Good morning, ladies and gentlemen, and welcome to the annual financial results presentation for Impala Platinum. Joining us today on the webcast and also on the call will be some other colleagues. As usual, we'll do a high-level reflection on the results and then provide an opportunity for robust engagement. I'll take questions in the room first, and after that, we will divert to the webcast and the call for questions as well. So very, very welcome. You'll see today a slight deviation from what we've done in the past. I'm gonna ask the expanded team to just talk at a high level to the results before we go to the Q&A. So following me, I'm gonna ask our COO, Patrick Morutlwa, to just reflect on the operations.
Meroonisha Kerber, our CFO, will then just give highlights on the financial side, and then we'll ask Nico just to close the formal proceedings before we jump into Q&A. We operate as a team, so we felt it's very important that you also get the faces and the sound waves of the entire team. So, you know, hopefully, that they don't disappoint me too much. So no pressure, guys. So without further ado, let's start. I just wanna point out to our forward-looking statement. Just please take note of that again, and then without further ado, I'm gonna hand over to Patrick. Patrick, please.
Thanks to you, Johan, and good morning, ladies and gentlemen. Let's start first on the safety side. Regrettably, we had a regression in our fatal injuries. We recorded nineteen fatalities for this year, and this is despite year-on-year sustained improvement on our LT frequency rate and total injury frequency rate. If you look at from 2019 until last year, we have seen a 29% improvement on our rates, but it's not necessarily translating in reduction in fatalities. We have a plan, and I'll present that plan in the next slide. Moving over to operations, we had a strong performance from our operations, 13% year-on-year mainly because of the inclusion of IBR, but we also had strong performance from our key asset, Rustenburg. We have seen a 4% improvement year-on-year, Zimplats, 6%.
We also have seen 5%, 4% from Mimosa, and Canada, despite us changing our operating strategy in response to the low palladium price, they've actually also performed very well. The unit cost below the inflation of 4.6%, primarily also driven by good production and also the cost cutting that we've done during the course of the year as a response to low platinum prices. Capital mostly is because we've now included IBR and also our expansion capital, mainly from Zim. During this year, we've also completed our key project. All our three furnaces in Rustenburg, they've all been rebuilt, which comes in handy to work down the work in progress stocks that we have. We have completed 35 megawatts solar project in Zimplats.
We've also now completed our 38 megawatts furnace in Zimplats. We should be bringing it online now in October. And also, lastly, we have seen us completing the BMR debottlenecking project that will give us about 10% more capacity. Very, very disciplined executable of our project in this year. We also see improvement for this year at Marula and Styldrift. Let me now talk about Marula. Marula did not perform up to expectation, mainly because we have encountered difficult geology that actually decimated our face length. We have plans in place to restore that face length. I'll touch on Styldrift in the following slide. Styldrift, it is still very key to our success and future at the Western Limb.
Let me try and dive deeper on safety. So on the 24th of November last year, three days before the 11th fatality, we actually called a safety summit, where over a 150 of our leaders, led by Nico, we convened in Rustenburg. We also had a Minerals Council attending, because we felt after the 3rd fatality last year, that we should reflect on the next steps and really come up with plans to eliminate fatalities from our business. We also had a follow-up on May this year, and from those two safety summit, what you see on the board, that's a plan that we've come up with, because as employers, we believe without any shade of doubt, that fatalities can be eliminated.
We have pocket of excellence within our own group, which has proven that it is possible, and I'll just mention one. We have a shaft at Marula Driekop. Since its inception fourteen years ago, has never had a fatality. So we can learn from this point of excellence and actually eradicate fatalities. Since the implementation of this plan somewhere early early May, I know it's still early days, but we have seen some promising green shoots. If you look at quarter four in particular, it was the lowest quarter in terms of LT frequency rate and total injury frequency rate for the last 20 years. Within a very same period, we have seen what we call White Flag days. We have seen three of them, two of them actually happened now in August.
White Flag days is a day where all our employees, all the way from Canada, all the way to Marula, they go on a graph for 24 hours, and none of them got injured, even in a medical treatment case. We've never seen this before in Implats, so we believe that this plan that we have in place, it is starting to show that if we are relentless, discipline in execution, we will definitely be able to see the elimination of fatalities. Personally, I have been part of this journey before, so it is possible to actually eliminate fatalities from high labor-intensive environment like what we see in Rustenburg.
