Good morning, all. Apologies for the slight delay to starting our presentation, but we are on our way. Our Executive Chairman, Dr. Patrice Motsepe, will be joining us virtually for these results. I would like to welcome you all to the African Rainbow Minerals Results Presentation for the interim period ended 31 December 2024. Thank you to those of you who are joining us online via webcast and LinkedIn, but a special thank you to those of you who have made an effort to be here with us in person. For our virtual attendees, if you would like to ask a question, please use the dialogue box provided. Your questions will be read out as part of our Q&A session at the end of the presentation, and we will endeavor to get to as many of them as possible.
Betty, please note that we will take questions from the floor first before going to webcast. I will now hand over to our Executive Chairman to start with the presentation. Thank you.
Okay, thanks, thanks to everybody. Very special welcome. I would have loved to be present, but you know we all have work to do to make sure that African Rainbow Minerals continues to be globally competitive and delivers competitive results. Now, let me start by thanking everybody for being present, and a very special thanks to our management team under the capable leadership of Philip and Sue. We also have a world-class team, contributions from Mike Schmidt, Andre Joubert, Thando Mkatshana, and Thabang Thlaku, and Sue, of course, our Finance Director. Thank you so much to the board members who are present, and particularly to our Chairman of Audit and all the other board members who are with us. The important thing of presentations of this nature is results are definitive.
We can do all the most wonderful work as a company, and of course, there are circumstances, for example, the pricing of our commodities that are outside our control, but our dominant focus has to be on those factors, circumstances, issues, operational performances that are totally under our control and consistently deliver competitive results, competitive in the context of our peers and also in the context of building a globally competitive company. That has always been the focus, and that will continue to be our objective in the short, medium, long term. Let me just repeat by saying results are critically, critically important, and delivering good results, competitive results is a critical factor from an African Rainbow Minerals perspective. Headline earnings for the first half of 2025 decreased by 49% to ZAR 1.5 billion.
The results have already been published early this morning, so I'm just going to identify those key factors, and Philip will provide more detail, and Sue also, our Finance Director, will provide additional detail on the specific issues which I'll be referring to. As is always the case, the management team, Philip, Sue, Mike, and Thabang are available for questions, not just during this presentation, but also afterwards, and will also be going on a roadshow to engage with our shareholders and specifically to interact with our shareholders. I really want to thank all of those shareholders who on an ongoing basis give us feedback and give us advice, including specifically their thoughts in areas where they think we can improve. That feedback is highly appreciated, and it's taken very seriously. Our financial position remained robust. We've got a net cash.
We had net cash as of the end of December 2024 of ZAR 6.1 billion. Earlier on, I spoke about what the headline earnings are, and we are declaring a dividend of ZAR 4.5 per share. The declaration of dividends is an important part of African Rainbow Minerals being globally competitive, and the declaration of dividends goes hand in hand with an important investment in the future. You will see from what Philip will say and provide further details. We invest in the minerals that we have, including others that we are pursuing, and you have to take a long-term perspective. Particularly in the context of PGMs, but all minerals, the pricing can be very cyclical. We have been in this business for more than 30 years, and we understand it.
During the good times, we invest in the future, and during the difficult times, that is when there are opportunities. Also, that is the time when companies with a strong balance sheet and with a world-class management team will always perform well. Our financial position, as I said, and we have received dividends recently, and our Finance Director will provide further details in that regard. Thank you. Okay, thank you. Now, as I said, the documents are available, and I will just refer to some of the broader issues. The headline earnings in ARM Ferrous has decreased by 33% to ZAR 1.9 billion. In ARM Platinum, the headline earnings have also decreased significantly by 144% to ZAR 689 million. We are always asked the question, what does the future of PGMs look like?
Over the last few months, particularly what has happened in America, it is clear that the transition to a clean economy, a green economy that all of us are committed to, will take significantly longer than was anticipated. We are confident that in the medium to long term, the pricing of our PGM minerals and metals will increase. It is a business that we have confidence in. It is a part of our portfolio of assets that we run and operate that we think will continue to do well. I often get asked questions by our shareholders about Bokoni, and Philip will provide, our CEO will provide more detail, but what we have said over the years, Bokoni is a world-class ore body.
We are confident that with some of the plans that we have and some of the strategies that we have in the medium to long term, it will create value for shareholders. An important part is what further details will be provided for. It is in the context of capital allocation, but equally more importantly, the context of the money, the investment that we are busy with in Bokoni, and to ensure that every cent we spend there is appropriate and makes commercial sense. It is also part of the long-term strategy of realizing value when the prices of the commodities will increase, which we expect. What is also important is all of our assets, all of the mines that we operate, there are no holy cows, and this is critical.
If at any stage the information and the data at our disposal indicates that any of our operations should go on to care and maintenance, we've done so in the past and we will do so in the future. What we've also realized is you've got to look at how you justify the expenditure and the cost that you're incurring in the context of profitability. There has also to be a balance between long-term profitability and our short-term objectives. The short-term objective, of course, is indeed profitability as well, but also the payments of dividends. We will provide more information in the slide, both on Bokoni, Nkomati, and other assets that are and ore bodies that are part of our globally competitive portfolio of ore bodies that we manage and operate. The headline earnings at ARM Coal also diminished by 11% to ZAR 182 million. Thank you.
The six-monthly headline earnings is a reflection of what I've stated earlier. This slide emphasizes the volatility. If you invest in mining companies, an essential part of your investment decision is an understanding of the volatility of the industry. Our duty as a mining company and as a mining company that is steadfast in its determination to be globally competitive, you stand out, you perform well when the prices of the commodities go down, and you are still in a strong position in terms of your balance sheet, but also in terms of your costs of operation, because at the end of the day, management is judged by what they are doing at the operations. Also, as I emphasized earlier, we see ourselves as a company that is committed to paying dividends on an ongoing basis.
You will see that the six-month headline earnings over the last five years or so have gone up significantly in 2021 and 2022, and we are now busy with that cyclical downturn. We invest for the future because we are confident that there will be an improvement in the medium to long term. Thank you. The dividends per share, as I said, we have declared a dividend of ZAR 4.50. Some of our shareholders were saying to us, "But you know you have got so much money on your balance sheet and you have got lots of cash. Should you not give us more of the cash?" We have a clear duty to pay dividends, but also to ensure that we have sufficient resources to create sustainable value in the medium to long term. Thank you.
The dividends received, we received ZAR 2.5 billion from our partnership, our 50-50 partnership in Assmang. I want to thank all of our partners who are with us, and I want to thank them for their contributions. I want to thank Patrice Motsepe and also thank Des and the whole of the management team at Assore for the excellent work that they are doing with the excellent leadership that ARM Ferrous is providing under the leadership of Andre Joubert, and Kajal is doing excellent work, and Mhlanga and the team. There is also good work that has been done at Transnet, and Roulette is doing excellent work, and we are very proud of the good work that our team is doing at ARM Ferrous, and they are doing at Assmang, and we are very proud of the partnership between ARM and Assore. Harmony is doing very well.
It always makes me proud when I was in Miami two weeks ago for a meeting of the ICMM, which is attended by the CEOs of the largest mining companies in the world. It is an important learning experience to hear the commitments of the best mining companies in the world in terms of responsible mining and their contributions to creating value for their shareholders and stakeholders, but also the crucial contribution of the minerals that all of us mine, whether it is mined by BHP or Rio Tinto or Anglo American or Vale or Glencore or African Rainbow Minerals. Those minerals that we mine, they make the world a better place and contribute to the improvement in the living conditions and standards of living of all of our people worldwide.
