Earnings Call: H1 2018

Feb 15, 2018

Morning, ladies and gentlemen. Thank you very much for attending our interim results presentation. Myself and Rehan will be presenting. Jakku is also here to answer some of the more technical questions, as is the remainder of our operations team. You can ask them anything you want, and they will then decide whether or not they will give you an answer. So we're going to be focusing really just on the operating and financial results of the last six months and reflecting maybe on some of the things that we've done prior to that that have set us up for these results. And then we'll also talk a little bit about the transaction, Sibanye Stillwater transaction and hope to give you some color on that as well. If you'll consider our disclaimer, forward looking disclaimer, I'll give you some time also to look at that picture, which is a really nice one, future of mining. So highlights for the quarter or for the six months rather. Am I pointing this in the wrong direction? Seem to have given up on us. There we go. All right. So we're very pleased with these results. If you compare these with the results leading up to the end of the financial year, then you'll see that the trends have been very, very favorable. We spoke a lot at the last presentation, the year end presentation about all the things we did to set up the business, to reset the business, both insofar as its cost base was concerned as well as its focus areas moving from the West Rand more towards the Central Rand, ZAR70 Million on costs as a consequence of that move, the changes that we made to the management of the plant and how we saved on some of the reagents as a consequence and also started seeing more stable production coming out of the plant or performance coming out of the plant. And and also the central water facility that allowed us to reach virtually every corner of our operations and that as you'll see later on in the presentation is still having a very significant effect on the amount of water that we're using from potable resources and the cost of that water. But we did see a very healthy jump in operating profit back to over $200,000,000 We saw a drop in all in sustaining costs and that is a function of production. Production dilutes all in sustaining costs like nothing else. We're pleased with the cost per tonne as well though. We managed to keep those costs very much under control and that is as a consequence of a tighter network of assets and also some of the savings that we managed to bring about in the twelve months prior to this financial year. A very significant jump in headline earnings. I think it's more than the entire year last year, if I'm not mistaken. We saw some free cash inflows despite the drop in the gold price, very healthy cash inflows and that's what we're all about. I mean our business is set up to generate free cash flows because we pay dividends and we want to maintain an uninterrupted dividend flow, which takes us to the next slide or the next point there. We declared an interim dividend of because our approach to dividend payment is we look at what our near term capital requirements are, we try to maintain a safety net. Depending on the state of the business, that safety net could be might have to be very big, but sometimes it could be smaller. And the trends are very the trends are the telltale indicator for this or informs this decision. And also the immediate outlook for the business informed this decision. There's the point about the externally sourced water, which is as a consequence of our central water treatment facility. And then I think a very, very important one for us and there'll be a lot of questions about that hopefully later on because we've got more information today about that is the acquisition of these Sibanye Stillwater assets that we hope to take to shareholders next month and we hope to be up and running there sooner rather than later. And then we also spent a bit of time talking about the dispute with Ekareleni. The interdict that we had against Ekareleni was dismissed last week by the constitutional court. Constitutional court thought that the issue as to whether a monopoly supplier ought to be allowed to withhold services pending payment. This is not a constitutional matter. Maybe it is, maybe it isn't. Be that as it may, the line that we're taking is we're not going to be paying all of this money quite yet. We've managed to get an interdict against the municipality that was set aside, but that was on one set of circumstances. Now we've taken slightly different look. That interdict was based or premised on the averment that Ekrolein is not supplying us. We can't interdict them on that basis again, but just looking at a sort of a broader set of facts and circumstances, the manner in which the surcharge is calculated, the account entries that we see and so forth. What the mandate is, what the municipality's mandate is in terms of the Municipal Systems Act and how that needs to overlap or at least align with constitutional principles. We believe that there's still some fight left in us in this regard. So over the next few days, we will be tendering payments of an amount and then we'll inform the market as to what that amount is, but it's certainly not the 120,000,000 that's being held in trust. And we'll then invite the council to engage with us on the basis on which we believe that the rest of the money should not be paid at this stage. And we'll see where that goes. Maybe we will have another round in court depending on the stance that they take. Okay. So just on the operating review, some of the highlights here. You could see that the volume trend is slightly down, but the combination of better grades, which or better yield, which is a function of both slightly higher head grade but also a plant that's performing really well, saw production go up quite a lot from just over two tonnes in financial twenty seventeen first half to 2.3 tonnes for this financial year or for this period. On the sustainable development side, this is a very important aspect