Earnings Call: H2 2021

Aug 31, 2021

Good day, and thank you for joining the Harmony FY 'twenty one results presentation. I hope you are all keeping safe. It's a pity that we can't be able to meet in person Due to the COVID safety protocols, we will be presenting our full year results virtually. With me presenting will be Baopele Lokubo, Masheko Masheko was also in meeting with me, Marianne Van Der Waalte and Hermann Peri from the executives and then also the IR team and the leadership of Jarrod Kutze. Please take note of our safe harbor statement. Our FY 'twenty one delivery versus our compared to our previous year's results. FY 'twenty one saw us deliver across all four pillars resulting in a fantastic set of full year results. From the very beginning of the pandemic, we knew that we had to focus on the well-being, health and safety of our employees and host communities. At the same time, it was also imperative to steer the company through these unprecedented times to realize our strategic objectives. I am proud to report that we did both. FY 'twenty one was indeed an incredible year for Harmony and has positioned us for what will be a truly exciting future. Some of the key highlights we achieved in FY 'twenty one include: we have been continuing progress improving across all aspects of ESG. Sustainable development is an important deliverable for management as we position ourselves for a greener and more equitable future. More of this shortly. We have had a solid operational performance. After acquiring Ng Poneng and related assets, we saw a significant increase in production and improved grades. However, this was only the new assets that we delivered. Excluding related assets, we achieved a 5% increase on the old Harmony assets and that's also a stunning performance. Excluding Mponengen related assets, achieved this extra 5%, which is actually noteworthy if we think that the closure of Unicell has also happened in this year after the first quarter. The financial highlights included a record headline earnings of billion from a loss of R828 million in the previous year, and this amounts to a R9.23 dollars per share. EBITDA increased 64% to R9.8 billion dollars and an EBITDA margin of 23%. We have delivered a strong, flexible balance sheet, allowing us to focus on key projects in FY 'twenty two, which are also paying a final dividend. Our key features. Some of the original highlights include a 3% improvement in our SA operations in SA and lost time injury frequency rate. That's due to 6.46 per million shifts, a 83% increase in operating free cash flow from €6,500,000,000 We have successfully integrated the Penang and related assets into our portfolio and have nine months of this results into our results today, which contributed towards a 2536% increase in gold production. We managed to meet our production and grade guidance for FY 'twenty one, and notably, our all in sustaining cost was only 0.4% above our guidance of ZAR723000 a kilogram, a very good achievement considering the sharp increase we have faced in commodities like electricity and consumables. Our ESG highlights. ESG falls under our first pillar of responsible stewardship and is embedded in our DNA. When making strategic decisions, all aspects of our ESG are also considered. I am pleased to report that we achieved some notable milestones this year, which include a record 3,380,000 fatality free ships during the fourth quarter of FY 'twenty one, and we have implemented an effective COVID-nineteen vaccination strategy. We have spent almost ZAR0.5 billion on training and development and ZAR7.9 billion on preferential procurement in South Africa in FY 'twenty one alone. Since 2016, we managed to reduce electricity consumption by 33% while realizing cumulative savings of ZAR1 billion since 2016 on the back of these energy saving initiatives. This is a testimony to the fact that Harmony turns risk into opportunities. Good governance and diversity are fundamental to our business. Ethical leadership is ethical mining. By adopting an integrated and risk based approach to decision making, we considered the consequence of each of our actions and how it's impacted every aspect of ESG. Creating future value. Omni has an exciting pipeline of brownfield and greenfield opportunities. We are now in a strong position to take advantage of these opportunities to extract value and convert our resources to reserves both safely and profitably. We are investing in exploration and have identified a number of opportunities, including Kelgold, Taotona and Sebukha shaft pillars, extractions and then also the Starbat North. Wafi Golpu is still in permitting phase, and we are committed to realizing our aspiration of being a specialized emerging market copper gold producer. The environmental permit for Wafi Golpu has been approved, and we, together with our JV partner, continue to engage with the State of Papua New Guinea regarding the permitting. Whilst negotiations in PNG continue, we will continue to invest in the projects that have the potential not only to extend the life of our mines to replace some of our mined ounces, but also to add to the overall value of Harmony. I think one of the stories today is really investing in creating value for the future and the capital projects that we've approved of late. So the key new projects include Zaiplas, which is a deepening of the high grade Moab Khotsong the mine waste solution, Kareeran tailings expansion and extension of our Hidden Valley mine in Papua New Guinea. Other projects already in execution include the Sapong Sub-seventy 5 project, the Duerrenpop 20 Seven-two 12 levels and related infrastructure upgrades and the Target one capitalization and decline development. These capital projects are expected to add significant value to the Harmony, and