Now, if you see that post-31 December, Harmony declared an interim dividend of ZAR 2.27 per share, and we will be receiving a dividend as ARM of approximately ZAR 170 million. I'm proud of the work that Peter Steenkamp is doing. Those of us who know the long history that African Rainbow Minerals have with Harmony, the current Harmony is a merger between ARM Gold that we formed in 1996 when we merged with Harmony. That is why if you look at the name Harmony, you'll always find the logo and the sign of ARM and the rainbow in the words ARM in the name of Harmony. They are doing good work. I'm excited about the copper that Harmony is busy with. Again, we've always said there are no holy cows.
We deal with all of our investments and with all of our assets within a clear commitment of what's in the best interest of our shareholders. As part of that, we look at the totality of options, and that's very, very important. Distributions we received from AMCOL, it went down. Post-31 December 2024, ARM received ZAR 462 million from AMCOL. Our investment in coal is one of the opportunities we've identified many years ago as being important to creating value for our shareholders. Also, we've got a huge commitment there as part of the just transition to a clean future and a green economy. Thank you. Segmental EBITDA split by commodities, you can see in 2025. Manganese increased in 2021, first half of 2025, from what it was in the first half of 2024.
There were times, I think about 10-15 years ago, manganese was a significant contributor to our headline earnings and to our profitability. The assets we have, the manganese assets we have in Assmang, are world-class. We are confident that they will continue to create value in the medium to long term, despite the prices currently not being as good as they were in the past. For a few months in the past period, it was much better than it was a year or so ago. The slide is self-explanatory in terms of the EBITDA split segmental contribution by each of the commodities that we mine. Thank you. Safety and health is a critical component of our commitment and how we function and how we operate. The safety and health of every single one of our employees is critically, critically important.
There is an ongoing commitment to implement best practices, but there is even a greater commitment to consistently train, educate, and to create awareness because at times it is when sometimes employees have a very good understanding of the behavior and conduct that is expected from them for their safety. At times, we become complacent and we have to overemphasize that the safety and health of every one of our employees is critically important. The lost time injury frequency rate, there has been a 33% improvement, and we unfortunately had one fatality at Modikwa. Our deepest condolences were passed and continue to be passed to one of our colleagues that we lost. The total recoverable injury frequency rate, there was an increase of 4%. The management team is doing good work as far as safety and health is concerned.
The critical factor is that there's always room for improvement and there's always a commitment to improve. Thank you. The final slide refers to our strategy. We are an owned operator. We've got an entrepreneurial management culture. We invest in our employees. We've got a deep commitment to the communities that live next to our mines. A significant portion of our employees come from there, but we also provide skills and expertise to the citizens, the residents of those communities, and train them and send them to the best schools. They are the future managers and engineers who run operations. The impact of artificial intelligence and technology is something that we are following very closely, and we are part of the most advanced discussions and exposure to how technology and artificial intelligence can significantly contribute towards increasing productivity, increasing efficiency, and increasing profitability.
Another important part that's also not sufficiently emphasized at times is the impact of technology and artificial intelligence on safety and health. Thank you. Okay. Now, Philip will take over and guide us on the good work that he's been doing and Mike Schmidt and Sue and the rest of the team. Will you please proceed, Philip? Thank you, Thabang. Proceed, Philip.
Thank you very much, Chair. Good morning, ladies and gentlemen. Once again, welcome to those who are here with us physically and those online. Also a special welcome as well to our board members.
Just going into the results, if you look at the production contribution, on the INOS side, we just had a slight reduction in terms of performance as a result of the outtake from ArcelorMittal, which most of us are aware that they've really made a declaration that they'll be stopping one of their plants at Newcastle. Manganese, during this reporting term, really showed a very strong performance, 13% improvement compared to how they performed last year. Last year, this time, you remember that we had some operational challenges, so those have been addressed and the focus on quality has been achieved. We're really grateful on that. On the Modikwa side, we have really seen a decline in terms of output as a result of the safety-related stoppages that we faced with following the winch-related fatality we had on the 29th of November last year.
Bokoni as well produced lower than the guided ounces from Middle Pint in the Rampa production, and also affected to a certain extent by the fatality that we suffered the previous financial year on the 16th of June. Going into our headline earnings, during the past six months, ARM faced a very tough operating environment, including low commodity prices across our basket, logistics and water challenges combined with above inflation cost increases. Cost reduction, cost containment remains a key focus area for us, and progress can be seen in the six-month review that we're going through. We remain focused on enhancing quality through mining-grade optimization, reducing waste dilutions, and increasing volumes. Going to ARM Ferrous, headline earnings were lower due to 22% lower iron ore prices, a stronger exchange rate, and lower sales volume for the iron ore division.
Higher average realized US dollar manganese ore prices and a better cost performance contributed positively to headline earnings, partially offset by a stronger exchange rate and lower export sales. Going to Platinum, as I already mentioned, we've had some operational losses at Bokoni because of increased spending on mechanized development, mainly driven by the decline development that we're opening up the ore body in line with our mechanization strategy that we have shared previously, and the ore reserve development together with infrastructure costs. At Two Rivers, ramp-up in mining development at North Shaft, together with increased finance costs, actually led to a reduction in our headline earnings. Modikwa, as I mentioned, the month of December was affected by the safety-related stoppages, and also we've had higher than normal rainfalls as well, which affected our open pit mining that we started around October.
Just on the coal side, lower export volumes and strong exchange rate as a result of reduced trucking due to lower prices. I mean, we do have a cut-off price within which we decide when to truck and when not to truck. During this period in question, we actually had to make a decision to stop trucking because the prices were lower than that limit price. In terms of the next slide that talks to the EBITDA margins, I mean, the Chairman has already alluded to the fact of the benefit of a diversified portfolio. I mean, this is quite evident here. At the same reporting period last year, I mean, INO division really displayed 53% on the EBITDA, but reduced now to 41% because of the above-mentioned terms.
The benefit of this is that the diversified portfolio is that when one commodity is down, I mean, the other is there to really back it up. We have really seen that with the manganese coming in, increasing their contribution during this reporting period. Moving into AMFERROUS, on the variance analysis, we see a decrease in prices and volume driven by the INO division compared to the same reporting period last year. INO increase in cash cost due to labor inflation, lower production volumes, and higher mining and plant maintenance expenses were experienced. Production volumes at Black Rock, as I mentioned, were 13% higher after management successfully addressed the ore quality issues. Sakura cash cost increased due to higher and increased manganese prices.
On the iron ore side, Khumani Mine remains our tier one asset with more than 10 years of life remaining, a high-grade ore body, and a lower stripping ratio, comparatively speaking. Export iron ore volumes of 5.9 million were just about 2% slightly lower than what we had last year, the same reporting period. Local sales volume were down 9% due to a reduced offtake from ArcelorMittal South Africa. As I mentioned, subsequent to the announcement, they basically reduced the offtake. We had for many years really singled out our single supplier and single customer, ArcelorMittal South Africa, as the high risk for Beeshoek Mine. Pleasing to mention that the ongoing industry initiatives, including private sector partnerships, PSP, concessions in collaboration with Transnet to restore the rail port performance, are progressing well, which will require significant time and capital.
Very pleasing also, as we mentioned, that obviously with Michelle as a leader, that we really have that open door policy. We openly engage, contrary to the previous leadership. Moving to manganese ore, Black Rock is a high-grade, low-impurity, long-life ore body with installed capacity to produce over 4 million tons per annum, following the investment that we made and which stopped about two years ago. Production volumes, as I mentioned, at this mine were 13% higher, mainly due to addressing those issues that affected performance over time. I mean, critical skills and also the issue of the challenging mining conditions. The quality issues have been addressed. It is pleasing to say the operation is stabilized and they are actually continuing to look for improvement opportunities to improve their margins.