of doing business in a big city. You can't be a nuisance, so you've got to make sure that you don't cause discomfort or inconvenience to the communities living around your operations. So the environmental spend, again, was high, $19,400,000 and this is where it will be going forward. We saw what we call dust exceedances basically means that we've got just over 90 dust buckets or collection points scattered across our operations and areas of influence. And then we measure these. There's a certain threshold that we don't want to exceed. Now these buckets could be as reliable or as precise as you want them to be or choose for them to be. The fact is that they give us a very good indication of the trends of dust dispersion from our infrastructure over time. We set ourselves a target many years ago to half the number of so called exceedances every year and we're comfortably sticking to those and it's now basically flattened out, it's plateaued. Most of the areas that cause dust to be lifted from our tailings dams onto surrounding areas have been vegetated. And we followed also we followed a process in terms of which we designed the vegetation program with regard to prevailing wind direction. And It's been a very, very successful program for us. The crown tailings just next to the highway on the way south is a very good example of what can be done in less than ten years. Program will continue until about 2022, if I'm not mistaken, when all of the sides of the Crown Tailings Complex will be covered as well as the tops. And then of course there's some of the other infrastructure areas also where this is ongoing, like Dagerfontein Way out in the East and also the Brackman Tailings Dam. I made the point of reduction in potable water. It's very much in line with our philosophy of sustainable development. The nice thing about this, of course, is that by saving water to the extent that we do, we're not just saving water, but we're also saving costs. And I think the annual saving calculated on last quarter's numbers was about ZAR24 million just on water. So the initiatives from last year, cost saving initiatives, take us on the north of 100,000,000 in costs. At this point, I'm handing over to Rian to take you through some of the financial numbers. Thank you very much, Neil. Good morning, ladies and gentlemen. With that excellent operating trend foundation, It is really looking forward to take you through the financial trends and also the financial results for the six months ended thirty one December twenty seventeen. Operating margin, very healthy 17.5% for the six months. As dealers explained, very much influenced by the 15% increase in average yield to the comparative period. And that despite of a decrease of 4% in the average rand gold price received to just over DKK 547,000 per kilogram. The other factor obviously playing in on that that Neil has already alluded to is the costs. We're very happy with where our costs are trending and the cash operating costs period on period has only increased by 4%. So a combination of those factors leaves us with that very healthy operating margin. All in sustaining cost margin obviously takes all those good things already into account and then adds a couple of other points, for example, corporate costs, which has decreased for this period. And then it takes sustaining capital expenditure into account as well. And the point that I want to make there is along the lines that Nel has explained around integrated thinking and sustainable development, we're not holding back on capital spend at all. So we're not depleting the business of any necessary capital. We actually give the required return, not only financially, but but also from an integrated thinking point of view as Neil has explained around water, so the environmental impact. So our sustaining CapEx spend is up, but despite that, it leaves us with a healthy all in sustaining cost margin of 8.7%. Obviously, all the good results we ultimately want to see in cash flow, which we were able to do so this six months with free cash flow ending up at ZAR63 million. Yes, partly some of it was a release of working capital, which very much influenced the prior periods, but mostly from very solid operating results and despite spending capital, which I'll point out later on the cash flow statement. And then yes, as Neil has explained, actually a very almost zero point zero zero dollars per share for the last year, but negative $0.024 headline earnings per share for the comparative period. So a multiple increase to the C0.143 per share that we're reporting this period. Thank you briefly through the statement of profit or loss or income statement. So revenue has increased by 6% period on period, which is a function of gold sold that have increased by 10% offset as I've mentioned by a deduction or reduction of 4% in the average gold price received. We're very much cost of sales stable period on period. There's some gold in process adjustment there, but costs we feel very much under control, which adds our gross profit from operating activities to CHF 115,200,000.0 for the period. I mentioned corporate costs, administration expense and general costs decreasing. A large input in that line is the long term incentive scheme expense based over a long period, but it's influenced by movements in our share price, which has come down period on period. So that has resulted in a smaller expense going through the income statement. Finance income fairly stable. Finance expenses, as you would know, most of that non cash. You'll see that on the cash flows paper. So it's very much an unwinding of the environmental liability obligation period on period. And then yes, the consequence if there's a profit, normally you see some tax on that. For us a very small portion of income tax, the majority of that charge through the income statement relates to deferred tax, which you also see on the balance sheet. And then that leaves us with a profit for the period of ZAR60.6 million. In the statement of finance position or balance sheet, very stable period on period, just