Glad to see everyone here, considering that we've changed the venue. We're a little bit worried that people wouldn't come to the correct venue. Welcome to the African Rainbow Minerals results, for the financial period ended 31 December 2025. Thank you to those joining us via webcast and via LinkedIn, and a special thank you to those who've made an effort to be here with us in person. We will go into the Q&A after the presentation, starting with questions from the floor, and then we'll move on to the webcast questions. If you're joining us virtually, please use the dialogue box to post your questions, and we will endeavor to answer as many of them as possible during the Q&A session. Please help me in welcoming African Rainbow Minerals Chairman and Founder, Dr Patr ice Motsepe.
Thank you. Thank you. Thank you. Thank you so much to everybody for being here. Very special welcome to the shareholders. We've got many, many shareholders and the management. I see some of our board members and Precious Moloi-Motsepe and her sons. Just and Thabang as well, who's our... Now, two quick issues. We've always known that it's about, for us at African Rainbow Minerals, it's about results, results. We have to, because of our performances, give reasons to the current shareholders to look at the company as a globally competitive company, both in terms of dividends, but also share performances. I have total confidence in Phillip and the world-class management team we have.
I usually want all 10 of them on stage, but there isn't enough space. This is what has made us very successful, that we've always attracted the smartest and the best from all backgrounds. Phillip will lead the process, and I'll make a few concluding remarks at the end. Also, our partners, I'm gonna ask Phillip, when he does his presentation, to recognize the partners who are here. Thank you so much, and I'll do concluding remarks at the end. Let's clap hands for Phillip, please.
Thank you very much, Chairman. Good morning to everyone, and welcome to our results presentation. Special welcome to Dr Precious and the team from the Ntshweva family. Also, a special welcome to our non-executive directors, the executive leadership team. I mean, our joint venture partners can see a number of you, and I know some of you are online. Special welcome and thanks for the support and also to everyone in attendance here. Improved earnings once again demonstrates the value and resilience of a diversified portfolio in a very highly volatile market. We are very pleased with the declaration of the dividend of ZAR 5 per share, which is actually consistently and in line with our commitment to pay the dividends throughout the cycles. Set of results that has been affected to a certain extent by commodity prices and also the exch ange r ate.
However, all operations have and continue to improve mining flexibility and taking full control of things that are within our control. Looking at the headline earnings slide, you can see what I've already mentioned with the value and the resilience of a diversified portfolio. I mean, we see the strong rebound from the PGM operations, whilst others were actually affected by lower prices and strong exchange. I mean, that bar for the PGM was red. Today, we are grateful that we can really benefit from that. Outlook on earnings remains positive at the back of a improved prices post 31st December, 2025. I mean, when you look at the manganese prices, we started with soft prices at the beginning, but from December, we started to really seeing some recovery in that space.
Returning competitive dividends to shareholders is a key consideration, is part of our business. The dividend received were affected by lower manganese ore prices, by the strong rand and sales to AMSA, which ceased in July 2025. I mean, if you look at that, basically for almost five months of the six, we never sold anything to AMSA. These negatively affected our earnings, our free cash flows, and also the dividends that were declared from the Assmang side. The free cash flow were also affected by the once-off termination payments made to Biyesu employees and also to Cato Ridge following the decisions that were made to put Biyesu on care and maintenance and also the closure of Cato Ridge. The sale of Sakura was successfully closed in November 2025. ARM received ZAR 900 million. Assmang was actually released in liabilities in excess of close to ZAR 800 million.
ARM also avoided attributable losses of Sakura with that decision that we made. Looking at the segmental EBITDA split by commodities, this also continued to emphasize the same message of the value and the resilience of a diversified portfolio in a highly volatile market. We do believe that with improved rail performance of both coal and Saldanha lines, volumes should really improve. Lot of work is going into that space. I'll show you when we go into the ARM Ferrous results that we've also registered some improvement within the period, reporting period. Very important and also pleased to mention that we had a fatal-free reporting period. Comparatively speaking, the same time in the previous reporting period, we had lost two of our employees. As we said, their loss was not in vain.
Those lessons and the learnings that came out of that were incorporated into how we do business. This is a reinforcement, you know, of our commitment to zero harm and making sure that all our employees return to their loved ones safely on daily basis. This slide basically reflect our strategy. Our strategy underpins business focuses, direction, and organizational culture. ARM continues to deliver on its strategy. We are really aligned, and we are really executing in accordance with that. Just going to the production by commodities. Production volumes at the PGM operations were affected by tight mining flexibility due to mining through geological features and limited phase length, which is receiving urgent attention, especially for Two Rivers Platinum Mine. Production volumes at Beeshoek were negatively affected by the cessation of mining end of October and placing that mine on care and maintenance.
Sale of Sakura, closure of Cato Ridge and Nkomati all demonstrate our commitment to take decisive action on non-profitable businesses. The slide highlights the importance of and resilience of diversification. Coal losses were due to drop in price and strong rand or strong exchange rate. Needless to mention that even under those conditions, GGV performed very well and delivered strong cost performance. Just emphasizing, even during those challenging times, we continue to focus on things that are within our control. Bokoni continues to ramp up ore reserve development. The definitive feasibility study will be concluded in H2 or the end of this H2, whereafter that, the investment decision will be made in terms of how we proceed. Outlook on earnings remains positive.
I mentioned that, even at the beginning of December, we've seen some price recovery on the manganese side, that really give us some positive outlook. We remain focused on enhancing quality mining, on improving quality production volumes, and improving mining grades and reducing waste dilution. The EBITDA margin, it's also a reflection of the decision to exit alloys was in line with our stated position to deal decisively with loss-making assets and also a reflection of improved and strong margins from the PGM business as a result of the strong PGM basket prices. You can just see the swing. I mean, the PGM from -3% to 36, +36%. Just zeroing in on the segregation, variance segregation slide. Increase in PGM prices actually drove our earnings performance.