Capital expenditure at Black Rock decreased by 51% year on year due to lower replacement capital spent and certain non-critical projects that were deferred to preserve cash in line with the current market conditions. Manganese ore, high-carbon ferromanganese export sales at Cato Ridge Works and Sakura increased by 14% and 9% respectively due to improved market conditions. Unit cash cost at Sakura increased by 19%, mainly due to higher manganese ore prices. Cato Ridge Works issued a section 189 and commenced with a facilitated consultation. Moving into the ARM Platinum. As highlighted earlier, Bokoni was the biggest contributor to losses in the Platinum division. On the cash cost that is shown on the top left of ZAR 629 million, that includes ZAR 156 million that was really related to increase in Bokoni development costs, opening up the ore body, setting up the mine for mechanized mining, as we have communicated previously.
The average realized US dollar prices for platinum and rhodium increased at 5% and 17%. However, palladium and chrome prices decreased during that reporting period. The significant unit cost improvement at Bokoni was due to higher production, even though it was lower than the guided numbers. Production at Two Rivers increased marginally as a result of an improved focus on the grade. As we said previously, we are mining through the split reef, but we seem to have really got it right, making sure that we mine the correct cut. As I mentioned earlier, on the Modikwa side, I mean, we had a challenge with regards to the safety-related stoppages, which affected our production performance. Just going into Bokoni mine, as the Executive Chair has already mentioned, it is a high-grade, high-quality ore body. We are in the production ramp-up.
I mean, you'd remember that we mentioned that we've got two concentrator plants, the UG2 at 60 kiloton and the Merensky at 120. Over the period of time, we commissioned the UG2 because the focus was to basically focus on the UG2 horizon. With that in operation, we need to mention that we still need into the future to ramp it up to the optimal side, significant capital injection. At this point in time, taking into account the current price cycle where we are, we have basically made a decision that we're not going to basically proceed with a major capital growth. What we are doing at this point in time, we're utilizing the 60 kiloton UG2 plant. We have focused on opening up the open pit.
We've started really mining open pit in October and have ramped up to about 30,000 tons, which basically constitutes about 50% of that capacity at high grade. We've stopped the mechanized development, which basically had a diluted grade because of waste and reef that was mined concurrently. We're redeploying those efforts into focusing on available stoping and thus really increasing the feed grade into our concentrator. Pleasing to mention that we have seen some good grades reporting into the plant during the past month and as a result, also increased ounces. The focus is basically making sure that we fill that plant with high-grade stuff and that we continue to work tirelessly on reducing costs. To that effect, we have really issued a section 189 process to right-size the mine. The consultation process is currently underway at Bokoni.
This plan that we have really put in place is expected to minimize cash losses in line with care and maintenance costs, at least care and maintenance costs, so that we can keep the mine operating and be able to really explore other growth options when the price tends in the near future. The UG2 Chrome recovery plant that we communicated previously, it's actually currently underway, and we will be commissioning that plant in June 2025. You'll remember that in the previous period, we mentioned that we have the board has approved the 120,000 tons of Chrome recovery plant, and then it was going to take about 12 months to execute. We have looked for opportunities, and that execution actually will be done by the end of June, which basically reduced the execution time in this project.
We are currently looking at several value-enhancing projects, and then at the right time, as soon as those are concluded, we'll basically communicate it. The objective of those value-enhancing projects is basically to enhance the revenue generation for the mine of Bokoni in the similar way that we have seen or the value that will really be enhanced by the chrome recovery plant. Regarding Nkomati, the latest update is that unconditional section 11 approval and competition approval were actually received in December. Currently, the two partners, which are ourselves and Norilsk, are basically closing up other remaining conditions precedent. In that slide as well, you'll see, I mean, the disclosure in terms of the rehab liabilities. There was just a slight increase as a result of the unwinding interest recognized against that liability.
Transitioning into AMCOL, when you look at the variance analysis, you'll see the impact of decreased volumes on coal profits. On mine unit cost at GGV, increased by 4% and 14% at PCB, largely due to decreased sales volume. As I mentioned earlier, because of where the prices were, the decision was made to stop tracking, which basically complemented the volumes in the previous period. Export sales volume decreased by 15% for the same reason. What is very encouraging is that we have really seen a movement on the stockpile levels. There has been some significant depletion because of Transnet's performance that has marginally improved. I mean, if you have really been following the story on the coal line, you'd have heard that Transnet is now starting to hit 1 million tons per week, almost consistently, because of the interventions that they've done.
There is still room for improvement to really step it up because at 52, at 1 million per week, it basically forecasts about 52 million tons. You know that the installed capacity is higher than that. A lot of work is currently taking place. I think the next focus will be on sorting out the signaling system, which will also be able to unlock some value in the coal space. GGV's mine average received export price was steady at $91 a ton, and the PCB average export price decreased by 4% to $84 a ton. GGV's sellable production decreased by 7% for the same reason that I mentioned earlier with the stoppage of tracking of export coal.
What is also noteworthy is a 7% reduction on capital at both GGV and PCB, just making sure that we continue to employ responsible capital expenditure and also capital allocation during this time. The Chairmen have said a lot with regard to Harmony. You've heard how Harmony is performing and the fact that ARM will continue to consider and to evaluate all options relating to this strategic investment in Harmony with the objective of unlocking and creating value for ARM and its shareholders and stakeholders. Just an update on Surge. Surge is the investment that we have in Canada. What I just want to mention is that the mine or the project is making significant progress in advancing the pre-feasibility study for the Burke Copper Project, which is expected to be completed within the next two years.
Just in closing from my side before I hand over to Sue, our key focus areas, disciplined capital allocation. I mean, this is quite evidenced from the slides. If you look at the PGM business, you'll see how the capital spend was reduced also on the AMCOL as well and the AMFERAS as well. We continue to look at opportunities of really making sure that we identify, defer what the capital that is really not really immediately required, and optimize for alternative suppliers where opportunities arise. Maintaining a robust balance sheet. I mean, the Executive Chairman spoke to that, and it is opening very, very crucial just to make sure that we have that flexibility for whatever positive opportunities or eventualities that may come our way. Ensuring globally competitive and profitable operations, that is our focus.
As I mentioned, even for a project, the Bokoni project, we've really had some review, and now we have a plan of action in terms of how we make sure to reduce the cash burn in line with our cash preservation. Decisive action on underperforming assets. I mean, we continue to really look at and review operations, making sure that they deliver in line with expectations. There are currently quite a lot of processes. There are currently quite a lot of review processes that are taking place, and some of them, I mean, at the right time when we have really landed, we'll basically share those results. Collaborating with key stakeholders to optimize logistics and infrastructure constraint, as I mentioned, especially the key service provider, Transnet. I mean, this is ongoing.
Even the Chairman did allude earlier that ARM is working tirelessly and in earnest with Transnet and also with All Users Forum and the Manganese MPC consortium that is really engaging, looking for opportunities and long-lasting structures that we really have to employ to make sure that we restore the Transnet or rail performance to its installed capacity. Exploring value-enhancing growth opportunities. Surge and the Burke project is actually such an example, and we will continue to explore those opportunities into the future. I am going to hand over to Sue, who will take us through the finance section. Thank you.
Good morning, everyone. In these challenging times, I think disciplined capital allocation is more important than ever. At ARM, when we look at capital allocation, we prioritize investing in our existing business, and that is because it is the business that we know. These are our ore bodies.
We know the landscape very well. In terms of risk, that's your lowest risk in terms of where you can deploy capital. When we speak about our existing business, we refer to the sustaining CapEx, capital expenditure, or some people call it the stay-in-business capital. That's where, in the period under review, we've deployed most of our capital. However, we don't stop there. We also look at growing our existing business as well as pursuing any acquisitions that make commercial sense for ARM. At the same time, we look to return capital to shareholders, whether it be in the form of dividends, which we have demonstrated over the years, whether the cycle has gone up or down. We have remained committed to paying dividends, but also in the form of share buybacks or repurchases when the opportunity avails itself.