briefly highlighting a couple of points. So that's a consequence of capital spend and depreciation for the period almost equaling one another. So the PP and E balance staying fairly stable. Good growth in our investments of about SEK10 million period on period. Healthy increase in cash and cash equivalents, which I'll elaborate on the cash flow statement in a moment. And overall, current assets, maybe current liabilities increase period on period, but both. So it still leaves us in a very, very stable current ratio of 2.1. Equity a function of the profit for the period that has gone through the SEK60 million and obviously the dividend final dividend from last year that we've declared goes through equity. On widening of the reap charge, the interest charge going through there, there you'll see the increase in the deferred tax liability of the charge, which sits in the income statement. And then other non current liabilities, a small finance lease that's attached to our gensets at Erga and then the other bit of that relating to employee related obligations, also the short term portion of that in current liabilities. So a very stable healthy balance sheet and again to point out no external loans, so debt free from an external loan perspective on the balance sheet. Cash flow statement, what I've alluded to in the free cash flow, you can see a marked increase there. Cash flows generated by operations, yes, partly as a release from some working capital that has built up in prior periods, but very healthy operating results and as you've seen in profit as well driving those cash flows. They have alluded to the interest paid, the cash portion very small in relation to the charge that goes through the income statement and the same with tax paid. So I'm going to pause for a moment on that line. And again, just put into context what Neil has said. So we've spent SEK86 million on capital for the six months. So the DKK 63,000,000 free cash flows after we've spent that money. And one excellent example that Neil has alluded to is the Central Water Treatment Facility. So we've invested in that capital in prior years and that's resulted in a marked decrease in, yes, potable water use from an environmental point of view, but it also resulted in a 41% decrease in the cash cost of potable water that we need to pay, notwithstanding a 13% tariff increase. So again, just illustrates that we want to set up this business from an integrated thinking sustainable development point of view. So we're not scared to invest in capital as long as those projects give us the required return, hopefully financial, but also for the other capitals in our integrated thinking model. We'll keep on spending on environmental. As Neil has alluded, the Ground Tailings Complex will continue with that vegetation program into the future. Small finance fees and then that's a dividend I alluded to that we paid obviously in this in the six months period that's passed that was declared from the results last year. So healthy SEK 40,000,000 increase that leaves the group with cash and cash equivalents of just under SEK 300,000,000 at thirty one December twenty seventeen. I'm going to hand back to Neil now. Thank you, Rian. So just some of the things that we'll be spending time and energy on in the few months ahead. Okay, that's a little bit too far ahead. Rhian took you through some of the capital numbers. Two of the big projects in the six months that are nearing completion of the zinc precipitation circuit, which is aimed at increasing ultimately throughput capacity by freeing up the illusion circuit. It also, I'm told and asked my colleagues about this, is that the technology allows for almost batch treatment. So the recharging of our solution with heavy metals is something of the past. And there might be a nice little synergy also that can develop between our current infrastructure and that which we intend to build in the Far West Rand because of the addition of this. Nice little free flow exhaust system that's being added to the end of the Ergo metallurgical circuit. We're also putting in two mills, moving them from Crown to Ergo. Those are virtually ready to go. And the reason really is that there are more and more of these high grade sand deposits that don't belong to us, belong to land owners that want to get rid of them. They want to clear their land, open it up for development, and they've got nowhere to go with us really. So we've been able to source some of this material into the City Deep plant and most of it is in the East Rand. So by setting them up here, we do anticipate bringing in similar kind of material, but maybe at higher rates and also at lower costs because there's a big saving on transportation costs. And this is stuff that we receive over the fence. We don't mine it ourselves, we receive it over the fence. And then a lot of time, effort and enthusiasm going into the Sabania Stillwater transaction. Circular is about to be circulated and we intend to also have information sessions to just explain some of the key features of the Circular and what we intend to do with this project going forward. So just looking at it from an execution perspective. So clearly for us in looking at this transaction as whole, we've been earning enough free cash over the last ten years to pay dividends without interruption. We're going into our eleventh year of uninterrupted dividend payment. Two years ago, I think we were the second highest dividend yield on the JSE, depending of course on the months that you took into consideration. So if there's a lot of free cash, then that goes to shareholders, not what we have goes to shareholders. And I think it was important for us to structure this transaction in such a way that we could indicate to shareholders that the earnings per share, the dilution in earnings per share, because we're looking at a 38% initial dilution in equity, that 38% dilution will either be offset or improved upon by near term cash flows coming out of this project. If this was a project where we'd only start producing gold after five