based on our assumptions, we expect an approximately 40% increase in net present value from the present from these projects. Not only do we expect improved grades, but we also are optimizing and extending the life of our mines too. The projects are expected to deliver strong cash flows and will bring significant upside to Harmony as these projects are completed. Notable in this graph is the importance of pursuing this project as to how it transforms our cash flow over time. Harmony is currently a 1,500,000 to 1,600,000 ounce producer. We are investing in our business and these projects because they have proven ability to extract value and extend the life of mine. We have shown these skills and expertise over the course of our seventy year history. Not only have we created value for the investors, but we have also sustained jobs, communities, small businesses and continue to contribute to the viscous of the emerging market countries we operate in. The new projects are indeed complementary and will add to our production profile. Not only are we extending our production but are improving margins and profitability over time. These projects, therefore, make strategic and financial sense and will create long term value for all our stakeholders and shareholders. If we look at our margin expansion through our catalyst, and this is really the time line of things that's going to happen going forward. In addition to these new products, there are other catalysts that will contribute towards the expansion of our margins. These include a number of our mines which are reaching the end of the life in the New Year. We will see the streaming agreement with Franco Nevada coming to an end in FY 'twenty five, and our major CapEx projects will also reach completion. All of these will ensure a decreasing CapEx profile, driving our margins higher. I will now touch on three of our four strategic pillars and how we have delivered on them each of them in the course of 2021. Our FD, Poipelo, Rukupo, will run through our financials and the cash certainty, after which I will conclude. Safety is a foundational value at Harmony, and safe production at all our operations at all times is nonnegotiable. We have invested significant resources in embedding a proactive culture of safety through harmony and now in Phase two of our humanistic transformation journey, which have we aptly named Tibakotshi, which means to prevent harm in Susutu. Tibakotshi is about understanding the importance of one another, caring for one another, and it requires a conscious shift on how we think about ourselves and others. Developing safety leadership capabilities, embedding good safety practices, embracing a proactive safety culture, improving employee engagement and learning from incidences are assisted in entrenching a safe behavior within all of our employees and help us to achieve our goals of zero loss of life. If we look at our achievements, whilst we are making progress, accidents remain a constant and real threat. We pay our respect to our colleagues who have lost their lives during the course of FY 'twenty one and extend our deepened condolences to their families. Each loss of life results in us having to reflect and see where our systems, procedures and behavior needs to change or improve. We are working tirelessly to ensure that results are proportionate to the efforts we are putting in. I am, however, pleased to report that despite the loss of life incidents, the majority of our key safety metrics are trending in the right direction. Our lost time injury frequency rate in South Africa improved three percent to six point four six per million, shifts from six point six nine in FY 'twenty. Some of the notable milestones we achieved in FY 'twenty one include Masimoong, Zhou, Mponeng, Hidden Valley and all surface operations. Free state plants were fatal free for the year, while Kalgold and Hidden Valley achieved three million fatality free shifts. Of vaccinations, COVID-nineteen remains a major focus and is considered a material risk to our business. There is continued coordination from all stakeholders, management and employees towards the fighting of pandemic in both South Africa and Papua New Guinea. Our vaccination rollout has been successful, and as of 08/25/2021, over half of our employees have either been partially or fully vaccinated. We are aiming to have eighty percent of our workforce vaccinated with the first JAP by the October. Our KPIs are linked to our ESG. Further evidence of our embedded approach to ESG can be seen here in the breakdown of our balanced scorecard. 20% of the management KPIs are linked to ESG outcomes, such as being included in the FTSE4Good Index. ESG components are also included in our financials and operational KPIs, which further illustrate our integrated approach to ensuring that all aspects of our business and the impact of our businesses are considered. We are continually assessing how best to integrate ESG factors into our KPIs and will be informed by those factors material to Harmony but also the various frameworks which guide our sustainable development strategy. Our energy initiatives. Just as we place emphasis on diversity amongst our workforce, it is essential to consider how we diversify our energy mix. With hydropower already in place in Papua New Guinea, we have an exciting and comprehensive renewable energy rollout plan in place in South Africa. The first phase includes plans for a 30 megawatt of renewable energy production, whilst Phase two will see us develop and incorporate a further 73,000,000 megawatt of renewable energy into our plants. We have realized significant savings through our energy saving initiatives post the acquisition of Mineway Solutions. We also have seen our intensive ore move down considerably due to the high