If you will see on this slide, this slide illustrates how we generated cash and how that cash was allocated in the six months under review. If you look at the sources of funds there on your screen, we received ZAR 2.5 billion in dividends from our Assmang joint venture, which is ZAR 500 million lower than the dividend received in the prior corresponding period. We also received ZAR 70 million from our investment in Harmony. If we look at cash generated by operations, that was a negative. The operations utilized cash of just under ZAR 1.1 billion, which includes around ZAR 1.6 billion outflow in working capital, mostly being trade payables. If we look at how these funds were applied across the business, we paid ZAR 125 million towards SARS. We invested ZAR 1.3 billion in capital expenditure, which was for both stay-in-business as well as expansionary capital.
As I said, the majority of it was for stay-in-business or sustaining capital. However, if you look at the movement or how much we spent year on year, in this first half, it was a decrease of ZAR 1.8 billion year on year. If we look at the largest outflow of cash, that was in the form of the dividends we declared and paid to our ARM shareholders of ZAR 1.8 billion, which was 25% lower than the ZAR 2.5 billion that was paid in the prior corresponding period. If we have a look at our financial position, you'll notice that our total borrowings increased during the period, looking at the movement from 30 June 2024 to 31 December 2024. They increased by ZAR 1 billion to a balance of ZAR 2.1 billion.
Now, the balance mostly relates to a syndicated facility that was taken out by the Two Rivers Mine, which consists of a revolving credit facility as well as a term loan. At period end, at 31 December, the total owed by Two Rivers was ZAR 1.9 billion. The ARM group closed the period at a net cash to equity position of 10.7%. We compare that to the 12.4% at 30 June 2024. As I mentioned again, it's because of that increase in the borrowings during the period. Since the period end, Assmang declared a dividend of ZAR 4 billion, of which ZAR 2 billion is attributable to ARM. This amount is not included in the numbers that are depicted on the slide. Okay, Philip covered the CapEx in a little bit of detail under the operational performance, but just some things I just wish to highlight.
If you look at that segmental capital expenditure on an attributable basis, that was ZAR 2.1 billion, so the ZAR 2.140 billion that you see there on screen for the six months under review, which is ZAR 2.2 billion down when compared to the prior corresponding period. That was mostly due to the fact that in the prior corresponding period, that included the Merensky Project capital expenditure at Two Rivers, which project has since been closed out. That is why there is that massive difference. If we look at where most of the segmental capital expenditure was spent, ZAR 1.2 billion was spent at our ARM Platinum operations, ZAR 793 million at our ARM Ferrous operations, and ZAR 147 million for our coal operations. Just to note that the ARM Ferrous capital expenditure includes capitalized waste stripping of ZAR 509 million on a 100% basis for our iron ore operations.
If we look in terms of capital guidance, if we look at the guidance for 2025, it shows a decrease of ZAR 630 million to ZAR 4.1 billion, or that ZAR 4,085 million that you see on the screen, relative to the ZAR 4.7 billion that we communicated last year in August. The reason for the movement is due to the postponement of non-critical projects across the group to preserve cash due to the lower commodity prices. We also saw holding back in terms of CapEx due to the uncertainty around the offtake, specifically at Beeshoek Mine. Therefore, for that reason, for F2025, 2026, and 2027, these CapEx numbers exclude any Beeshoek capital expenditure pending some clarity that is found in engagements with ArcelorMittal.
The CapEx for those three years includes approximately ZAR 3.5 billion of sustaining CapEx across the group, which includes around ZAR 750 million-ZAR 900 million per annum on an attributable basis of capitalized waste stripping at the I&O operations. Here, we just show the reconciliation to our headline earnings. You will notice that our headline earnings year on year increased, and that is basically because in the prior corresponding period, we had quite large impairments that came into or that contribute to the ZAR 1.2 billion, which we do not have this year. This year, our impairments, as you can see there, ZAR 136 million and then ZAR 10 million as well, compared to the prior corresponding period where we had impairments after tax of around ZAR 1.7 billion.
We have then the headline earnings coming to ZAR 1.5 billion compared to the prior corresponding period of ZAR 3 billion, which was that 49% decrease year on year. Thank you very much.
Thank you very much, Philip and Sue. Ladies and gentlemen, we've got our Chief Executives of the operations on stage to answer your questions. Mr. Thando Mkatshana, who's our Chief Executive for Platinum and Coal, and Mr. Andre Joubert, who's our Chief Executive for Ferrous. We also have Mike Schmidt joining us, who's our Executive for Growth and Strategy. Just some house rules before we get into the Q&A session. Could I kindly ask you to keep your questions to the operations of the business, the markets in which we play, and the strategy? If you've got any procurement or any other type of questions, please feel free to approach management after the presentation. Okay, Betty, we will start with questions on the floor, and then we'll move over to Webcast after.
Thanks, Ben. It's Brian Morgan here from RMB Morgan Stanley. Just a couple of questions, if I may. Are we doing this three at a time?
Yeah.
Yeah, okay. Just if I may ask a question on Harmony, we're looking at about this latest trading statement, 18% payout ratio. More and more investors that I speak to are valuing the Harmony stacking on the basis of a dividend discount model. Basically, just clipping the coupon. As a Harmony shareholder, given where we are in the gold cycle, is 18% payout ratio suitable? Shouldn't it not be higher? Especially given ARM's is higher than that. That's that one. Philipp, you spoke about the underperforming assets, and I was wondering if you can just flesh that out a bit for us. Maybe if you could just tell us which ones they are, and then give us a little bit of maybe guidance on what we can expect to see there. The third one is on BSOC.
If ArcelorMittal pulls the plug on the contract, what are the options with Beeshoek? Will it need to be closed if it needs to be closed? What are the closure costs? Can you give us an idea?
Okay. Thanks.
Sorry, Thabang, can you hear me?
Yes, I can, Chairman.
Yeah. The specific questions that relate to Harmony, I think it's appropriate that Harmony should deal with those. I know that they have their promotional reasoning as well as results presentations. Concerning BSOC, I mean, Philip, you will provide guidance then on BSOC, and I think Andre and Philip are appropriately positioned to deal with that. What I thought we should do, Thabang, let's take five questions, let's write them down, and then we'll respond to all of them.
All right, Chairman. Okay.
Thank you, Philip. Yeah, proceed, Thabang. Are there any other questions? Let's take five questions, we'll write them down, and then the minutes will respond to them.
Morning, everyone. My name is Ntebogang Segone from Investec. I think my questions are around the iron ore business. I see that you have significantly revised your iron ore, particularly with your export sale volumes over the next two years. Previously, you had it around 12.5 million tons. For example, for 2026, you see it actually going to 12 million tons. I just want to know what your revised guidance or what brings into your revised guidance. Also, in terms of unit costs, I mean, if you compare the iron ore business versus Kumba, Kumba reported unit cost decrease versus iron ore or ARM Ferrous had a unit cost increase of around 10%. You've right-sized your operation to around 12.5 million tons in terms of production. Now, also at the same time, iron ore prices have also gone down significantly, even though they're at or above cost support level.
How do you then look into sort of the operational outlook for the I&O business going forward?
Andre is there. Will you answer that question? Not now, after the remaining three questions. Thank you. Next questions.
Martin Creamer from Mining Weekly. You spoke about a narrow reef boring technology that seemed pretty good for Bokoni. It looked like it was going to be a game changer, but I hear nothing about that this time around. Have you abandoned it? You state, "ARM will continue to consider and evaluate all options relating to the strategic investment in Harmony with the objective of unlocking and creating value for ARM and its shareholders and stakeholders." I'd really appreciate some outline of these options. What are the options?