years and very significant capital expenditure, it was going to be tough to convince shareholders that it's worth your while to simply just take this dilution and wait out the four or five years. You'd rather just get out now and come back in five years. So we wanted to be sure that the numbers stack up to where we could go to shareholders and say that you will not have a significant dilution of earnings, not even from the word go. Or if there is one, it would be short term because we're setting it up in such a way that there'll be cash flows coming in, in the very short term. We also wanted to ensure that we could go to the existing shareholders and demonstrate that the answers that we're bringing in are value accretive. And something that's maybe not entirely appreciated but that will hopefully become clear once the circular has been distributed is just the quality of ounces that are coming that's coming onto our portfolio. So at the moment, going forward, we have a certain anticipated head grade that sustains our life of mine plan and our reserve statement, which is sort of on just south of the 0.3 gram a tonne mark. So out of that, we anticipate with current technologies that we have and engineering infrastructure to recover roughly 50%. We're doing better than 50% at the moment because we are still we still have the benefit of the nights, for example. We still have the benefit of bringing in slightly higher grade materials from here, there and everywhere. But in the long term, the reserve statement that sustains or the ore body that sustains our reserve statement is just south of 0.3 gram a tonne. Recovery of that, of those reserves, those ounces around 50%. If we manage to bring this new resource into our reserve and resource statement, the average grade here is between 4050% higher. So we anticipate and this will all depend on test work as we go along. And I don't like calling the cost per ounce or the cost per kilo before I see the goal on the table. And I think my colleagues share that sentiment because it is a highly concentrated environment that we find ourselves in. But just looking at history and looking at the numbers now and past experience, we do anticipate recovering a higher percentage of the ounce per tonne out of the new resource than we anticipate recovering out of our existing resource. So the quality of ounce is better. So although there's only a 92% addition to our reserve statement, you're likely to see a better than 90% improvement on ounces recovered over life of mine. Something that's very important to us, I think also was execution risk. The reason why this project maybe come from Goldfields to Sabonia and is now ending up with us is the capital charge to get it up and running from the outset was very significant. And I think if you're in an environment where you have a whole host of capital priorities or projects that require your capital. I mean, to spend the sort of money that was initially envisaged for a dual product stream, very large plant, very large tailings dam and so forth, it was going to be difficult to justify that capital because in the realities of our operating environment, you earn your capital. You don't just get given capital and say, sell a V and go and have some fun spending money on fancy tools. You've got to earn your capital. You've got to be able to demonstrate that you'll be able to generate a yield, an adequate yield on the capital that you spend and that the leads and lags and the execution, etcetera, etcetera, that those are justifiable that your shareholders are comfortable with it. And if you have one ore body where if you could spend ZAR2 billion, you could be in operation by opening up a few new panels or going down one or two levels, it can be up and running in a few months and you've got to then compare that with a project where you've got to be in construction three or four years, spend all this capital and you're going to be producing less gold than what you're getting out of one of your panels and one of your mines. It's tough to justify that to your shareholders and to your board. I think what Sibanye has allowed us to do here though is very innovative. The infrastructure that we are acquiring as part of the transaction allows us to get going to start producing gold without having to spend all that CapEx. And the period of time over which we then look at whether or not this larger project, the two fifty million tonne Phase II project is a go. That project also allows us to look at a whole host of different permutations, of different scenarios, just the volume throughput, the right blend, the configuration of the plant. Do we need to build the big tailings dam right from the wood go or might there be other tailings deposition space available, become available over time? So we can ease into Phase two while generating cash flow out of Phase one, and I'll take you through some of that. Phase one can be up and running in less than twelve months after the deal is completed, and you saw the pro form a numbers coming out the other day. Obviously, those are sort of laboratory test assumptions, etcetera, etcetera. But it gives you a good indication as to just how what the potential of this could be if gold price and production numbers come together. And then of course, as I'll take you through the rest of the slides, if we then don't get to do this Phase II, what is the alternative? Where do we end up then? And it's interesting that the fair and reasonable assessment, for example, was premised on that scenario. Everything was thrown at this model in the fair and reasonable, as you'll see when the circular comes out. And it was tested in the final analysis against this alternative scenario, assuming that there's no capital available, nobody wants to invest in the big project and we have to go back to the fallback scenario, where do we end up then? And it's against this that we assessed execution risk and against this that we want to take this to shareholders. The net present value of the alternative as opposed to the blue sky optionality in the