volumes treated at our surface source of business. We have a clear copper gold aspirations and are committed to the decarbonization through various initiatives. The second of our strategic pillars is operational excellence, where we have once again shown in the past year that we have been able to extract the best from our assets. We have identified five key focus areas to help us achieve operational excellence throughout Harmony. These are safety and health, which I've discussed active cost management, which I will address capital allocation prioritized to drive margins growth and production excellence aimed at productivity improvement and, obviously, infrastructure reliability. The acquisition of Mua Potsong in 2018 and then Mponeng and related assets last year has had a significant impact on our all in sustaining costs due to the high grades at the underground mines and low cost and high volumes at the surface sources business. This chart illustrates which of our mines have the highest all in sustaining margins, but it also shows where we need to focus our attentions. Mines in the red block namely Target, Joel, Kelgold and Sapong are all undergoing optimization projects to ensure margins expand as they contribute and produce the plan, driving costs down. This is just the same slide, just in U. S. Dollar per ounce. Just quickly talk through these assets that require focus. First of all, Kalgold. I mean Kalgold really a mine that we've mined at the first lockdown, we mined for profit. This is the only operation that was or the only operation that was operational in South Africa, and we really mined the higher grade of ore body out. But we also have a long term plan for Calgold. And really, the biggest thing for us is really to create the flexibility. So in the last year and also going forward in this year, a lot of effort will be put into the A Zone and water tank pit, the bridge area that actually should also be mined so that we can actually create a bigger pit and actually get sustainable volumes in place and stockpiles in place for Kalgold so that we can actually go through the ups and downs like the train and all other kind of things, get Kalgold in place. So Kalgold, although we didn't perform according to our didn't make money, we actually planned it that way and actually want to create a bigger and more flexible mine going forward. Target one was probably the mine mine that we had quite a blowout for the year. There was two things that happened there. The first of all, we had huge problems with ventilation and cooling, which we, in the meantime, resolved by actually installing extra capacity. We also had the collapse of the two stopes massive stopes, which we had to deal with. And then we had a seismic event at Target, which related to loss of life, which we had to rethink our safety aspects of Target and actually then many of our communities, we re supported with the new standards that we put in place. All of that has put target in quite a difficult situation for the year, and we hope to see this year that Tinker will improve. So PORM is really about creating face length flexibility. We're actually busy with the Sub-seventy five project. We do believe that we're going get better grades going forward. And we actually have restructured the mine to have now two general managers, both in the old what we call, Tshepong South and Tshepong North, which is the old Pakisa and the old Tshepong. And that since we've done it, we've seen quite a good performance of Tshepong. And in general, I'm pleased to say that we, in actual fact, completed the deepening, chilliffs are running, we are back at normal things, and we really have done quite a lot of work to actually optimize the mine and going forward, the mine will be in a much better shape. Cost control. I think our all in sustaining cost for FY 'twenty one, as I said, was ZAR723000 a kilogram, marginally more than our cost than guidance for FY 'twenty one was between ZAR700000 and ZAR720. Two contributing factors for the higher all in sustaining cost was COVID-nineteen and royalties, which each added around two percent to our all in sustaining cost. Excluding these items, we would have been below the lower end of the guidance, and we are confident that we will manage to keep our costs controlled. We don't expect COVID-nineteen costs to be as high as in FY 'twenty two as this includes a number of once offs such as establishment of clinics, installation of temperature readings at all operations and just a general management of COVID. Obviously, with the vaccinations being rolled out, that obviously is at a cost not for the vaccination itself, but for the other work that we have to do as far as that's concerned. But our oil and gas sustaining cost for 2020 is planned at to ZAR800000 a kilogram to cater for the inflationary increases and the increase of electricity costs in South Africa. Our wage negotiations are currently underway, and we expect the agreement in the first quarter of FY 'twenty two. Just in terms of our cost variances between FY 'twenty one and 'twenty, you can see in the slide here, it was a function of numerous items but predominantly the inclusion of Mponeng and related assets in our numbers. And this added around ZAR5 billion to our cash cost. That is in normal numbers. It's also worth noting that FY 'twenty costs were lower than anticipated due to the lockdowns and the impact of the pandemic, so we did see a normalization of costs in this year. Other items which increased were consumables, general stores and maintenance of about CHF305 million support costs, CHF133 million really, the reduction of steel nets in all our operations, high grade or stopes of high risk stopes. Chemicals and explosives was about CHF83 million. And then contractors contract that we added at