As I mentioned that Two Rivers Platinum Mine was actually challenged with regard to mining through the geological structures. As a result, because of the effort and the support and also the amount of effort that went into that work to navigate through that, I mean, the unit cost was actually affected negatively. This unit cost will improve as volumes increase, as also we mine away from those geological features into stronger mining areas. We remain focused on grade improvement, on increasing quality production volumes, which will have a positive impact on the unit cash cost. As I said earlier on, focusing on factors that are within our control.
Tonnes at Two Rivers were 3% lower. Ounces as a result was 2% lower if you compare it to the previous reporting period, because there's been a lot of redevelopment, mining around the structures that had to be done. Volumes are expected to improve from FY 2027 as we move further away from the geological disturbances and with the creation of extra phase land flexibility. We're basically anticipating to bring a full production level into production around July, which will really help immensely in terms of creating that flexibility. As I mentioned, ore reserve development at Bokoni is progressing well. To access the high-grade stopping, supporting a ramp up to optimal production level.
On the ARM Ferrous site, I did mention that the business was affected by the lower prices, especially on the manganese ore, which was 20%-22%, you know, less in the same period, but recovered post-December 2025. Also the stronger rand continued to impact profitability and our free cash flow generation. Unit cash costs increased by 18% at Black Rock, driven mainly by inflation, lower production volumes, additional capital development and higher labor costs due to vacancies. I mean, the production performance was affected by... You remember that on the 18th of April, we had a loss of life at Black Rock. You know that whenever there's loss of lives, we normally are faced with stoppages. Stopped. Then we took some time to recover.
Shortly after recovering, we had an underground drill rig fire incident, and that also called for further stoppage. The learnings have really been incorporated, and we are pleased to mention that towards the end of that period, around November, December, their business is actually on a positive trajectory. To that effect, we do believe that that 18% cost increase that we saw will actually be reduced to lower numbers by the end of the financial year. Black Rock is opening additional mining areas to increase flexibility and also to increase production output. Much improved rail performance will improve outlook following the engagement and the deliberation, the collaboration that we're having with Transnet employees who are our service providers in that space.
Khumani remains a tier one asset with more than 19 years of life remaining of high grade and low stripping ratio. Water supply remained consistent during the first half of the year with no significant operational disruptions. Khumani's unit cash costs increased by 11% and is also expected to recover by the year-end. This was due to inflationary increases, lower production volumes as a result of excessive rainfalls. I mean, we have really experienced rainfalls as high as about 122 mils vis-à-vis, you know, less than 10 mils that the area used to really be exposed to. As a result of that, being an open pit operation, we have to really park units, and no production was taking place then.
These challenges are behind us, and we do believe that we'll finish off strong, you know, by the end of the financial year. At Beeshoek, management are considering all value accretive options, including income-earning activities to offset care and maintenance costs, and that is currently underway so that this doesn't really draw cash, you know, from the center. Subsequent to reporting date, Assmang concluded an offtake agreement with AMSA for 1.2 million tonnes of Beeshoek stockpile. We're currently sitting with 1.486 million tonnes, so the 1.2 million tonnes of that is really now agreed to be sold to AMSA in the next 12 months. That should really improve the financial position in that space.
Production volumes at Black Rock, as I mentioned, were lower by 4% due to systematic production challenges during the first half. I did basically give you some color in terms of what really affected that. The turnaround or the recovery plan is in place to restore performance, and this include basically focusing on quality blast, making sure that we go back to the basics. It include improving load and haul efficiencies, optimizing the battery electric vehicles' performance at Nchwaneng 3, and also the optimization of our shift system. All this is expected to really yield positive results on our unit cost and improving the profitability of that business. Black Rock is still a very high grade, low impurity, long life ore body with installed capacity to produce more than 4 million tonnes per annum.
On the manganese alloys, production activities, as we mentioned earlier, ceased end of May. Existing stock is being sold at Cato Ridge Complex. On the Sakura site, the production also up to 31 October was 81,000 tons. By taking decisive actions against loss-making operations, Assmang has successfully avoided significant losses and liabilities. Assmang has strengthened its financial position and has set itself up for sustainability, which has positive impact and effect on ARM. Going to the aspect of what's happening on the rail. I mean, for long, we have been saying that the performance of Transnet has affected our business negatively, but we didn't just sit our laurels and do nothing. I mean, we joined hands, we collaborated with them.
On the iron ore site, we formulated what we call Ore Users Forum, which basically comprises of four iron ore producers within that region. On the manganese side, we actually established what you call Manganese Producers Consortium, which also comprise of the four main players in that space. A lot of work has been done over the years. As a result of the collaborative efforts, I mean, between us and Transnet, we are able to really realize the improvement on the rail performance for us, Ma'am, by 7%. On the MPC side, Manganese Producers Consortium, we are advancing rail and port reforms with Transnet, including the request for quotations that will be submitted from Ngqura Manganese Export Terminal.
You'll remember that, during, I think the 2nd half or the 1st half of last year, the minister did really announce, you know, the call for the request for information, the RFI. That process was expected to really conclude in September. I mean, to this date, we have never really received any official feedback, but we do believe that it has concluded. It was more for the benefit of Transnet to do their homework, to just find out what are the key customers really willing to put on the table. The next phase will be the request for quotations, and then after which they will have to make a decision in terms of who they're gonna allocate in a possible partnership as we move forward. We're exploring all avenues and options with related to the PSPs in that space.