event that the numbers enable us to earn the capital required for the project. So this is what Phase one is going to look like. You'll recall when you looked at the presentation that we did with Sibanye when we announced the transaction, that there are a number of tailings dams coming into this portfolio, excludes the uranium surface resource. So the uranium asset is still with Sibanye. And I'll talk a little bit about some of the strategic considerations as to future equity participation and so forth and what role that plays or could potentially play in my view. But you will have remembered that as part of the dumps that are being purchased, there is a relatively high grade dump, Number 4 Dam, my apologies, Number 5 Dump, that's situated not too far away from the Drifontaine II And III plants. So this will be the initial target. It's right there, right next to the plant and the reclamation station will be built, pipelines will be put in from their pipeline to the Number 4 tailings dam, which was the big catalyst for us. I mean, this is the one that really brought execution risk within a tolerable level, the fact that we managed to get the tailings dam as well. Not a lot of CapEx. Based on all the contingencies and project fees and all the other stuff that are brought into these estimates, CapEx is $288,000,000 That assumes that we don't take advantage of the zinc precip synergy that I referred to earlier. So that's something that we'll consider as we get closer to commissioning. And it also builds in a fairly hefty contingency, a project contingency. So after $288,000,000 on this, we can get Phase one up and running between 1,000,000 tonnes per month production or throughput. And it's a dump that contains average gold of 0.45 to 0.46 gram per tonne. And based on the competent persons report workings, the NPV of this is roughly 1,300,000,000.0, which was the purchase consideration that we had that we relied on or that we had picked the whole transaction on initially when we did the number the share issuance that was going to take place. Of course, all of the mines in South Africa have seen a decline in share price since then. It's been pretty much proportionate, although we find that our jaws open up a little bit wider, both on the upside and the downside compared to some of the other mines. So seems to be more of a gearing effect or a multiple in our stock price. And that's maybe because of the trading trends that we're seeing on the New York Stock Exchange in particular. I'd like the volatility and then the liquidity. If you look at the number of shares that are going to be issued for this phase though, $265,000,000, the number is well below the 1,300,000,000.0. So on today's share price, the NPV of this first phase that requires around 250,000,000.00 to get going, we have positive NPV and look to make positive cash flows in twelve months after the commissioning of the project, well less than twelve months if you consider the performance that were published last week or the week before. So now during this period, this will take about five years to deplete, maybe just a little bit less, but six months into Phase one, we'll start with test work on Phase two, the bigger one. And test work would involve bulk sampling from the remainder of the resources and aim really at seeing what is the best blend between all of these other resources and Drifontane No. Three. Because Drifontane No. Three, which is just on the other side of the two Drifontane plants, also has an average head grade of just north of 0.45 gram a tonne. The others are lower. They're hovering around the 0.3 s, thereabouts. You have the statistics on some of the other presentations that we made. So we want to see just what is the optimal blend between Drifontendri and all of the others over the life of mine to have a relatively flat and predictable gold profile production profile going forward. At the same time, we want to have another look at what the best plant layout is, volume wise, technology wise, etcetera, etcetera. And then just see what deposition options are available at that point in time. Are you going to build a very large tailings dam right from the outset and go for $1,000,000 right upfront, work that capital down? Are there other deposition options, other volume throughput options and so forth. So it will be a very detailed look into what the sweet spot is between volume throughput costs, gold production and capital expenditure. Of course, we're quite keen to do this because if we get this in place, it opens up the entire two fifty million tonne resource and it establishes a very compelling long term competitive advantage in that area in the sense that you could then consolidate the whole of that West Rand's remaining tailings in the surrounding areas because you will then have a footprint on which you could build a large enough tailings dam to accommodate the tailings from all of those mines, from Rangfenton all the way through to the other side of Carletonville. And we saw that with Ergo. We built Ergo, what was it, ten years ago, maybe a little bit less, on an eight year mine plan based on the Helzberg tailings facility. We've moved way beyond that by now. I think we've got another ten years left after having been in production for close to ten years. So once the infrastructure is there, once the tailings deposition facility and the infra plant infrastructure is there, then this thing sort of just feeds off itself because now you can almost zero cost new resources that you bring into it, zero capital cost, just the pipeline, the reclamation station. The other capital, the big capital has already been there. The factory has been built. The processing facility has been built. The deposition facility has been built. And that's where this option, this model, although not the most attractive insofar as near term cash flows are concerned, Certainly, if you take a twenty, thirty year perspective, it's a very, very attractive option. And it could make a big difference also to the environmental impacts of mining over the years, over