Colville, which is an increase of CHF171 million as we mined more waste and then up electricity money due to the annual tariff increases that we saw. If you look at our production guidance for the year coming, in FY 'twenty two, we are expected production to increase to just under 50 tonnes of gold across all our operations. This translates to around 1,589,000 ounces. This is an increase in production between 34%. Of note is really the reduction in surface sources as we've mined out many of the surface sources that was particularly at the Kopenong plant that was for surface sources which we now on to care and maintenance. The next slide is really the same just in ounces, same slide. And then the slide is on improved grades. We're also improving our grades. A constant trend in the expected grade guidance for FY 'twenty two will be around 5.57 gram per tonne from our underground operations in South Africa. Our third strategic pillar is effective capital allocation. I would like to spend some time here discussing our new projects in FY 'twenty '2. The Harmony embarked about the growth strategy in 2016. I'm pleased to say that we have transformed our operations significantly over the past five years. We have concluded value accretive acquisitions, dearest our portfolio, while also improving quality of our assets. We have reduced our debt, placed ourselves in a strong position to extract further value through exploration and development of our various projects, and we will be committed additional capital to these projects in FY 'twenty two as we invest into our future growth. On the right hand side of the slide, we have listed the projects that meet our capital investment criteria. A number of deliberations took place with technical and mining specialists. We have also taken into account the views of stakeholders and shareholders alike, and we believe that these projects are the ones that will add significant value to Harmony. The substantial value in our portfolio and these projects allow us to do what excel in, That is to mine responsible and to benefit to all of us. If you want to look at the next slide, it's really the slide about our growth and resources. Acquisitions have added 28,400,000 ounces to our resources, which has resulted in a 90% increase year on year. And if you look at reserves, similarly, our reserves have increased by 16% on the back of the new acquisitions, adding 9,300,000 ounces year on year. The additional reserves will be from Xaiplas, Mponeng, Mineway Solutions and In Valley Extension. Our FY 'twenty two capital guidance. Our total CapEx will thus be increasing from $5,100,000,000 in FY 'twenty one to $8,000,000,000 in FY 'twenty two. Sustaining CapEx will represent 71% of the $5,700,000,000 while the major or growth capital will be 29% or $2,300,000,000 in FY 'twenty two. The breakdown of major capital expenditure can seen here, with the majority of the major capital being allocated between Xaiplas and Mineway Solutions. And Xaiplas will be funded by Moa Kotsong, Mineway Solutions and Hin Valley by our group cash flow. The same split can also be seen here in U. S. Dollar. It is important to emphasize that we are investing in our high grade long life assets. We have de risked our portfolio through the surface and high grade longer life assets, and the result is percent of the free cash flow generating in FY 'twenty one was from our newly acquired assets and surface operations. This is a substantial shift from what we had in the past and perfectly illustrates our reengineering portfolio. Attracting more value from these assets is therefore essential. The capital we previously allocated to Mab, Kotsonga and Hidden Valley has been paid back, and we are expecting the remainder of our investment in Puneng and related assets to be prepaid in FY 'twenty two. At the Puneng, billion of the ZAR3.3 billion acquisition price has been paid back already with only nine months, with about ZAR1.6 billion outstanding. When we look at the Xaiplast project that we just approved, I mean, the key numbers that they're doing there is a 225,000 ounce per annum producer. We will have a grade of over nine grams a tonne, a twenty four year life of mine and a pretax real IRR of about 19%. But this is a long life asset, an asset that certainly stand us in good stead over many, many years. It is a more in itself has been a very, very good asset for us, very, very profitable, and we expect Zaiplas to be equally profitable going forward. Just in terms of how Zaiblaas ore body looked like, and you can see the left hand plan there, you can see the Mawapratzong ore body was really three distinct different ore bodies, the one being the upper mine, which was really mined out through Greater Illigua Mine. Most of that was mined out through Greater Illigua Mine. And then the middle mine, the mine that we're currently mining, and you can still see what is left in the middle mine. And then the big very big Zaiplas ore body. And that's actually the biggest part of the ore body for Mohawk Potsong. And again, it's right in the sweet spot as far as grade is concerned. And so we're very comfortable that this mine will be a good mine for us going forward. When we look at the mine waste solutions, again, close to 100,000 ounces per annum, a very good all in sustaining cost of ZAR571000 a kilogram, very IRR of 43%, a sixteen year life of mine. And it's really about next slide, we'll actually show you the area. On the top, you can see the green area there is where Mine Waste Solutions plant is. On the right hand side, you will find the Carreer Ant tailings facility. It's really about extending the tailings facilities for to cater for the next sixteen years' life of mine. And then we will mine the mine waste solution complex and also the waste complex. The waste