We are playing a very critical role in really leading these collaboration efforts. On the coal side, the impact on the USD coal prices and stronger rand are reflected on the left side of the graph. You can see that on the volume side, the operations performed, and on the cost side, there was just marginal increases as a result of increased volumes. Cost control have really been tight in that space. On mine, unit cost per saleable ton at PCB increased by 12%. That one was largely due to a 4% reduction in saleable production, increased plant maintenance costs, and also the impact of inflation. Stockpile levels, however, were increased if you look at period and period.
GGV and PCB remain well-positioned in the industry cost curve position, yes. The drop in domestic sales affected production, which affected negatively on a unit cost due to lower coal offtake from Eskom. Total volumes at GGV decreased by 2%, largely due to a reduction in the trucking or stopping of export to coal. We did previously mention that below a certain coal price, USD price per ton, we basically consider if the price is strong enough, we consider, you know, trucking. At this point in time, because the prices were lower, the trucking was actually stopped. GGV, again, demonstrated strong cost performance. With regard to our investment in Harmony, we've always maintained that it's a strategic investment for ARM. Also, knowing that it gives us an exposure to copper.
Copper is an important commodity. ARM is seeking to grow and to acquire copper assets. ARM's strategic investment in Harmony aligns with our copper objectives. On the search side, we are very pleased with the progress being made in advancing this project with the potential to become a tier one operation. The tier one jurisdiction and with a really quality ore body. I mean, it's copper, molybdenite, and silver are the key main element that are really going to differentiate and put that project in a different space. The completion of the DFS is expected during the end of this financial year, and that will be followed by the definitive feasibility study and also the submissions to the environmental authorization.
ARM to date basically owns 19.9% of Surge Copper, and we do believe it's a good project that is worth really following closely to really realize the dreams that we have to get back into the copper space. Investing in our growth, in our existing business, I've really mentioned a bit about Bokoni, that we did suspend the milling and the mining the end of the financial year 25, and the operation has prioritized ore reserve development to allow the high-grade stoping production and to support the sustainable future output. We are at the stage now where we have to review that outcome, where we have to really go into the independent technical review to do some value engineering, whereafter we'll have to go and present this to the board for investment decision.
We are still very excited about the quality of the ore body that it is, the grades that it have, and all that it will really bring to the party. In terms of Nkomati Mine, we've really successfully commissioned the chrome washing plant, and we've also been able to dispatch the first chrome concentrate in January. Thus, the revenue that will be generated there will be able to offset some of our care and maintenance cost. The assessment of strategic options is progressing well and will be presented to the board also by the end of the second half F-2026, after which clarity on the strategic direction for Nkomati will be provided. As I close from my side, just the last thing to focus on is ARM's key focus areas.
Operating globally competitive and profitable mines, focusing on things that are within our control, which is cost control, quality mining, quality production volume increases with an intent to really get our operations onto the first half of the industry cost curve position. Disciplined capital allocation. We committed to allocating capital based on competitive margins and returns. Project compete for allocation using our ranking tools and objective decision-making criteria. Decisiveness on underperforming assets. I mean, I've really basically shared with you and updated you on the decisions that we have made to that effect. Maintaining a strong balance sheet by generating profits, reducing costs, and deferring non-essential capital expenditure. I think Tsu will basically give you color in terms of the numbers and also what the CapEx forecast numbers are.
Pursuing value-enhancing growth opportunities, and Surge is an example of that, and also what we are doing, you know, with regards to Nkomati, the trade-off option analysis, and also the Two Rivers Merensky project. Collaborate with stakeholders to optimize logistics and infrastructure. I did give you an update in terms of our efforts through the OUF, Ore Users Forum, and also through the Manganese Producers Consortium. I'm going to then hand over to my colleague, Tsu.
Good morning, everyone, and welcome. During the period under review, we prioritized investing in our existing business in the form of sustaining capital or what we also called stay in business capital. During the six months, we invested on a segmental basis ZAR 2.2 billion into our business on a segmental, meaning on an attributable basis. We also, and it goes to the second block you see there on your screen, we also paid dividends of about ZAR 1.1 billion, which was our capital that we're now returning to our shareholders, which further confirms our commitment to ensuring that we do return capital to our shareholders whilst at the same time balancing, looking at, you know, what the business actually requires in terms of capital.
This slide illustrates how we generated cash and how that cash was allocated in the six months under review. If you will see, there we received dividends of ZAR 2.5 billion in total, which is made up of ZAR 2.4 billion from our Assmang joint venture, as well as ZAR 116 million from Harmony. Cash generated by operations during this time was ZAR 1.7 billion positive. If you'll recall the same period last year, we were actually seeing that same ZAR 1.7 billion positive, that green. We were sitting in a negative, same peri`12sod last year.
just, you know, adding to what Phillip has said, that increase in the commodity prices we've seen, you know, the marked increase or the marked impact in terms of our cash and in terms of the performance of our operations. If we look at how these funds were applied during the period, we paid tax of ZAR 177 million and we invested ZAR 1.3 billion in CapEx. That ZAR 1.3 is basically if you're just looking at our platinum operations due to the way we consolidate our financial statements. That was for both stay in business capital as well as expansionary capital. If we compare that to the prior corresponding period, it was really a flat movement.
The second-largest outflow, after our investment in CapEx, as I mentioned earlier, was a dividend to our ARM shareholders to the point of ZAR 1.2 billion, which basically was a final dividend of ZAR 6 that was paid during the period. Yes, it is lower than the prior corresponding period, wherein we paid ZAR 1.8 billion, and that was a dividend of ZAR 9 for the financial year ended 30 June 2024. If we look at our net cash and debt, our total borrowings, if you look between the two columns there on your screen, the first...