the fifty, sixty odd years that they've been mining in that area because tailings dams were intentionally built over dolomites for water to leach into those aquifers and away. So that was the thinking in those days. Now we know it's wrong. It should have been done differently. You want to prevent that pollution plume into the aquifers. We don't really know if it has as profound an effect as it's sometimes claimed, but it just shouldn't be there. I mean, it's as simple as that. We can take all of that away and clean up that entire area. There you see the 2,100,000,000 NPV. We're specifically not talking about the CapEx numbers for this just yet because it is such a wide range. If you take a very conservative approach, build the biggest possible tailings dam with all the bells and whistles and so forth, then the capital numbers start looking a little bit intimidating considering today's gold price and our capacity. But then you can work it back very significantly to a number that even with what we have at the moment seems well within our reach. So we want to leave the capital discussion around Phase II out of today's discussion and we'll have follow on discussions once the CPR and the competent persons report and the circular are out because I think proper context is required to understand these CapEx numbers. And a lot of water has to flow into the ocean before we get to that point where we say this is the number and this is the number because that's the return and this return earns the capital for this project and we think the market will be excited about it. It's a few years into the future. Now this is the fallback situation. So if we get to that point three years from now where we need to pull the trigger on Phase two and the money is just not there, the environment is just not favorable enough, then this is the fallback situation. Not our preferred situation, but this is as bad as it's going to get. And that is number three dam now also comes into the equation. And then the total resource that's mined is a 77,000,000 tonne resource with the higher than 0.45 gram a tonne head grade and based on the calculations of our competent persons group, an NPV of 2,700,000,000.0, which is almost double our market cap. And this we're buying for $265,000,000 shares. So I think the fact that the downside looks like this in the event that we cannot exploit the full potential of the resource is something that insofar as execution risk is concerned and dilution of earnings over twelve years from now because this is how long it will take us to do all of this, both very significantly address those concerns. I have to confirm, I have to reiterate that. And this has been the perspective of our management team, of our board all along, executive management and the board all along, is we're not in it for the short haul. This looks very tempting. But you will find during this process that we are going to take a very long and a hard look and do whatever we can to get Phase II up and running. We don't want to be limiting ourselves to twelve years. Yes, it will be twelve very attractive years, even at today's gold price, well within our reach. I think the CapEx in order to get from Phase I to this phase is 300,000,000, thereabouts, between 300,000,000 and 400,000,000, which has been working to this NPV number, of course. So although this is a very attractive option and attractive for twelve years, we don't want to do the twelve years and be limited to only that. We want to do the fifteen, seventeen, twenty five, thirty years and set up the infrastructure capable of doing that because from a perspective of long term value and full on sustainable development, that is the better option. But this this is the downside scenario if we can't do that. Hell of a downside. All right, so ladies and gents, that's the story and we'd be happy to take your questions. Hi, Niall. I have Brendan Rahn, Mining MX. Can you just clarify something for me on this deal? You are asking shareholders to waive the requirement for an offer to all of them. But at the same time, you're letting Sabani have the right to buy control through the market up to 50%. When they get to the 50%, is there then the option of an offer to all shareholders to take out the company? No, no, the waiver is now. Because remember, the waiver or the compulsory offer threshold is 35%. So they will cross the 35% right now. And the resolution is then to waive it now. But taking it beyond two fifty, there isn't another waiver required. Is that legal? Yes. Neil, from where I sit, and correct me on what I'm missing, but you seem to be giving away or selling control of your company on the cheap to Sabani. I mean, that's how it strikes me. What am I missing? Yes, I think it does appear like that. It's certainly something that's been raised by a number of people looking at the sort of the terms that we've announced up until now. I suppose what one needs to consider, and this is the way that I approached it, this is the price to get the asset. So on the one hand, we have Diode Gold, which is a good business, but it has a limited life of mine and it has a single asset. And your share price trades not on your share trades not on what it is worth today but what the market thinks it's going to be worth tomorrow. And if you run your models, if you run look at the sort of the growth multiples that are typically factored into that sort of calculation, then it's difficult, I think, on current gold price to come to the conclusion that the share price is going to be stimulated by much other than changes in the gold price. Production forecast is pretty much a given. The costs are pretty much a given. It's a very predictable production and revenue flow, assuming what your gold price assumptions are. So for this to become exciting for shareholders, you need movements in the gold price. Not much else is available to give it that impetus or that energy. And at this stage, shareholders own 100% of that. The moment that we do the deal and assuming Sibanye does not exercise the option just yet, for a 