complex is the area that we'll move in first. That is a higher grade of the tailings dumps that's available and, hopefully, mix it with the mine waste solutions part of it. But that is the mine that we have to do. But we really have to now extend Kari around to be able to mine And actually, it's quite a no brainer of a project. And then we look at Hidden Valley. Hidden Valley is really just the extension of another two point five years of the current life of mine. Really on the back of using the Omata Pit as a tailings facility because a big constraint there is really tailings placement because we're getting to the end of the current tailings facility life of mine. And it's a good mine with a good cutback, good management team, and we are retaining, obviously, our workers for a strategic for possibly deployment later on into Wafi Golpu. Just for those of you that has not been to Hidden Valley, this is how the splits look like. You can see the cat back on the right hand side will be Stage eight, which is the last cat back. And right in the left hand corner, you will find the TSF Namata pit, which now will be the TSF 2 and the plant, the processing plant that are out there. If one then look at creating that second TSF, that is the Hal Martha Pit. We will build a wall and then obviously use the tailings to go into that old pit that we've mined. So yes, now I will hand over to Bertella to take us to the next part of the presentation. Thanks, Peter. FY 'twenty one has indeed been a fantastic year for us, and we delivered an exceptional performance. Headline earnings per share increased by just under 700% to ZAR9.23 from a loss in FY 'twenty of ZAR0.54. You note EBITDA increased 64% to ZAR 9,800,000,000.0 from ZAR 6,000,000,000 in FY 'twenty. The higher production combined with a 16% higher rand kilogram gold price resulted in a net profit of ZAR5.6 billion in FY 'twenty one compared to a loss net debt to EBITDA in U. S. Dollars. In addition to reducing our debt, we've created flexibility and now have ZAR7 billion or USD500 million in available headroom through cash and undrawn facilities. This gives us substantial room to maneuver and provides a strong buffer during times of uncertainty. It also allows us to take advantage of the kinds of opportunities that Peter has discussed and others which may yet present themselves. Again, just a U. S. Dollar representation of the headroom. Harmony now has a clear dividend policy where we will return 20% of net free cash generated to shareholders. We'll be paying a final dividend of $0.27 in FY 'twenty one, and this combined with our interim dividend of $110 results in a dividend yield of 2.4% based on our share price on the August 27. We're confident in our ability to pay a dividend alongside our growth aspirations as we're in a strong position to fund CapEx from our retained cash. Thanks very much, and I'll hand back to Peter. Thanks, Poipelo. Okay. So let me conclude. The Harmony of FY 'twenty one is very different from that of old. The Harmony is positioned in FY 'twenty two and beyond and has a solid building block in place to ensure it will be mined sustainably throughout the cycle. We have optimized our existing operations and we have integrated the ESG practice throughout Harmony. Our acquisitions, combined with our responsible hedging strategy, will ensure that our balance sheet remains strong and flexible so that we can deliver positive returns to our shareholders and stakeholders. Our investment case remains compelling. We have reengineered our portfolio and deleveraged our balance sheet to create optionality and pay a dividend alongside growing the company. We are geared to the rand gold price with rand cost but U. S. Dollar revenue. As a 1,600,000 ounce gold producer, we are expanding our margins through organic growth and our new exciting projects. We have a Tier one copper gold asset in Papua New Guinea, and our embedded ESG practices will create lasting legacies and ensure a sustainable future for all our stakeholders. We thank you very much, and we'll now be taking questions. If we can just move over to the Chorus Call, we'll take questions for people that are dialing in. Of course, sir. The first question we have is from Adrian Hammond from SBG Securities. Morning, Peter. Good morning, Greg Beloit. I have three questions. Firstly, just I'd like to get a bit more clarity on your ability to pay dividends that you seem to be confident on. If I add your CapEx in addition to sustaining CapEx, get a falling cost in excess of spot prices. So just curious to know how you reconcile that outlook given your aggressive CapEx plans and your ability to pay Secondly, want to know if you considered the implementing B120 project, if it's still an option? And if not, why? And then thirdly, could you give us an update on the movements within union membership? And if NUMSA is making headway into gold as they are in platinum? Thanks, Adrian. I think maybe if I take the dividend one first. Obviously, I mean, our policy is quite clear. It's 20% of net free cash flow. That's after all CapEx and the like or other below the line items. Yes, obviously, with the CapEx spend that we're seeing next year, our free cash flow generation will be minimized somewhat. But it's important to understand that this ZAR8 billion that we're spending is setting us up for growth. So obviously, as that capital comes down and the projects come on stream, we're going to see significant margins opening up. So I mean, in order for us to grow the company, we need to spend, this CapEx, and the dividend will follow suit. But I must add that in assessing these projects, etcetera, the discussion of a dividend does still feature. So it's important to still keep that in mind when you assess our funds on dividends. So is that still