Very good question, Martin. I think, Philip, you and Mike will deal with the bore cutting technology and questions relating to that. The wonderful question on Harmony, I think Martin Cribbin will answer it from our behalf. Next question. I will deal with the Harmony question. Can we proceed? Thanks for the very important question, Martin. Next questions. Thabang, are there any other questions?
It appears like we don't have any other questions on the floor, Chairman.
Okay. Let's do this first. Philip, will you start and make a few broad observations and response? Then Andre Joubert will deal with the specific ones as well as Mike. I'm not sure whether the two of Thando will answer. We'll share that. Can we start with you, Philip?
Thank you very much, Chair. I mean, just going to the question of dealing decisively with underperforming assets. I mean, we have had to take firstly a deep dive on every operation. For an example, at Modikwa, there has been a review where we had to make a decision to shut down South One Shaft, which is one of the three operating shafts at Modikwa. That resulted with two phases of labor rationalization, Section 189, where the first exercise actually had to take out over 300 employees or 300 job positions and currently undergoing phase two of that review process as a result of closing down South One. I mean, the recent also position that we have taken at Bokoni, as I said, the blueprint in terms of the Bokoni is mechanization, narrow reef equipment technology to be employed.
Where we are or where we have been was to basically stop and say, are we going to continue with that high-cost mechanization? We have just made a decision to reduce that development significantly by 50%. We also had to basically bring in the open pit ore, which is low risk, which is high grade, and was easy to ramp up, which is what we have really done since October. As a result of that, we are feeding quite an increased grade into the plant with an intent to have higher revenue enhanced in that process. That is just an example of the review process. Two Rivers as well, we had to undergo a review process where that resulted with also a Section 189, where we had to really reduce down the labor.
Those are the decisive actions that I'm really alluding to as we look at our business and our portfolio. It's continued to, it's an ongoing process as we move forward. On the AMSA options, as we mentioned, we do not have a long-term contract. AMSA, the previous year delivered 2.5 million tons per annum. The plan was to basically deliver almost around 2.2 with some investment that we needed to do in terms of the cutback, in terms of the fleet replacement. Because of this uncertainty and the announcement that has been made by AMSA, we are not in a position basically to go ahead with that. That is why you have seen also some significant reduction or deferment on the capital side.
At this point in time, we're still running the scenarios in terms of how we're going to take it forward because, as I say, it's a month-on-month type of engagement. We don't have a three-year contract in the space. I'm not sure through you, Chair, whether Andre wants to add anything on the BSOC side.
Thank you, Philip. Just in terms of the sequence, let's ask Andre will deal with the questions that are related to ARM Ferrous and Mike will come on the technology part. Tando, you may have some observations on some of the issues relating to Platinum and see if there's anything you want to add from a financial perspective. Can we proceed to Andre? Andre Joubert?
Yeah, thank you. Yeah, the question about Beeshoek in terms of the rehabilitation or the closure cost, obviously we're not thinking closure at this very minute, but the impact of ArcelorMittal South Africa is going to be huge on Beeshoek. I mean, Beeshoek is a mine that's set up to actually produce 3 million tons per annum, which we have done consistently. I mean, through the ArcelorMittal South Africa process and the cutbacks, and Beeshoek is landlocked. We cannot export from Beeshoek. We're only limited to selling to ArcelorMittal South Africa. ArcelorMittal South Africa is our only customer at this point in time. We're going from a 3 million ton mine, we went down to 2.8. This year, the plan was 2.2, and with the actual will be something, will be about 1.4, maybe 1.5 million tons. That has got a major impact on Beeshoek. What we're doing currently, we're reviewing various options.
As we speak, we're doing those options. The closure of AMSA and the announcement of the new coal salt plant was a little bit of a surprise to us. That was only made known to us officially now in the beginning of this year. We were already cut back to at the rate of 1.4 million tons, which is a 45% reduction in volume offtake from Beeshoek. It's not good news for Beeshoek, but we are doing the work. We're considering all the options. We identified four specific options, and our commitment is to do that work during the course of this month. We are also engaging with AMSA management on this. There's clear, absolutely clear understanding. I've also engaged with my unions.
I've even engaged with the Premier of the Northern Cape for everybody to understand that the closure of Newcastle will not only impact the people in Newcastle, it can also potentially impact the people in Postmasburg around Beeshoek. I think the question, if I can at the same time just answer the question about the cost and unit cost and the iron ore outlook, firstly, the impact of Beeshoek on the bottom line or the profit of Assmang is not that great. It has a very small impact. Khumani Mine is our mainstay, and that's where we put a lot of our energy and effort in. As you've seen, Transnet and the Transnet line in the statement that we made that Philip discussed, the comment was made, it will require a lot of time and a lot of capital to fix.
There is going to be a Transnet is now in collaboration with industry decided to do two shutdowns every year. Initially, there were 10 days of shut per year. What is going to happen now after we have done an independent technical assessment, Transnet is going to do two shutdowns every year. This year that we are already in, there is going to be a 15-day shutdown. Next year, just because of the shift in the timing of that, Assmang is going to experience two shutdowns. The one shutdown will be 10 days, and the other one will be 15 days. Assmang will experience a 25-day period where Transnet is going to shut the railway line to repair it, which is a good thing. It is absolutely, absolutely critical to do. That is why our forecast for the next financial year is from 12.3 down to 12.
There's nothing wrong in our mining operations or whatever. It's just a sequencing of those. The next cycles, as we come in every year, it will be two 10-day shutdown cycles. You can see later in 2027, 2028, we're going to go up back to the 12.5 million tons. Just one thing about the unit cost and the 10% increase. That is a weighted average 10% increase. Khumani alone had an increase of 8%, of which 2% of that is allocated because of higher shipping ratio that we're going in. The other was a bit of additional maintenance that we had to do. We're right at the end of our yellow fleet life cycle, and we're now in the process of replacing them right at the end of that now. The big impact was BSOC.
BSOC was a 17%-18% increase year on year. That is purely 100% due to the fact that we've got a reduced volume offtake. Because of the uncertainty, we did not buy any new fleet. We're keeping existing fleet going, and the maintenance cost of that is a reason for the increased cost. Lastly, comparing it with Kumba, we just make 100% sure that we compare apples with apples because our cost that we declare and the relative percentage increases is all in cash cost, which includes waste stripping and also includes the fur stripping. Thank you.
Thank you very much. Thanks a lot, Andrew. Can we proceed to Mike Schmidt? A deal? I will deal with the Harmony issue because I think that's a very important question, but the technology question at Bokoni, can you deal with that, Mike Schmidt?
No, I can. Martin, you asked me one question, and I'm going to respond with four. Just to elaborate, for many years, as we approached challenges within the smelting industry in South Africa, we have embarked on alternative smelting technology. That has gone leaps and bounds. Andre will speak to that later at the appropriate time. We had challenges with mining and conventional mining, and we adopted technologies which we started 20 years ago called narrow reef equipment. That is mechanized equipment, not your question. In the last reporting period, you asked a similar question, and I responded to the NRE. At the time of the last reporting, we had purchased a fleet, mobilized the crew. We have put them underground. They have been going now for close to six months, very promising. It has met all of our objectives.
What is also realized, significant improvement in hanging walls and safety conditions, and we've seen remarkable improvements in grade. Those trials are continuing. We are not commercializing that yet. It has to be at the appropriate time when the mine is built up to scale, and I'm talking about Bokoni. Let me come back to what you referred to about narrow reef boring equipment. We have advanced that project quite significantly. We have tested it from a conceptual, financial, commercial, technical. We've had independent studies and the first trials of the cutting, and that will be rapid development. I want to just distinguish between the two. Historically or right through cycles, typical mining advances in underground opening up, and that is one of the challenges with Bokoni. You can only blast 2 meters a day. That's what the best you can do, a 2-meter advance.