The second and the third columns, our total borrowings reduced by just under ZAR 1 billion, you know, exact number is ZAR 925 million during the six months under review to a balance of ZAR 1.1 billion at the end of December. The balance mostly relates to a syndicated facility that's outstanding, that was taken by Two Rivers, which consists of a revolving credit facility as well as a term loan. In that ZAR 1.1 billion, ZAR 938 million relates to a loan owing by Two Rivers. If we look at the group, the group closed the period at a net cash to equity position of 12.7%.
Since period end, Assmang has declared a dividend of ZAR 2 billion, of which ZAR 1 billion is attributable to ARM, however, that amount is not in those numbers that you see there on the slide. The capital expenditure was covered by Phillip in each of the division sections. Just from this slide, some things that you can note that segmental capital and expenditure on an attributable basis was ZAR 2.3 billion for the 6 months under review, which is almost flat compared to ZAR 2.1 billion compared to the prior corresponding period.
Most of the segmental expenditure, as you'll see, most of it was spent at ARM Platinum, about 54% or ZAR 1.2 billion, followed by the ARM Ferrous operations, again, on an attributable basis, ZAR 908 million, and ARM Coal, our ARM Coal operations, ZAR 146 million. If we look at the capital guidance for the current financial year, so the one that we're in that will be ending 30 June 2026, as well as the ensuing two years, you will see that the guidance for 2026 shows an increase of ZAR 446 million compared to the ZAR 5 billion that we had guided when we were standing at the Sandton Convention Center in August when we were giving the guidance for 2026.
That increase is mostly due to an increase in waste stripping at Modikwa, specifically, the open pit. If, you know, in that 4,995 for the current financial year, Modikwa accounts for ZAR 560 million, whereas previously we had guided for the same period for 2026 that Modikwa would spend ZAR 309 million. That's really the bulk of the difference. If we look at the guidance for 2027 and 2028, it includes approximately ZAR 3.5 billion of sustaining capital expenditure per annum, which includes an average of about ZAR 850 million for capitalized waste stripping at our iron ore operations, Khumani specifically. Here we just show the reconciliation to headline earnings.
You will see that our basic earnings increased quite a bit compared to prior corresponding period, over 60%. Just showing then how we reconcile back to our headline earnings, which is basically backing out all of the capital items, specifically the profits that was realized on disposal of Sakura by Assmang of ZAR 240, as well as a gain on remeasurement of Nkomati when we purchased the remaining 50% that was held by our partners, Norilsk. You get to then the headline earnings of ZAR 1,669 compared to the prior corresponding period of ZAR 1,520, which accounts for that 10% increase in our headline earnings year-on-year. Thank you very much.
Thank you, Phillip, and thank you too for the presentations. Ladies and gentlemen, before we move into Q&A, I would just like to introduce some of the new faces on the panel. Tsu and Phillip do not need an introduction, but we've got next to Tsu, Jacques van der Bijl . Jacques is ARM's new Chief Operating Officer. Next to Jacques, we've got Maryke Burger. She's the Chief Executive for ARM Ferrous. Tando needs no introduction, but he's currently the Chief Executive of ARM Technical Services. Next to Tando, we've got Mr. Johan Jansen, and he's the Acting Chief Executive for ARM Platinum. We will now move to Q&A. We'll start with questions from the floor.
Martin Creamer from Mining Weekly. I'd be very grateful if you could just give me some update on the Bokoni tunnel boring situation. Also an update on how Smelt Direct is doing, the acceptance of Smelt Direct. Thank you.
Thank you. Thank you very much, Martin. Thank you very much, Martin. Maybe let me respond to the tunnel boring machine. You are very close to the family. You know, even some of the things that we put under the bed, you know about them and come and ask those questions. Martin, where we are at this point in time, I mean, this is the reason why we didn't even mention it. You know, you're still basically on a trial. There's still some work that we need to do in terms of the practical operations underground. Principally, it's a cutting technology. I mean, it's not a new concept. We know that the tunnels have already been developed using that. We are making good progress.
There are some teething challenges because we're still the ground where we are, you know, still quite soft ground, so we basically going slowly. In terms of the profile of the excavation, you know, that is developing, it really shows that if we sort out all those teething issues, it will yield some positive returns. Early stages. That's why we didn't even want to report about it because we're just waiting to see consistent really performance in that regard so that we can really report, you know, the positive results. We have incorporated lessons that we picked up from Mogalakwena and also from Eland. As a result, really, are looking forward, you know, to an improved performance as we move forward.
With regard to the Smelt Direct, Andre is actually in the house. I would then ask Andre maybe to give just a high-level overview and update.
Yeah. Thank you, Martin. With Smelt Direct, we're definitely ready for commercialization. We've done all the test work, and we're very confident that our technology will work and that we can smelt alloys, using significantly up to 70% less electricity. What we've done in the past period, we've concluded a feasibility study for Machadodorp Works, and the outcome of that feasibility study showed that with the macroeconomic situation in South Africa right now, with the high cost of electricity, high price of chrome ore, and the low price of the alloy, that even producing at the lowest end of the quartile, this project is just not viable.
As you've seen from the presentation that did in terms of the capital ranking. We apply very strict discipline in that regard, and this project has to survive those elements as well. I think that the chrome business, and I mean, we've seen how the chrome business has bled in the past year or two. I think that once there's a structural reform in terms of the Chinese dominance, and dictating the pricing and the ore pricing, we will see. We are ready. We can approve, proceed. In the meantime, we are now doing test work on manganese alloys, and we're working with local and there's a huge interest from international partners in terms of partnering with us to develop this technology further.
It's definitely something that's gonna feature in the future, and we're still very, very positive about it. Because it does two things. Your energy consumption is significantly less, and also your impact on the environment is significantly less. All in all, a good project, but we still have some serious work to do there. Thank you.