flexible? I mean, I noticed the footnotes in your slide that you although your policy, you say it's quite clear, you you still consider future CapEx spend, so it's not so clear. Yes. And I mean, those are standard caveats that any company would have. And we have to be responsible as well, the Board, in terms of assessing what's coming up, what lies ahead, etcetera. Sure. Thank you. Adrian, your Mponeng question, let me just repeat that again because it's about deepening of Mponeng. Is that correct? Yes, into the carbon leader, really. Okay. Yes, the deepening is really on VCR, but then obviously there's also a bit of carbon leader that will be available to the north or west of it. But yes, at this point in time, we are considering the extraction of the two shaft pillars, which is both Savuko and Tauthana, and then what we call the Tauthana Blue Block, which the Tauthana Blue Block is the area that AngloGold Ashant in any case had in their plans, and we are busy developing that area and creating that flexibility. What is exciting about the Cebuca and Totona block is that it is obviously on VCR and Carbon Leader, and both of them has got higher grades than, for instance, the Bombanani had. So they are very, very high grade blocks that we can take. Obviously, they are tricky and have to be taken with caution and a lot of planning that goes with it. And then, obviously, the deepening of Mponeng is certainly something that's on the card in the long term. At the moment, we don't because we have a nine year life of mine left in our current without even the sharp pillar extractions that we want to So it's obviously something that will come a little bit later. But yes, deepening the mine will actually add another thirty years of life at a very good profit to Mponeng. So we're very happy with what we experienced at Mponeng. We've got fantastic people there, very, very good performance culture and everything in place. And then as far as the unions are concerned, yes, we still have the NUM as being the number one unit, and to the tune of about 60% of our labor force belong to the NUM, even after taking over where, obviously, AMCOO has got a much bigger say in Mponeng. But having said that, we obviously work with all the different unions, so we are busy with negotiating. We have got all the major unions around the table, being NUM, AMCOO, and also RUASA and Solidarity, all the unions around the table to have their discussions with us. We try to keep a relationship with everybody else, but NEM is still the majority union for us. Thanks very much. Have we got any further questions? Yes. We have a question from Leroy Mguni from HSBC. Thanks for the opportunity. My first question is just around the Tsepong impairment. It seems to be driven by deterioration in your outlook for grades. And I'm just trying to reconcile that with some of your comments from your last results around expecting those grades to improve as you mine more from the higher grade Pikiso section. Has anything changed there? Maybe if you can give us a bit of color around what exactly driving that impairment. And then just on your guidance for production, it seems there's quite a bit of production that will be lost from your South African surface operations. So if you could just elaborate a bit on exactly what's driving that and if it will return in latter years, please. Thanks for that. First of all, Supong, every year, we do as we upgrade our ore models, geological models and also our grade models, we obviously do a life of mine plan. So in Sepong's case, nothing deteriorates from the deepening of the mine because the deepening of the mine is already in the high grade. So the high grade part of that will certainly continue, and we expect the grades to improve going forward as we get to the needs of the ore body. So that is still in place. I think impairment is really about the life of mine, looking at the life of mine. And there are also some changes in terms of certain blocks that we've taken out and said we're not mining because it's not too low grade, and certainly we're not going to make it. So that's what the impairment is normally working on. And then the second question was really on the let me just remind me on the second part of that Production process. On surface, yes. Surface sources, we the biggest change from last year to this year is that we're actually going to take the Kopanong plant offline from surface sources. And the Kopanong plant is actually run out of surface sources to be mined. So what we've got left now, we will do through the grade Nilego plant and not through Kopanong. So Kopanong plant is coming to an end to put on care and maintenance. And then obviously, as we go with the surface sources, we start with the higher grade dumps first and then lower grade. So there's no chances of actually bringing surface sources back going forward. I mean, what we have with surface sources is what we've got. And what we can do going forward is that we will bring in the Kusarza lead to plant to actually mill surface sources in the West Bates area. But as far as the Bal River area is concerned, those surface sources are completed. So we're not at the end of of that high levels of surface sources that AngloGold Ashanti had. But we always knew that. We always knew that we're only going have a few months of that going forward. Kopenong plant, obviously, is now up for care and maintenance, and we can must make a decision still in terms of are we going to actually take it down or try and do some more surface retreatment. That feasibility at this point in time is ongoing. The next question we have is from Jared Hoover from RMB Morgan Stanley. Hi, Peter and team. I've got a few questions, please. Maybe I'll just start off with my first two and I'll follow-up with a few more. So my