38% sacrifice in equity, our shareholders get to own existing shareholders get to own 68% rather 62% of a ZAR2.7 billion NPV. Now that in anybody's language is value accretive. That is something that does give some impetus to the share price now. It's an energy source, an external energy source that provides some potential upside. In addition to that, assuming that we do see the gold price going to where many of the profits of gold say it should be going with just silly levels of debt globally and fiat currencies being sustained by nothing other than sentiment. The fact that you've got a second footprint with a two fifty million tonne resource, close to 3,000,000 ounces of gold and opening up the rest of that area, that too is a sort of impetus or energy source that could give a bit of traction to your share price. So you compare size, prospect of what we've got now compared with size, prospects and value with what we're bringing in and we can demonstrate to those shareholders that are not too concerned about issues of control or issues of who gets to say what and whose picture is on the front page of the newspaper. We could demonstrate to them that there is in fact the prospect, a very real prospect of much enhanced earnings and a dilution in ownership that is certainly not disproportionate to the value that's being achieved. So that's the one thing. The second thing is, this is how much the asset costs. If you want this asset, then this is what you're going to have to pay. This wasn't a competitive process in terms of which Sabanya said, we want you to bid and we'll decide who we're going to sell. We went to them and said, we believe that this asset belongs with us and that we could provide value. So, yes, fair enough. You can have it, but because we also know that it's a very attractive asset, one that is perfectly capable of being separately listed and justifying its own CapEx and you just saw here, Brennan, that it is in fact capable of doing that. I mean people can write out a check for this number. One man, one fund can write out the check necessary to get the initial capital infrastructure up and running. It is capable of being separately listed where they could determine what level of participation they want. As you could have this, but we want to have a significant proportion of the future upside. We're not just going to give it away. And because of just what the net cash flow profile going forward is going to look like, what your current asset base will contribute and what this asset base is likely to contribute, we want to be in a position where we could have majority of that and we'll pay for it. I mean, we've done a valuation on the asset, which I think just looking at the NPV of the fallback position was a favorable valuation from our perspective. We've done the valuation and we'll pay for the shares what they are trading at. And considering that it might be right there at that point where we want to do phase number two, the cost of capital is 15.5%, at least if you want to raise it. Most expensive way of getting money to do something is by issuing shares. So here, we're avoiding all of those costs by offering a 10% discount. And you know what? Control is neither here nor there. Control is something that people write about and they get excited about. But once you sit there in the boardroom or in the engine room of the business, the guy who controls, and I said, what, is he really going to feel differently about where the business needs to go? Is Sibanye really going to be a tougher taskmaster than our existing board? Probably not, because they set a very, very high standard for us. So if I were in Sibanye's shoes, I would have insisted also on at least that sort of participation or the option to participate on it. And then there's something else. You also have to, as a corporate, look after your assets and look after your interests. Now remember, Sabania, and this is not something that ever came up in any of the discussions. And I don't know if this is foremost in Richard's mind in negotiating the deal on the terms that he did. But they have a very, very large uranium resource, which they paid a lot of money for. And in order to process that uranium resource, they're going to ultimately also require access to a large savings deposition facility. Now all the rights that they currently hold in terms of which they could establish that facility are rights that we're now acquiring. So if we decide to take the bit between our teeth and just run off and say to them, sorry, we're not going to accommodate you on the staling stand, then they would have just then they would have sterilized the asset. And that would be irresponsible because some of their shareholders, you are going to ask them, so what's now going to happen to your uranium asset? Why don't you go and sell this asset to DoD Gold and not make sure that you at least have access on to tailings, their position facility, that they can do whatever they want with the trigger, the catalyst of $100,000,000 2 hundred million dollars asset. So clearly, there's some strategic consideration as well. Whether or not Sibanye will exercise the option at the time is entirely up to them. And I don't think they're going to make an emotional decision. I think they're going to make a clinical objective decision. Is it worth paying that much for the additional 12%? Are we going to see the cash flows? Do we have sufficiently solid relationship with management and the board that they will build the tailings dam and honor the agreement that we have in terms of which we have the right to deposit? Or or do we have to sort of rein them in a little bit? So I think those will be the decisions. I am and it seems to be the thing that's foremost in many minds. It's the one thing that I'm least concerned about. Ultimately, these things are determined by one simple thing, and that is, are you making money or losing money? Are you doing well? Are you making a complete mess of this asset base? I don't see the Sabana team as it currently is, making some sort of a silly emotional