Good morning, everyone. My name is Senthoka Sebone from Investec Bank Limited. I have a few questions just around the ferrous business. With the iron ore price, currently the last time I checked, trading above cost support. However, if you take into account the high costs, or double-digit year-on-year increases at Khumani Mine with now the stronger ZAR, how is management positioning the operation to maintain that profitability and resilience despite these headwinds? Secondly, I mean, Ferrous is very much related to corporate, right? My question is around with the outlook on the ferrous business, seeming like you're seeing that reducing in management fees, and thus then having a sort of pressurizing that corporate and other function, how is management thinking about repositioning or rightsizing the corporate cost base?
Specifically with the following of Dr. Motsepe moving to being a non-executive chairman and no longer an employee at ARM, should we expect sort of like a structural reduction in overhead costs going forward? My last question is then around Bokoni. I mean, previously it was communicated that the target for the feasibility study was going to be communicated in early 2026 and now has been changed to later on in 2026. I just want to understand the rationale behind the move and what led to then the move in timelines.
Thank you. Thank you very much for those questions. I mean, on the ferrous side, you rightly mentioned that this has been our cash cow, if I have to use that word. Obviously, what has affected us now was a lower USD. Actually, there was an improvement on the USD. I mean, year-on-year, 8%, you know, to $94 a ton. However, the strong rand. We did mention that the production at Khumani was affected by those external factors. However, the sales, if you look at just Khumani, if you just strip out Beeshoek, the sales was I think about 100,000 tons, you know, less.
There are quite a lot of initiatives taking place at the mine, optimizing the stripping ratio, just to make sure that we strip what we need. You know, we don't just have to really increase. Cost control, improving efficiencies, you know. There was a challenge as well with the drill rig performance. You know, those things really received the necessary attention. To date, I must say that it's looking better. That's why I was saying even that cost increase, we experienced 11% increase up to December. That number should really improve by the end of the financial year. The reason why we're working very hard with Transnet is because there's also a lot of value that can really be unlocked from that.
I think we did mention that with the independent technical assessment that we did, the state of the rail network needed some huge investment, and it will take at least 5 years, you know, to just get it to one can say a normal state where we'll be able to sort of, really step up or increase our volumes maybe from a 12 and a half to something 13 or that. That work is currently underway and because there's quite a lot of value unlock just from the issue of increasing, because we already have a fixed cost base. If you add extra million tons, extra 2 million tons to the 12, that comes in positively on your profit margins.
With regard to the project, maybe I can hand over to Jack just to comment on the Bokoni project, why they're changing timelines.
Yes, certainly. Good morning, Tebogo. On Bokoni, you're quite right. In our last guidance in September last year, we said that we would complete the 120,000 ton study DFS by February, and then we should be able to give further guidance to the market on that. That study has been completed and pleased to say that the outcome of that was positive and constructive. We are just now currently busy with our internal governance processes with regards to, as Phillip has indicated, third-party technical review, as well as compliance against our Front-End Loading requirements, to make sure that the study complies 100% with all our internal regulations. We anticipate that that would be finished in the next two months.
During the fourth quarter of this financial year, we will be presenting that to our investment and technical committee as well as to the Board for consideration. We should be able to give much more firmer guidance in terms of details on numbers, during the next reporting cycle.
Not sure whether, Marika, you wanna add anything on the question that was asked about Khumani?
Yes, Phillip, I would just add that we're also actively doing work to maximize our net back from our ore on both Black Rock and Kumanie. Your question pertained to Kumanie. The model is underway, and the intent of the model is to determine the intrinsic value of our ore to ensure in various process applications, to ensure that we get the optimal economic value for both ores. We also had Kumanie with the stripping ratio being 2.86. It's increasing to almost 5 in year 4 and 4.5 in year 5 due to a specific bit we need to strip, KM15, strategically to maintain our long-term production. We are relooking at considering rather refurbishing equipment from Beeshoek and moving that to Kumanie than purchasing new equipment. That's one of the m ajor items.
Furthermore, we are collaborating on water with neighboring mines. Phillip did address the OUF matter for rail and port. Another matter that is also receiving quite a bit of attention is consolidating of contracts between Black Rock and Khumani for better terms on, for example, diesel, tires, as well as blasting.
Lastly, on the issue of the corporate office cost, it's an ongoing exercise. We do review costs, you know, and I said our focus on, is on things that are within our control just to make sure that we improve our profitability is an ongoing exercise.
Maybe I can add.
To?
Yeah.
It's okay.
Maybe I can add-
Yeah.
On the reference to chairman. yes, I mean, I think with Dr Patrice moving from executive chairman to non-executive chairman, he ceases to be an employee of the company. What you would have, you know, previously seen in terms of salary or long-term incentives, short-term incentives fall away. He would be earning NED fees, non-executive director fees, you know, like our board members, going forward. You would see that coming through into the numbers, the corporate costs.
Thank you very much. It's Tim Clark from SBG Securities. Just a couple of questions. Just on Two Rivers, the Merensky project restart, can you just give us some idea if there's a change to or anticipated change to CapEx, to capital on that one, or if, you know, the last time we spoke it was a fairly simple, you know, simple extension to the project, and it didn't look like a lot of risk. That's the first one. The second question is just on Khumani Mine and Sishen.
I just wonder if you could give us some thoughts on working together and, you know, we saw the wall between the two mines being, you know, adjusted in the Kumba reserve report. I just wondered if you could talk about the opportunities you see in collaboration between Khumani Mine and Sishen potentially. My last question is just on manganese, just on the application for a concession. If I read it correctly, it looked like you were looking for a concession on the port. Is that also on the rail? Will it be an integrated system or will it just be port? That was the question. Thanks.