first one, relatively easy. You've given us a mine by mine asset split for FY 2022. But can you give us an indication of what the total CapEx for the Mine Waste Solutions TSF extension is for Hidden Valley and for Zaiplat? And just remind me what your gold price is that you're using to calculate your IRRs? I'll leave it there for now and follow-up with a few more. Okay. The total CapEx spent on major CapEx, as we call it, project CapEx, for Zai Filars will be billion, but that will be spent over a very long period of time. As we create new levels, we start mining, so we will continue. So it's about ten year time that we're to build all the declines to the bottom of the declines area. Carreerland extension is ZAR3.2 billion. That will be about a four year to build. Obviously, we're starting now with the soil preparation and everything else. That will be quite a high capital spend in the first year or so. Hidden Valley is what's the number of Hidden Valley? It's about 1.4. One point four. Again, that will be spent as we do the cut back the time, so it's ZAR1.4 billion. So those are the capital spends that we have. And the final part, Jarrod, of the question is ZAR800000 a kilogram was used in the calculation of the NPVs and everything else. ZAR8000 per kilogram was used, ZAR8000 a kilogram. Thanks, Peter. I mean just high level, seems like quite a high number to use. Do you perhaps have a sensitivity at a slightly lower gold price for us, what those IRRs might look like? Maybe at, say, 600,000,000, 6 50 million? Yes. We used, I think, dollars 700,000,000 and $750,000,000 and then a $800,000,000 and $850,000,000 and obviously, euros 900,000,000 that we've put into the obviously, we do we always do sensitivities on these things. Even if the gold price do drop, I think these projects are still the worthwhile to continue because, I mean, they were long term. They are low all in sustaining cost operations. So they certainly go and if we go to like ZAR 700,000 a kilogram, we will still be building these projects. Probably below that, will reconsider. Okay. Okay, great. And then my second question is you recently made a bid for or call it an unsuccessful bid for Golden Globe in Australia. So and obviously, there's a lot more CapEx coming up in FY 'twenty two. So my question is, is this CapEx that you're spending in South Africa and Papua New Guinea now really Plan B because your intention was maybe to do acquisitions? Or should we be thinking that there's potentially more M and A to come in the future over and above this current CapEx to fill that production profile gap between 2026 and 02/1930? Gareth, I'm not sure where you get the information from, but we never made a bid for Golden Globe. Think we were part of a team that looked at the asset, but we never made a bid for it. So but yes, we're always scanning the environment for opportunities that can possibly come our way. The We're always on our we're constantly looking at things. At this point in time, we've got nothing in mind that we can possibly do. Obviously, it must be value accretive. And we also have to look in terms of how we're going to be able to manage that properly. Yes. So yes, so we have not we don't have anything on the cards as we speak. Okay. So fair to say that M and A is something that is constantly in focus? And I mean maybe once you go past these two sort of peak CapEx years, 2022, 'twenty three, we could potentially see something if it meets your hurdles? Yes. No, we will. Certainly, we'll always be on the lookout for something. Okay. And then one more question from me. Obviously, there's a step up in SIB CapEx as well. And historically, you've had issues around flexibility in your underground operations. It was made worse by COVID-nineteen. But should we be thinking of this bump in SIV CapEx as maybe one to rectify the flexibility situation? Or it's just a case of that's the level you need to spend to keep the production profile at about 1,400,000 ounces? Yes, think it's a bit of both. We certainly have lost lose a little bit of time during the COVID lockdown. Remember, at one stage, we only had 50% of our people back at work. And then when we got back, we had to look after our vulnerable. We also had to look after people that was not at work. So kind of like the development was not always fully manned. There's a little bit of catch up there, but I don't think there's a problem in terms of our flexibility. We've got all of that in account in our plans going forward. But we do want to create more flexibility and do some more development. But there's also some of the operations actually getting to the end of their lives, which is like Kusar Zareto. It will take some development still because it's got about a three year life, but then two years from now, there will be no development on that mine. Will only be the harvesting of the final part of the ore body. So, no, it's a bit of that. Yes, it is quite a jump, but it's because of the underperformance a bit in the previous year and a little bit of catch up as far as that's concerned. But I'm not concerned that we don't have the flexibility to deliver on our plan. The next question we have is a follow-up from Adrian Hammond. Adrian, yes. Some follow-up questions, please. Then just curious about costs going forward. Firstly, are you hiring contractors to offset more contractors to offset COVID impacts? And then I think maybe a question for Papelo. Just like to get a sense of what sort of cost inflation you as a African a large South African gold producer is experiencing now for a normalized ramp per tonne basis, So factoring in it power, diesel, labor, etcetera, what sort of inflation numbers are you experiencing? And then just perhaps a follow-up from Jared around other opportunities. So you stood here sometime a year or