Why have we not employed what has been available in the industry for more than 100 years, successfully employed throughout the world? That is TBM, tunnel boring, which has been too big, too restrictive, too difficult to negotiate. We have been at that as an industry for the last 20 years, and ARM has been at that technology now, year four. The first unit is already built. It has been altered for our circumstances, and it will be mobilized at the latest by end of April. By end of July, we will start the first TBM cutting, which is tunnel boring machines. These are opening up the ore body so that we can get into, to your question, the narrow reef boring technology, which is reef cutting. That machine is complete with all its accessories.
We've done multiple tests offsite, and that thing will be mobilized on site by October, that unit. We hope to start cutting once the rapid development's done. We'll start cutting, not hope, we will start cutting by January of this year. We're very positive that this is not only going to be a change towards safer, more rapid, more cost-effective, but far more profitable mining, not only for ARM, but for the industry at large. Thank you, Patrice.
Excellent, Mike. Tando, is there anything you want to add to some of the questions that were asked?
Chair, I think those questions were covered very well. I do see there are online questions when we get there, perhaps I'll add more on those.
Okay, thank you. Thank you, Tando. Sue, is there anything you want to add?
Nothing from my side, Chair.
Thank you. Sorry, just two quick remarks because I think the question that Martin Creamer asked is very important. It is linked to the earlier question that relates to Harmony. Two quick preliminary points. Tom Boardman is the chairman of our Audit and Compliance Committee, one of the most successful entrepreneurs in the country and started Boardman's and BOE and was CEO of Nedbank. We are not just fortunate, but honored to have Tom as our chairman of Audit and Risk. Some time ago, we were together in Cape Town, and I said, "Tom, we're talking about lots of things." We were talking specifically about this Harmony issue.
I said to Tom, when I was seven or eight years old in the family business, I was standing there at a counter, and one of the customers came and said, "I want white bread." I said to him, "You know, I've got brown bread, and it's not only brown bread, it's very warm." We had competition next to us, and we had to go and at times go and collect the bread warm because if it was warm, we thought that it would, and in fact, we did. It was more appealing. People would buy the loaf of bread, but not just buy the loaf of bread, buy other things as well. The customer said, "You know, I want white bread." My father said to me, "Listen, the buyers, the purchaser is always right. The customer is always right." I didn't understand that.
I was seven or eight years old. Of course, as we grew up, you recognize that your customers are always correct. Now, why did I tell you this story? It is because Tom and I were talking about the shareholders. The shareholders of ARM are always right. The shareholders of Harmony and every other company where we are involved in. That means we have to engage them, and we have to engage them even more when there are issues that they have different views than we do. When Martin was asking about this very important statement that we look at how ARM relates to Harmony in the context of its strategic importance to the company, forget about the word strategic, just in the context of how best to realize value for shareholders. When we say that all options are on the table, we mean that.
Remember, the shareholder is always right. The shareholder is always right. What excites me, when I was in Miami, I had a meeting with our partner in my capacity as Chairman of Harmony. The people, as I said earlier, who are best suited to comment on Harmony is Peter Steenkamp. Peter used to work for ARM, ARM Gold. Peter started working for us in ARM Gold when he was a young miner, and he is really one of the best CEOs in the gold mine industry. The important issue for us is, in fact, let me just go back to what I said about when I was in, in fact, not just in Miami for the meeting of the top CEOs as part of the ICMM, but also in Davos. We believe that what we go peace enormously exciting. We are waiting for the permitting.
As I said, Bayer is a better place to comment on that. Again, bottom line issues for us, absolutely bottom line, is how do we consistently build on the track record of creating value for shareholders. It is normal. Sometimes shareholders have a short-term perspective. Sometimes the shareholders are traders, but we have a duty to all our shareholders. The fundamental duty that we have is to consistently create value in the medium to long term. Tabang, what are the questions there? Take five minutes. Just read them to me, and then we will identify who deals with them, and then we will answer five at a time. Can you read the questions, Tabang?
Sure, Chairman. Our first question is from Deleghi Deleghi from Maruri Capital. Good day, Chairman and your team. He's got three questions. The first one is, the rest of Africa still part of your strategy? The second question is, with the signs of imminent liquidity crunch, would you consider secondary listing and also raise your corporate profile and access to foreign currency? His third question is, is the reserve replacement ratio important to the platinum assets? And if so, do you see which assets do you see driving that outlook or position going forward?
Is that the first question? I mean, are those the questions from the first person?
That's correct, Chairman.
You know, this is an exciting thing why you consistently have to not just recruit, but employ and retain young talented people. They are very in see things that we do not see. Not just that, they can at times tell us that this institute is over, they are old-fashioned, and you have got to change that. Now, Sue, there is some excitement. Let me start with you, Philip. Philip, Sue, Mike.
Andre and what's his name? Thando, just look at which parts of that question do you want to answer, okay? I am going to start with you later. Just keep an eye because it's, I mean, the liquidity crunch, the replacement ratio in platinum, exciting questions. Next question, Tabang.
The next question, the next few are from Raymond. Raymond, I'm going to pick two because I think one of them has already been addressed. He's saying historically there's been a correlation between U.S. budget deficits and gold price movements. And he's basically asking what does ARM management think about the gold price or what is happening in the U.S. right now straighten the gold price and how does that impact our view on Harmony. His second question on Harmony is, would ARM support using script as in share issues for acquisitions? So those are the two questions from Raymond. I'll read the next slide from Level Mufugeng.
Yeah, we probably go to Level. Philip, you and the team have heard that. Again, with the greatest amount of respect, we will give broad answers to issues relating to Harmony, to the extent that it relates to us as ARM and very specific issues that relate to management issues and questions that relate to Harmony. I can guarantee you the CEO of Harmony and Marianne and the team are available, we feel and others. Philip, you and the team just keep in mind on some of the questions that were asked, and then you will take different aspects of them as we proceed. Please continue, Thabang, with the third question.
Level is saying, "Hi team, thanks for the opportunity." On Transnet, there's been talks of RFIs, so requests for information, and RFPs, requests for proposals from the Department of Transport. What are you seeing from your end in this front? In your view, how long do you think it takes to abort concessions once RFIs and RFPs are concluded and you consequently see an uplift to volumes? Chairman, should we pause there and then we can come back for the second round of questions?
Andrew, you answer the question relating to Transnet, okay? Okay, Tabang, you are satisfied. I think you're right. Let's answer these questions and we'll take the next round. Will you, can we start with you, Philip?
Thank you very much, Chair. I mean, the first question was the aspect of the rest of Africa. Are we still open to that? I mean, just going back to our strategy, it's still the same. It's about delivering competitive returns and creating sustainable value for our shareholders. Whenever we talk about the growth, potential measures and acquisitions, you look at what is on the offering in terms of commodity, in terms of country, and you do the country risk analysis to say, can we really go and set foot in that based on the potential return on investment? Should we really go ahead with this investment? So those decisions are really made in that line in the light of the strategy that we have, which is ready to continue to create value. Looking at the Burke or Surge investment, that 15%, it's a new country.
The copper is not a new commodity for ARM. ARM historically mined copper, but that is basically sort of also enabling or setting the scene for us to go back into copper and under ARM. Those decisions are made at a point in time. There was a question that was asked as well regarding the issue of the script in terms of the share issues and that. Those decisions, I mean, to mention the issue of the capital allocation, and you see there is quite a number of buckets in that. At a point in time, when we have facts, when we have information, we make the right decision in light of where we will be at that point in time. You can't say we're not going to follow our rights issue or we're not going to do that.