Let me start with the Khumani, Sishen question that you're asking. I mean, as you well know, Khumani belongs to us, Assmang, and Sishen at this point in time belongs to Kumba. There is a firm boundary between the two. As to whether are there opportunities of collaboration, opportunities of unlocking synergies or that, I mean, those most probably, if you look and said, if this thing was in one person's hand, what would it look like? It will be something different. For now, it belongs to the two owners. You know, the mere fact that a young man remains single up to 40 doesn't necessarily mean that there's an absence of girls that he can marry. It's an issue of saying, you know, maybe he has not landed, you know, on a certain position.
I'll ask Jack to maybe opine on the Merensky Project.
Certainly. Thank you, Phillip. Yes, Temanda Merensky, in August 2024, as you know, the project was placed on care and maintenance. At that point in time, we basically substantially completed the construction of the concentrated plant. We went up to what we term as C3 commissioning, which is essentially cold commissioning complete. It tested all the drives and functionalities and made sure that the plant is functional. The only remaining item is now to do a hot commissioning, which is actually introduction of ore into the plant. The concentrated plant by far, you know, when you build a project like Two Rivers Merensky, it's the biggest capital item. We're quite pleased that that is behind us.
The capital remaining going forward is really just deepening the declines from the current 3 level up to 5 level to establish sufficient half levels to be able to ensure production capacity of 200,000 tons. We did start with a partial release of a section of the project last year in October. Given the improved financial and strengthening of the balance sheet of Two Rivers, we felt that the time was appropriate at that time to start with the long lead item, which is the decline development. Pleased to say that the teams have done phenomenally well since starting in October, so that decline is progressing quite well. We are in the process of updating the feasibility study for the restart of the project, that is substantially complete.
We're just now in discussions with our partners and going through the necessary reviews and approval processes. We also plan to make a decision on that in the fourth quarter of this financial year for a potential restart as part of our new financial year from first of July onwards. I think on the pleasing side, the only remaining capital is really the mining-related decline development conveyor belt installations, as well as these minor items like a tailings line that we just need to complete from the plant to the tailings dam. We, during the next report cycle, we'll be able to give firmer guidance on exactly what is the capital required there.
Maybe the one item I just wanna mention is during the project phase, we did build up a working stockpile on the Merensky of about 1.2 million tons. That to a large extent has since been processed. Quite a large portion of the restart would be working capital as we build up that stockpile again. Fortunately, now we can now time the starting of the plant and see what is from a financial and a risk point of view, the optimal time to restart the plant to balance your mining output versus the, you know, obviously the earlier revenue that you get when you restart the plant. Thank you.
With regard to the MPC, obviously, as we mentioned that we just waiting for the call for those submissions. We looking at different variations, but also we would like to really be involved in terms of the construction of the new port, you know. That will be clear, you know, as we move forward and there's the request for the request for quotation is basically opened in that process. You know, you'll get to know what is in the offering, but we are ready. We have done the full study. We running with different models, we have not sort of firmed up where we can say, "This is exactly." It will also depend on the respondent and the reaction that we'll be getting.
Marika, do you want to comment on the MPC?
Phillip, that is absolutely correct, and surely, an integrated system would be the optimal. On your question, is it rail and port? We will see if rail is included when the request for quotation and proposal comes out.
Okay. Thank you very much, ladies and gentlemen. We'll move to the questions on webcast, starting with Klengi Mdaung from Dow Jones. Klengi was asking, chrome ore prices are looking stable with the possibility of soaring on the back of higher oil prices. How much chrome were you able to recover for the half year from your operations, and what is the outlook for the rest of this financial year? Her second question is, would you consider reopening Machadodorp Works now that the government is planning to give energy tariff discounts to ferroalloy smelters? Should we answer those two questions, and then I'll move on to the next?
Johann, can you respond on the chrome side, please?
Yes, I can, sir. Modikwa, we've produced 69,000 tons of chrome. Two Rivers Platinum, we've produced 63,000 tons of chrome. That's obviously 100%, so it's not the allocation according to our equity stake in the operations. Thank you, sir.
As we mentioned on the Nkomati site, Tando, do you want to comment on the chrome as well?
Thanks, Phillip. As Phillip mentioned, quite pleasing that we've commissioned a chrome plant at Nkomati. That plant will be producing between 9,000-11,000 tons per month.
That is additional chrome that we didn't have in the past. Also maybe to highlight that is very, limited volumes up to about, 12 months, while we are finishing, the feasibility study for the, other options going forward. Thank you.
Thank you. Our next question is from Bruce from Integral Asset Management. He's asking, what is your planned steady-state level of stop tons at Bokoni, and by when do you expect to achieve steady state? I'll take two questions from Lisa Steyn from News24. Lisa's asking, given the recent uptick in coal prices, has trucking resumed? At what point will this decision be made? Her second question is, could you please provide an update on the Pula Graphite matter in Tanzania as I'm unable to defend the matter, and will it make a provision for the potential damages sought? I'll just move on to the last question that we've got on webcast. Sorry. Now that I'm refreshing, there's more questions, I'll just read the next question from Warren Riley from Bateleur Capital.
Chairman, I think you've had time to practice for this question now. There's increased lobbying for you to run as ANC president. Could you please provide your view on this?
Maybe let me start with the Bokoni. I mean, Jack has already mentioned that we've concluded there's a independent review, and then we'll do the value engineering, whereafter we'll be able to go and present this for an investment decision. I mean, you'll remember that we started with the early ounce project that was basically around 60,000 tons per annum. It didn't make money, and one thing that, because we were actually feeding a low grade, you know, ore into that plant. Where we are now, we said going forward is gonna be value over volume. You know, so we know that the certain minimums that Bokoni will have to really have, you know, in terms of installed capacity because scale is very important.