two ago with great ambitions to explore further and diversify the portfolio. Peter, could you give us some color on the change in the landscape since that point in time due to it seems that those opportunities are harder to find? Okay. Thanks, Adrian. I'll take the first and then the third question, and then you can take the second one. On the labor and contractors, Adrian, no, we haven't actually increased our labor our contractor complements to make use of it. We, in actual fact, last year closed down UniCell, so we absorbed that labor into our operations, and we're now back to normal levels. Obviously, the next mine that we will close is Masimoong, which got about 2,000 people that's on the mine. And we obviously also hope that we can absorb them into our operations by opening up a voluntary separations and things like that so we don't have forced retrenchments. So we're very stable as far as that's concerned. Our contract labor has been very stable. In terms of the landscape, how it's changed, gold price is quite an influence in terms of being able to find the kind of right assets and pay the right price for that. And but we still have the ambition to go into Africa. We still have the Continental Africa now. We're still looking for opportunities in Southeast Asia. We will also look at some Australian assets, if possible, but that's obviously very expensive. And opportunities in South Africa, nothing of that is off the cards. We, at the moment, believe that we've got very good projects, we are very excited about our ability to deliver on these projects and actually deliver. That's a good challenge for us. But certainly, looking at opportunities that will come our way. But we had probably an opportunity in the past that we had a company that wanted change their views as far as their strategy is concerned, and that obviously suited us. Going forward, we're not sure what's going happen, but I think there's still some opportunities that are still available for us. But the African Continental African Dream is still there, and we are always looking at opportunities to go there. Thanks, Peter. Can I just take you up a bit more on the costs? You've given your new guidance. And typically, when costs go up so much, one talks of cost savings. So are there opportunities within the group to remove costs going forward? And yes, I think so with that in mind, if gold prices start to fall, what options do you have to offset that, please? I think, Adrian, if I can maybe just take the first part of that question. I think, obviously, we there's been quite a lot of things that headwinds that come as far as cost is concerned. The one is obviously the electricity is always forever increasing. Obviously, renewables is one of the ways out, but obviously trying to find a way of actually saving cost. If we look at our absolute cost year on year and what we plan going forward, our absolute cost is going up with only 5%. I'm talking about operational cost. The rest is really in the capital and the things like that. And capital, you can either switch on and off and things like that. Can go with that. But I think importantly is that we want to derisk the portfolio that we've got. We've got certain assets and we want to get better quality assets and actually mining the better quality assets as being at the and that will create, obviously, the margins that we need to go forward and be able to go through these fluctuations in the gold price. So, it's really on taking these kind of operations, developing them, making sure that they perform well. Those are the cost levers that we can pull. I think all the things that we possibly can do in terms of saving costs, we've done. There's still a huge work that we're doing to try and debottlenecking all our operations to improve our productivity. That's what we call our business improvement strategies. And one day when we have Investor Day, I think it's worth your while to come and see what we are doing as far as that is concerned. So a lot of that work has been put in place. But really, it's about actually getting the higher quality assets into our portfolio, making the biggest part of the mix, and making sure that we drive our margins up. Would Pilliv, would you like to take some of that? Are you covered on the inflation aspect, Adrian? In the past, your average inflation has been about percent, given the dynamics of the past, any change to that? Yes. I mean, we've always tried to manage it below general mining inflation. Obviously, with our pocket of costs, labor is obviously the biggest chunk than electricity. Peter touched on the electricity. I mean, there is that large increase. We can't avoid that, but we try and manage it with through managing consumption, renewable, etcetera. We're in the middle of wage negotiations, as you know. So I mean, all parties are trying to conclude that as quickly as possible. And then when you look at your other costs, your consumables, etcetera, those will generally be managed within normal inflation, your 4% to 5%. Pito. Pito, I think that's all we've got time for. We need to wrap things up. Yes. Just for me, just to say, thank you very much for joining us today. I really appreciate that. Again, I think, like I said in our conclusion, we have a total different company. We've got new challenges ahead of us to really build these projects and build world class projects. We're looking forward to that challenge. And yes, as a company, we are certainly very excited. We also get a huge amount of support to all the stakeholders that we have within our workers, everything else. We hopefully will conclude the wage negotiations soon and then obviously get some stability as far as that is concerned too. So thank you very much for being here today and we really appreciate your presence. Thank you.