decision about that and it's only to bully. Neil asked me about this because I didn't ask him about it. We had a long discussion about how this thing is going to be structured and who's going to be doing what and so forth. And I never raised the question with him and I think he probably wondered about that and he said, well, are there any issues that concern you about this? For example, the equity split and so forth. And I said, well, for us, it's a leap of faith. But we think that we can do this well enough for you guys also to the standards that you measure performance that you'll be happy with what we're doing. And of course, if we don't do it, then we expect to be fired the way that we expect to be fired by our current board if we don't deliver value. But if not, we're assuming that you'll let us continue with what we do and hopefully it will be good enough. And he said, yes, there's one thing that I want to make very clear. The market needs to understand that we don't consider this to be an acquisition. We consider this to be an investment. That's how I look at it. I don't think we're giving anything away. Now Leon's going to ask me exactly the same question because it's been he's bonded too. I don't agree with you. Giving away control of your company is a big thing. You talk about if we're there, we'll do this and we'll do that and we'll do this. You're not going to do anything. Sibanye is going to call the shots. Now you're right in saying, well, they're not stupid people. They will do the right thing for the company making money. But if you look at the track record of Sibanye over the last two or three years now, they've done a significant amount of very dilutive deals, all of them on the premise that it will ultimately deliver a lot of value. And it may or may not happen, and I'm not saying that they're wrong. But you could end up in a situation where DRD gets used as this mop up vehicle for other tailings businesses all across the world, PGMs, I don't know. I'm just so I'm trying to sketch a picture here that giving away control of your company is not nothing. Well, Dion, what I had to measure up both personally and what we considered as a team is, is that risk so profound that we should settle for what we have and give up the opportunity to develop this asset which, worst case scenario, offers an NPV of double our market cap? That was the question. And you know what, I think I'd rather just take the risk on the at this stage a possibility, but hardly a probability. They can if they want to. We can't stop them. So are we going to walk away from this opportunity only because we're afraid of what they might do? Of course not. Then you'll never do anything. Sorry, Neil, to carry on. I hear you. And I'm not booting that. But when you really get those values, and I don't know what the gold prices that went in there or the discount rates or anything, but two, two point whatever billion. Why is Sibanye not doing it themselves, number one? Well, if you could just answer that for a start. Yes. Look, I don't think Sebania ever considered this project on the sort of from the vantage point that we did, namely, let's do this incrementally. Let's do it step by step. Their approach has always been, and this is the way that it was initially pitched or discussed rather, their approach has always been a very large tailings dam, dual stream gold and uranium. And I think that they simply just that they just thought that the likelihood that they were going to do this themselves in the short term, considering all the other projects that they've got, because they've built most of the platinum mines in South Africa, the Stillwater deal, it's a team that can also only do so much. So what do you do? If you like the business and you want something done, then you go and buy another business that comes with a ready made team that can actually execute it. And by reserving the right to buy back control of the asset, they're almost achieving what they would otherwise have achieved if they just did it in house. Also remember that by staying separately listed, you could go and generate your own capital. You can go and find your own capital. You don't have to compete with capital internally with all the other projects that they've got. Okay. So sorry if I'm hogging the mic. Just a couple of things. So what you basically just said is that they need you. No, I don't think they need us. I think they just they They can't do it themselves. No, no. I don't think they can't do it themselves. If they wanted to do it themselves, then they can. But they're juggling 100 balls at this stage and they've got one team. And here's an opportunity to achieve what they set out, what they want to achieve with this asset in the long term without having to go and raise their own capital and without having to go and recruit their own teams. It took us seven, eight years to really set up our plant to the point where we're comfortable that we're looking at all the different contingencies. You don't get these skills just off the shelf. They would have to go and actually recruit the right team to go and do this. So I like the team and I said, well, let's invest in this business and maybe it can give us the desired result without being a distraction. Just the last one then. If that value is real, why don't you just up the price and not give away control? What price? Yes. So why don't you pay more? I mean, you said this is the price of the assets, take it or leave it. Why don't you just pay more instead of giving away control? It's not for sale on those terms. Okay. So that's what bugs me. They want to take control and Let me worry about the control. Why don't you just work out the numbers? If you want to take something away from this, take away the downside number. It's my job that's at stake, not yours. Any other questions? All right, that seems to be a wrap. Anything from the nothing. Ladies and gents, thank you very much. Nobody is allowed to leave until we've eaten all the snacks, so please join us for a tea and a few sandwiches. Thanks very much.