Historically, I mean, certain decisions were made, but as you know, hindsight is always the best teacher. At the point in time, when you make that decision, it becomes the best decision for the company. Chair, I will stop here and then I will pass on the baton to my colleagues here.
Excellent. Good response, Philip. Can we proceed to you, Sue, in the context of all of the questions, those parts that you'd like to respond to?
Thank you, Chair. I think maybe I'll just speak to the one about the liquidity crunch, whether ARM would consider a secondary listing in order to raise our corporate profile and also to access foreign markets and foreign currency. I think for ARM, we do see ourselves as a global company. Yes, most of our assets are based in South Africa, but we view ourselves as a global company. In terms of secondary listing, accessing foreign markets and the type, we are open and we are considering whether it would be something that would be in the best interest of ARM. We are not close to it at all, but we are considering it in light of where ARM is and where our aspirations in future are as well. Thank you, Chair.
Thank you. Thanks. Excellent response. Thank you very much, Sue. Mike?
No, I think Philip's carried it well, except to say copper is pretty much high on our radar, and we think that we know that's an exciting and a very strong demand and outlook for copper going forward. The barriers to entry at these high prices for operating assets, we know, is extremely difficult. At what stage do you get in, whether it's a green or a brown field? That work, we have a small interest now in that Canadian asset where we have 15%. We have a technical team. We are on the board in terms of technical representation, and we continue to pursue and look at copper interests.
Thank you so much, Mike. Good, excellent response. Tando.
Thank you, Chair. Perhaps I can jump into the question raised by Deleghi regarding the reserve replacement ratio on the platinum side. Perhaps highlight that we're very fortunate that all the platinum assets that we've got have high quality ore and they are long-life ore deposits. All of our mines are in excess of 20 plus years. If you look at Bokoni, which we've highlighted earlier on, I think at a mining rate of above 200,000 tons per month, we will mine there for the next 40-50 years. Similarly, at Modikwa and Two Rivers, there's also a high reserve ore body. We do look at that ratio when we do our long-term mine planning, and we focus based on it in terms of what investment we're putting in place in terms of staying business and the production levels that we plan for. Thank you.
Thanks, Thando. Thanks, Philip. Excellent response. Andre?
Yeah, thank you, Jay. Levi, thank you for that excellent question. Very, very topical. In the business that I'm responsible for, traditionally, we only controlled about one-third of the total cost, which is the cost to mine, produce, and process our ore and put it into the train. The next portion of the journey to get that product to the customer was obviously taken care of by Transnet, and we were very much looking forward to this new way that our government is going to look at this in terms of the white paper that was published in terms of this process. We started about four years ago already because this is not something that came to the table today. We started four years ago, Relat and I, and we started engaging with other producers.
During this four-year period, we formed something called the OUF, which is Oil Users Forum, which is a line from Sishen to Saldanha. We also formed something that's called the MPC, the Manganese Producers Consortium. Those two consortiums are a vehicle through which we want to participate in this private sector participation process or concessions of some sort. We are ready for this. We know what's coming. When the RFIs come and the RFPs are going to be submitted, we think that will take, and again, that's not a quick process. That will take roughly to the end of 2026. Once the RFIs have been submitted and we have responded to it and the decisions have been made as to who, when, and how this is going to be done, that will most probably be towards the end of 2026 if all goes well.
I think the uplift in volume and production can only happen from 2028 onwards. I just want to give the shareholders and investors the comfort that we started, as I say, about four years ago as an industry forum to stem the downfall of the reduction in tonnages. I think we caught that at about an 80% level of performance. We are stabilizing at that level through, and what we have done is independent technical assessment. We are partnering with Transnet in what we call collaboration agreements in terms of some of the work that needs to be done. We also have an ore restoration program or the corridor restoration program, again, where we work with Transnet. We are not sitting back and waiting for this event to take place. We are taking proactive action.
I must give everyone, and thanks to Transnet, thanks to my fellow iron ore producers, manganese ore producers. There is a lot of effort, a lot of energy going in because this element of logistics for us in South Africa is absolutely critical to our existence. It is critical to our growth, and it is critical to our profitability. Good progress is made, and we are ready when the RFIs are submitted. The fix is not going to be a quick fix. If we get involved, we will fix it, and we will make sure that those lines are going back to their nameplate capacity and get their reliability and dependability back. Thank you.
Excellent response. Thank you so much, Andre. Just two quick issues because we will, as we said earlier, Philip, Sue, Mike, Tando, and Andre Joubert and Tabang will be available to answer all of your questions. I just want to check because, Tabang, how many additional questions are there from the webcast?
Chairman, we have quite a few more, but I think some have been answered. I would say about five or six perhaps that are worth hearing.
Okay. We'll take the last five. All of those who are online and want to ask any other additional questions, please feel free to contact through Thabang. I mean, Thabang is doing excellent work and the team, and we are here. Just one quick issue. I just remembered what Andre, sorry, what Mike said to the question that was raised by Martin Creamer. I think Martin was referring to what we had discussed previously. I think, Philip, you and I know that Martin had a few questions for you, and Mike will deal with them. This narrow reef boring equipment and tunnel boring machines and the reef cutting, you will have seen, Martin, that when it relates to making announcements to the public, our culture is conservative.
It would not be appropriate to make public pronouncements on good progress that is being done in relation to innovative strategies that we are looking at to create competitive value. There is a lot of excellent work that Andre Joubert is doing at ARM Met. Really world-class work. In line with our conservative culture, we really do not want to make public announcements until and unless we are 100% comfortable and convinced that it is appropriate to make the announcements because after the announcements, we have to implement. What Mike was saying is that a lot of very good progress is being made, and we are excited. The excitement does not give us the comfort to make public pronouncements because with public pronouncements, you create expectations.
Our culture is to only create expectations when we are 100% convinced that the shareholders will realize value over a concerted period of time. Can you take us through those questions, Thabang?
Sure, Chairman. Our next question is from Gadegoma Tonsie from Investec Bank. Your outlook on PGM seems positive. Should you not be ramping up investment in Bokoni at this point in the cycle in order to maximize value when the cycle turns? You've previously highlighted that the viability of Bokoni requires higher volumes. The second question from Gadegoma says the cash burn at.
Mike, sorry. Philip, you and Tando will deal with it, okay?
The second question.
Table afterwards, okay?
The cash burn at Two Rivers remained at ZAR 1 billion as per numbers reported by your JV partner. A unit cost inflation of 10% year on year is on the higher side of what we have seen from your peers in the second half of 2024. Please guide on cost control at Two Rivers and cash generation in an environment where the PGM price remains flat. The next question is from Tobela Bika from Nedbank.
Can you hear me?
Yes, Chairman.
Philip, you can hear me.
Can you hear me, Chair?
Okay. Can you hear me? Thando, we'll deal with the second question, okay?
Okay.
Thank you. Proceed, Thando.
Tobela is asking what are the care and maintenance costs at Bokoni. When do you expect the PGM market to turn? He is trying to figure out our appetite for cash burn at the PGM operations. Secondly, he is asking what is the timeline on Surge Copper and when do you expect to start spending CapEx towards that asset? The next question is from Shashi Shekha from Citibank.
Good afternoon, Thabang. Philip, you and on this specific question, you and Thando and Mike, you can deal with that, okay?
Okay.
Continue.
Two more questions. Shashi from Citibank is asking what our view is on the rhodium market. Shenyue Mudaung from McCloskey is asking us to please elaborate on the manganese grading issue and if it was managed. She is also asking if there are plans to go underground near term. Our Black Rock operations are already underground. Chairman, we will conclude the questions there.
Okay. Andre, that question on Black Rock and manganese, you will deal with that. And the rodeo part, Philip, you, Mike, and Sue, you, Philip, Mike, and Tando. Okay. We're going to ask closure now. Thanks, Thabang. Philip?
