capacity. All that now is in line. So I think on those fundamentals, We have a very robust, good project. Someone asked, what's the payback on this? The payback is likely to be 2.5 to 3 years arm at the current prices. Now I want to qualify, when we do a project, there's no ways that we'll do the project assumption on current spot arm. The long term view is probably 30% to 35% lower than the current spot price to support the fundamentals of the project going forward. Jungqvist, I'm not sure if I've missed out on Anything that I should have thought about. Just the one thing about. The doubling of the costs. So, Brian, I mean, That is a concern to all of us, but you've got I think there should be an appreciation that all of us went through 6 to 8 weeks of no production. So it's the production costs that are compoundedly escalated and Madikwa, in addition to that, had Some challenges regarding safety stoppages and the industrial action which compounded the problem. We're already seeing in the 2 months subsequent to that, that there's been a pronounced drop in costs. I have no doubt it's very similar on the ferrous is that we did not deliver on volumes and commenced it with that, your unit costs are higher. Going forward, I do see a big improvement. Thanks. So one question was on the management fees received as to what caused the increase in the fees. So this was mainly due to revised Fee arrangements at Asmang, which aligns the management fee that ARM earns, aligns that to the performance of Asmang. So as Asmang's performance increases or improves, So then does the management fee increase that ARM earns. That was the one. And then the other one was the negative working capital, I So that one is due to an increase in debtors at the PGM operations, which is commensurate with Increase in the sales revenue at the PGM operations. So we saw quite a spike there towards the latter part of the period. But this is really just timing and you will see as those debtors pay then it flows are back into cash. So we're not too concerned about that at all at the moment. Andre? The question that I think fired at me was the one about the technology at Kumaane in Biosuk. For now, with both of those operations, Kymani with a 20 year life 25 year life of mine, we're going to stick with our washing screen for the high grade material. And then the Jig plant, which is not the same as the UHDMS process, where we have a much finer A cutoff point which we can really control very well. So we're going to stay with that technology. And then the ultra fines portion, We still treat with the WIMS plant. So we're going to continue with that for at least the next 25 years. Beyond that point, when we start to treat our, what we call, the jig discard, then we will certainly look at milling the material down and then using The HDMS process or the WIMS process, which we will do the trade off at that point in time. At our Besuk mine, Also the same, we're going to continue with the technology. We've investigated, we've done feasibility studies on that, on the worms and on the UHZMS plant and we I concluded that the best way forward for Biosug will still be the washing screen and the normal GEEK plant. And we've done a lot of on mine exploration work at Biosug mine. And we, at this point in time, are doing a feasibility study to see if we cannot extend the life of Biosug mine by We're not certain about the number, but at least doubling the life of our precious mine at this point in time. Sakura. You're correct. Sakura was a disappointment from an investment perspective, but from operational perspective, That plant is really performing well. And as Mike alluded to, is that the alloy prices have picked up quite significantly Since November until now, it's almost 30% improvement in the pricing. And from our forecasting and the numbers that we're doing, It will Sakura will most certainly do a lot better. And then the manganese ore prices, on Brian's question again, Mike touched on that, but I just want to remind you, Brian, that the capital project that we've done is not finished yet. Specifically now, we're in the underground infrastructure construction phase where we also took a deliberate decision To delay the contract so that we don't have when we brought people back for COVID and the exposure to each other and the social distancing, We took a deliberate decision to hold back on the contractors and bringing them back. For that reason, we've delayed the project slightly. And the cost increases that you see is really still due to the inefficiencies of the project not being completed. But when that project and underground infrastructure is installed, we will see a very good improvement in the unit cost performance of that mine and of course, as the volumes also increase. Thank you. Thanks, Andre. Thando, is there anything on your side? I think one question that was asked by Lofeuo. In terms of the additional processing capacity, yes, we can confirm that we've secured additional processing capacity for the Merensky concentrate. Thank you. Thank you. I think all that's left is for me to answer Delekki's question around the shareholder base and whether we've seen a movement. We still have a very solid shareholder base in South Africa, many loyal shareholders. We have seen though in the last 3 to 6 months increased buying offshore, the U. S, the U. K. And on the Singapore side. So there is increased interest from international institutions as well. Chairman, with that, I'd like to just thank everyone for their time and for your attendance today. And as mentioned earlier, we do have a conference call where the management team will be available to answer questions at 2 o'clock today. The links and the website sorry, the links to join that are available on our website. So if you do have any additional which will be available thereafter. Thank you very much, Mr. Chairman. And that concludes our presentation for today. Thank you. Thank you. Thanks, Jengisa. Thanks to everybody. Thank you.