The minimum that we're looking at, it's around ZAR 120, you know, nothing below that, and then with the potential to really increase that. Those details will be firmed up after we have really concluded our value engineering and also have gone through the internal processes because we don't want to say something then after value engineering, that number change. We don't want to be announcing numbers prematurely. I will stop there on that front.
Maybe if I might just-
Yes, Jack.
Chair, Phillip, if I might just add on one piece. On the 120,000 tons, absolutely, I mean, most of your PGM mines have got a relatively high fixed cost base, since it's quite labor-intensive. You need a minimum volumes to be able, and ounces produced essentially to cover those fixed costs and make sure that you're competitive from a cash cost point of view. However, the benefit that Bokoni does have is the high in situ grade. What that enables us, even at 120,000 tons, when you feed 6.5 - 7 grams a ton into the mole, the amount of ounces that we can produce, even at those reduced volumes, are very comparable to what we're currently producing at Two Rivers and Modikwa.
That places Bokoni in a very strong position, sustainable position, to be able to, you know, survive the price cycles and be economical, you know, over its 20-year life of what we're currently planning for. Yeah, and the benefit of that is with only a limited volume of 120,000 tons, the amount of upfront capital that we need to put in is substantially less than, for instance, when you have to recapitalize and build a new 240,000 ton plant or concentrator plant. Yeah, we are in the process of finalizing and just doing the third-party reviews and value engineering, and we should be able to provide further clarity at the next reporting session. Thank you.
Thando to on coal.
Okay. I'll take that coal question. I think, yeah, quite pleasing to see the prices ticking up. More pleasing is to note the improved performance from Transnet. I think they've continued from where they left off last year. There's enough capacity to be able to put our coal on the rail at this stage. We are monitoring the situation. Should there be challenges with Transnet, we will be able to then evaluate the possibility of bringing trucks back.
Though one has to also mention that the cost of, let me say maybe the incentive price to be able to start trucking should be on the in the north side of $130 per ton. It's still quite a while to get the given the current coal prices. Thank you.
Maybe coming to the matter of the Pula. I mean, I think, previously the Chairman did really gave a view that this is the matter that is sitting before court. We really have to wait and see what the outcome of that is. We have done our homework, and we know what our positions is, and we've done our submissions. Let's allow the judges to really adjudicate on that matter.
Maybe I can add. Chairman?
Let's, let's ask all of the ARM questions. We came to watch.
ARM resolve
... the Bafana Bafana play. They say we see the haka in rugby. Let's finish all of the ARM related questions, and when they're finished you know, I'll deal with that at the end.
Okay, Chairman. We only have 2 more questions. Done well on timing. Thabang Gxabeka from Nedbank is asking, are you still confident with your iron ore volumes for the second half of 2026, in terms of the guidance that's been given, taking into account that Transnet is planning a shutdown? Could you explain the poor cost performance on the manganese business? Also your realized price, I'm guessing this has to do with manganese, seems weaker than the benchmark would suggest.
Yes, we're absolutely confident on the second half of the year's iron ore, rails and sales. One of the reasons for that is in the first half of the year, we already railed 440,000 tons more than planned. The port did start up at a low base. There was around 200-240 remaining at end June. We loaded a vessel of 170,000 tons the third of July. The stocks was very low. With the 440 coming through by December, the minimum stock we would want in port is 290. We do sit with additional around 150,000 tons, and the Transnet shut was within our business plans.
We're actually very confident that there might be an upside. On Black Rock, pertaining to the comment on poor cost performance, the 18% Phillip alluded to is made up by 6% inflation, 3% is volume, and we're absolutely in a process of recovering and optimizing, having several rollouts on identified efficiency projects. We're targeting to by financial year-end be on business plan, so that 3% will be covered. There's around a 1% that is due to labor. It is vacancies that was filled. We also did that through 2 processes. It's critical skills from Beeshoek with the retrenchment process that we transferred employees from Beeshoek to Khumani Mine and Black Rock, retaining that skills.
Secondly, our fixed term labor reduced at Black Rock, but our permanent labor increased because as said, how we train from the local community our employees and upskill them to become skilled workers. The remaining of that 18% is two things. The first thing is legislatory compliance. We are required in terms of the Mine Health and Safety Act, Regulation 8.10, to install CPS, collision prevention systems to a level 9. It's obviously for the industry and for the safety of our employees. The systems are technologically very advanced, and it costs money. That is part of the percentage of the cost increase. We are well ahead with that.
I want to say also Black Rock is the forerunner in South Africa on the installation of the CAS level 9 systems. The remainder of that cost is capital development. You would have seen, Phillip reported as well, Black Rock's capital is year-on-year 35% up. It's development capital. In the prior period and even before, there was a cash preservation aspect where we stopped some projects. We are actively developing areas on all three shafts to be secured and have stopes available to produce.
So-
There was one more question on the-
On the receive pricing.
Yes. Similar as Khumani, as I've mentioned, the team is actively busy with work to maximize the netback we get from our ore through the value and use models that we are in process of develop to ensure we do get the intrinsic value for our ore. Thank you.
Thanks, Marika. Chairman, this brings us to the end of ARM related questions.
Is it finished now?
Yes.
Okay.
Um-
Thank you so much, Thabang. Can we clap hands for Phillip and the management? To Thabang as well for the excellent work. Just two quick issues. I think where's the gentleman from Investec? Excellent question about making sure that there's a focus on cost, corporate cost, enormous reduction of corporate cost. I mean, I never saw my salary every month, you know? The only salary, the only income I saw was the dividends and in the various other companies. I'm very proud Tsu and Phillip are doing excellent work.