Thank you very much, Chair, and thanks for all those questions that have been raised. I mean, the first question is Bokoni ramp-up. What do we think about that? Investment proposal was Bokoni at 180,000 tons per month, which would have been a 60-kilo ton on UG2 and 120 on the Merensky. When we started, obviously, where the mines were stopped with that care and maintenance, everything was just closed. As a result, the state of operation of this took time. That is why it took time to basically recommission the 60-kilo ton UG2 plant. That was done already in October 2023 and is currently running. We did say that ideally, for that size ore body, the ideal optimal size is 240,000 tons per month, which is in line with your Modikwa.
I mean, the installed capacity is 240,000 tons per month, which is in line with the likes of Beeshoek. If you really want to have a good position in the cost curve to move towards the first quartile, anything below that is not going to enable you to reach that. We commissioned a 60 kiloton whilst we were basically taking forward the studies. We concluded on the studies. We know what is optimal, 240. We came back and we said, with where the price is, the cycle on the PGM price is now, it will be irresponsible to really go and spend that amount of capital to really build Bokoni up to 240,000 tons. We explored the option to say, what can we do with the installed capacity with the 120 kiloton Merensky? There are two things that we can do.
Convert it into another phase two UG2 that will take you at least from 60 to 120. At 120, with all the inputs that we have, this mine should be able to at least break even or make slight profit. I mean, at 60-kilo ton, there is no mine even in South Africa, PGM or wherever, that is really profitable at 60-kilo ton. Hence, what I have shared back to say, we took actually a stop. We reflected and said, what do we do to make sure that we reduce the cash burn? The actions that we really shared earlier on, cutting down the mechanized development with 50% and also making sure that we increase the open pit volumes and also conventional stocks that are available, not necessarily spending big capital CapEx in that.
We are basically using what we have at this point in time, minimal capital, low-cost structure, at least towards that point of care and maintenance cost. A question was asked, what is the magnitude that we're talking about on the care and maintenance cost? I mean, the figures that we have in mind is ranging between ZAR 30 million-ZAR 34 million per month of maintenance cost. I mean, previously, Bokoni under Anglo American, they were spending about ZAR 24 million per month. That is, I mean, up to 2021 before we acquired that. There is inflation in that, and there is also some areas that have really been opened, like holding the club hut, which was not there during the time. That basically gives an approximate of where we are.
In terms of the build-up, we'll take a responsible and prudent capital allocation, one at a time, and making sure that what we do is right. The opportunity time or the opportunity that we have now is to convert that 120 Miransky plant either into another 120 Miransky or into a 60-kilo ton phase two, at least taking us to 120,000 tons, which will really put us into the break-even position. I hope I've really answered that question. There was a question on the surge as to what is the forecast. I mean, from my presentation update, I said we are expecting the outcome of the pre-feasibility study within the next two years. After the pre-feasibility study, the next phase will be the definitive feasibility study, after which then we'll be at that decision where it will be end. What is the outcome of that?
What is the magnitude of the capital? What is the timing of that? It is still basically some few years down the road. We will be giving you an update after the pre-feasibility study is concluded. Thank you.
Okay. Thank you very much, Philip. Sue, is there anything you would like to comment on the questions?
No, nothing from me, Chair. I think most of the questions were around PGMs.
Yeah, but you have a lot of sense. Make money function. Thanks. Thanks, Sue. Mike.
We all covered. Nothing to add. Thank you, sir.
Thank you. Thando?
Thank you, Chair.
Not on Surge Copper, Mike. Can you comment on Surge Copper in the context of your growth responsibility?
Sure. It is in a good jurisdiction. In a mining area, it has very promising properties. In fact, they've identified seven to date in the expertise. It is still greenfields to a large extent, exploratory targets. There are some low-hanging fruits which are being evaluated. Surge Copper in terms of Berg, that is at least a 10-year project in making. For now, it's two years before we get the pre-feasibility study and at least a year beyond that before we get back to our board and investment committee. It is very promising.
Okay. Thank you very much, Mike. I know we're running out of time, so we're going to proceed as quickly as we possibly can. Tando?
Thank you, Chair. Perhaps I'll focus more on those questions raised by Gadegoma. In relation to the investment in Bokoni, I think Philip has covered it quite well. Again, emphasize that what we are doing is ensuring that we spend and invest responsibly, but without drawing all optionality that is there. I think, again, in line with what you've said, at the right time, Mike has touched on some of the technology we're trialing there at the right time when we have proven it and we're confident that it will be successful, we will make an announcement. On Two Rivers, Gadegoma asked around the cash burn there. Correct, Gadegoma, that there was or there's ZAR 1 billion that we've seen in this reporting period that was spent at Two Rivers. Most of that, as we announced last year, that Merensky project has been put on care and maintenance.
Most of that cost was really drawing down on the Merensky. So it's not associated with the current operations. In terms of the unit cost increases of 9%, yes, it's above inflation. However, we point out that about 2.5% of that increase is associated with additional investment that we saw an opportunity given the geological challenges in and around Two Rivers. When we shut down the Merensky, we moved three crews from Merensky to go and work on the UG2 in opening up the reserves and increase flexibility. That will work very well for Two Rivers going forward. It will be able to realize the benefit of that investment. Two last questions. The one in terms of care and maintenance, Philip has covered that cash burn of about ZAR 30 million per month.
We are working very hard in terms of ensuring that Bokoni cash spent per month comes down in line with what has been presented. With regard to the outlook on rhodium, quite difficult to call as to what's the main cause of the price increases we've seen. Over the last week or so, we see about 10% increase on the rhodium price. However, as we have noted, mainly also from other commentators that there's a lot of destocking on the PGM commodity. One could deduce that perhaps it's a drifting from platinum and palladium to rhodium, particularly around the fiberglass industry that had moved away from rhodium when the rhodium prices were high. We are just watching the space and see what developments are coming out of there. However, it's really what we've seen on the prices have been very flat prices without major improvement. Chair, I'll stop there.
I think I've covered all those questions related to PGMs.
Thank you so much, Thando. Andre, you got a last answer.
Yeah. I think my question has a pretty short answer. At Black Rock, I think we changed the focus from we did have problems last year, and we reported on that, that some of the areas that we mined in, we could not achieve the grade of the ore that would turn into a saleable product. We changed our tact and we did a lot of work. I am very proud of the work that David Salembo and Kulani Kumata did at Black Rock, where we increased the development that we are doing so that we have got a much better idea of the ore that we are into. We also changed our focus from volume to quality. I think the results that you see is a much improvement in that and also mining discipline. A lot of effort went in there.
The results that you can see with a 13% improvement year on year. Also, the quality of the ore that we are producing has significantly improved. I think I can safely say that Black Rock has gone over that little hump that we had last year, and we are good to go. Thank you.
Thank you, Andre. Thank you, Thabang. Thank you, Philip. Thank you, Sue. Thanks, Mike. And thanks, Thando. And once more, Andre. I just want to conclude by expressing our deep appreciation to everybody who's present, those who've been asking questions online, and those who are with us. It took a bit—my apologies that it took a bit longer than usual. We felt that we had a duty to answer all of the questions that you had. Of course, there are many others. Our deep gratitude. Philip and the team are ready. They'll be available for questions afterwards. If any person from the media or any shareholder or any analyst wants to ask any questions, please do so through Thabang. Thank you very much. This is the end of the presentation. Do you want to say something, Thabang, as we close?
I do, Chairman. Thank you very much. Ladies and gentlemen, there will be a sell-side and buy-side roundtable at 1:30 or 2:00, sorry, for your more detailed questions. Please join us on that virtual call. Thank you very much for your attendance, and we will see you next time.