We'll always, from a board perspective, thank you to the board members from being for being here, look and support and make sure because this company has to be a world-class company, and we have to make sure that shareholders, whether in South Africa or worldwide, they don't have to buy the shares of African Rainbow Minerals. They can buy the shares of other companies. We have to give them a reason that they should have confidence in ARM and keep buying their shares because we give them competitive and, in some respects, superior returns. As we leave, I've had so many questions from many of our shareholders about this requirement of the Johannesburg Stock Exchange. It's different fr om New York.
In New York, in the New York Stock Exchange and NASDAQ, you know, you've got Jamie Dimon and various others. They are chairman and CEO. We follow the British system, and we don't only follow the British system. We are in total compliance and respect that and as I said, a huge amount of confidence. We've, over the years, employed the smartest and the brightest black, white, colored, Indian South Africans, and we'll continue to do so. We've always seen ARM as a company, as I said, that must deliver competitive returns for its shareholders and has a huge obligation to all of its stakeholders, the communities where we live and the country as a whole. Now, let's go to this question which I knew that some of the shareholders are asking it.
I knew even the last time when I answered it that it's not gonna go away. Becoming non-executive director, as I said, in compliance with the JSE requirements gave rise to some people thinking, "We told you that there are attempts to get ready." Of course, there's this people who are very enthusiastic and some are zealous and they keep printing these keepers and these jerseys. I don't know where they get the money from. Now there's a website that's been launched, and I'm told there are several websites that are being launched, and nothing has changed.
I've said from the beginning, I've got no doubt in my mind that the biggest contribution, the humble contribution, in fact, it's not just a contribution, it's a duty I have, and it's a duty we have as a family to the people of this country that have made us what we are to try and make this place a better place, build a future for everybody, focus on uniting, not just within the ANC. I'm, as I said, the boring part. I'll always stay within the ANC, but I'll continue what we've done. We will make donations to all political parties. I will maintain the historic relationship that I've had across the board because belonging to a different political party, you're not an enemy. We're all South Africans.
I think good political parties always listen to the voters of other political parties, and there's always something to learn. Just two things that we should also be aware of. It has come to our attention that there are some persons in the ANC who see that those who are overzealous, and by the way, I fully support the decision of the NEC. There should be no campaigning until after when they say it's the right thing, right time. The point is, there are some persons now who are funding these websites.
They are funding the websites and the skippers, the aim is to discredit me, to say, "Yeah, you know, he's not following the rules, he's all about himself, and it's all of these business people and these wealthy people who are urging him." When they told me this in the beginning, I thought conspiracy theory. The people who told me said, "You see, we told you." What happens is, those persons who somehow think that things may change, which is, forget about that. The aim is just keep discrediting Patrice, keep casting. He's not about the poor. He doesn't respect the rules of the ANC. He's all about himself. When they do that, now I have to respond. I don't...
I ignore these things. It's gonna continue. It won't... That's why I'm saying this. I'm saying to the shareholders that this issue about will I get involved in politics, and some even say I'm gonna form another political party. I'm too old and boring to be forming political parties. It won't go away. It's, and I say parties because those who think that I may become, I may interfere with their objectives to their political ambitions, they start these websites. They print the skippers. When they print the skippers on the website, they then go and say, "The NEC must now make an announcement." That Dr. Patrice Motsepe is not following the rules. I always follow the rules, and my integrity is very, very important.
It's easy for people in my position. We can either close our eyes and say, "I don't need to help and to unite and make this country a better place," or, as has always been our position. The best place for us to play, to make this contribution is outside politics. You know, I said this 20 years ago, and I said it five years ago. The minute you run for votes, you lose sight of the broader objective, the broader benefit for all South Africans. Let me go back to my shareholders. Please, I have a duty to answer these questions to you because I'm chairman of African Rainbow Minerals, a company we started many, many years ago. Let's try and do what I do. I ignore these things. You know, it's false.
It's unfounded. I, the last, you know, I would never go and fund people to buy skippas. PM27 could also mean post meridian. I don't know. I initially thought I had a monopoly on PM, and I was told, "No, no, no." I just, we have to continue to be positive and optimistic. This country has got such incredible people, and I've never been more confident. I'll tell you partly why. It's because, you know, we grew up in societies where your legitimacy, your credibility was amongst the poor, was amongst the marginalized, the unemployed, and from that position.
We've educated more than 5,000 students in this from the family foundation and have done many, many other things over many years because we always understood, stay with the people on the ground. Listen. They are the people who determine. No, not the money you have in the bank. It's irrelevant really. What do people think about you? Is this a family that cares for us because of what they do, or they're all about their money. The joy we derive is in these relationships we've built over many years. Let's focus on the results. The results are good, and the results will get better. We'll always be there, and we'll continue supporting African Rainbow Minerals. As I said, as a family, we'll continue.
We will continue using African Rainbow Minerals as well for African Rainbow Minerals to play its role in building a future for all South Africans. Black South Africans, white South Africans, colored South Africans, Indian South Africans make this country the best possible place and the future looks very, very bright. Can we clap hands for the management and for everybody who's here? In conclusion, I said Dr. Precious is here with her sons. Now, they've got such big beards, and I can't even call them her sons. Thank you so much, Kgosi, for coming. Thank you, Kabelo, and thank you, Dr. Precious. Let's clap hands for them as well. We are finished now, eh?
Mr. Chairman,
Finished. Thank you so much. Is there food here?
Yes, I think we are serving lunch and.
Phillip guaranteed me that the food is very good, please stay and hang, have and enjoy the lunch. Thank you.
Chairman, if you'll allow me.
Yeah, go ahead.
... a skippa is a T-shirt for those who don't know what it is. Please remember, we'll be hosting an investor roundtable at 2:00 P.M., and the dial-in details are on our website. Thank you very much.