So we back ourselves with the team that we have, both operational and also from the safety front, and all the changes that we've made to strengthen the team, in this previous year, to be able to eliminate the sequence of fatalities from Implats. So what has happened has not dimmed our belief and commitment to see fatalities being eliminated from our business. Moving over to Styldrift. You all remember that last year we stood here, really this time in August, after we've taken over IBR, and we told you that IBR have got three parts. We said BRPM, it is meeting the expectation, and you will have seen that despite the labor unrest that we've experienced in that shaft in particular, it still delivered according to plan.
We told you at the time that processing, we were unhappy with the recoveries, and because of the extensive knowledge and expertise that we had in Rustenburg and Minpro, we believe that we will be able, within 12 months' time, to reverse that trend when it comes to recoveries. And I'll talk about it now. And lastly, Styldrift, we acknowledge that it was lagging behind in terms of the ramp up, and we said it is about 18-24 months job for us to get it set up to be able to ramp up to full capacity. So today, I wanna take you through this simplified value chain.
But before I dive deeper into it, I really need to tell you that it is supported by a very comprehensive framework of work that we're doing. For example, we are integrating IBR now into Impala Rustenburg to leverage the synergies that we've identified before the acquisition. We have changed the reporting lines. The executive head of IBR report directly to Moses, and, you know, from last year, the processing division has been actually reporting to Rustenburg. So now, going into the value chain. So last year, we told you there's nothing wrong with the mine design. We still maintain that. The bulk infrastructure is still in place. We have no problem with that.
Development is actually going very well, to a point where we had to stop some of the main capital development because they're actually far ahead of schedule. Last year, it was very clear that our bottleneck was the mineable face length, and that's what we've been working on for most part of the last 12 months. So the graph at the bottom, you will see that last year we had only seven workable face length instead of the 16 that actually was planned. And it just mainly because most of the sections were flooded. They had backlog in terms of some of the support ventilation issues. So literally, you could not complete the whole mining cycle in those sections. So I'm glad to say that by the end of this financial year, we now sitting on 16.
We've got 14 stoping crew, so literally we're sitting with the flexibility of one point two. So, yeah. Then the other problem that we had at that time was sectional infrastructure. That's your tip to face distances, your roadways. We have done a lot of work. You can see the graph, tip to face distance, that we've managed to drop it to a hundred and sixteen. The ideal is about a hundred and ten, so there's still work to be done, together with the roadway conditions, and also water management. At that time, also, we were not happy with the grade, so, for us, it's quality before quantity. So there was a lot of work we've done to fix the grade. As you have seen, it's now responded. We're now about 4.01 .
There's still a bit of work to be done, but that turnaround has been effected and so as I speak to you now, where we have a bottleneck, as you know, value chain, if you solve the problem here, it actually moved down the value chain. It is now our ability to move the ore, but like I said, it is also compounded by some of the problems I was talking about, leadership that we're dealing with, so we now have brought Sandvik on board to really look at the whole fleet management, to really empower ourselves to be able that if when we blast and generate this ore from these sections that we have now created, we have the ability to move that.
For completeness' sake, also, as I said, another area of improvement was the processing division. We have brought the expertise that we have in Rustenburg, and we have been able to turn around the recovery now to about 82.2%. The ideal we're looking for is 85%, so more work is still to be done in terms of changing the reagents, continue with the work that we've actually put in place to embed those changes that become now ways of how we do things. As I close on Styldrift in particular, it is still a world-class asset. It is still high grade, long life and shallow and mechanized fleet.
So, and that's where we believe that the future of the Western Limb actually reside. And that's why we back ourself that in the next few years, we should be able to be exact, by FY 2027, towards the end of it, we see ourself that we will get Styldrift to full capacity, as stipulated on the nameplate. On that note, I'll hand over to Meroonisha.
Thank you very much, Patrick. Maybe just to start off with, I mean, notwithstanding the combination of a very commendable operating performance, excellent cost controls, and several initiatives that we implemented around prudent capital allocation, the key feature of the results was essentially the lower PGM prices. That affected profitability and free cash flow generation. If you look at our earnings for the year, there were two notable one-off non-cash items. The first was the combination of impairments at our Impala Rustenburg, Impala Canada, and both our JVs. And that was largely just due to the lower pricing environment, as well as the elevated levels of interest rates that we're seeing at the moment.
The other significant charge that we had during the year was a ZAR 1.9 billion once-off IFRS 2 BEE charge, and that arose on the conclusion of our landmark empowerment deal, which we did for value, and which basically underpins our commitment to sharing value even whilst the sector faces, you know, reduced profitability and margin compression. If I look at the cash flow, similarly, the cash flow was impacted by two large items. The first one was the conclusion of the RB Platinum transaction. We had a ZAR 11.4 billion outflow to acquire the remaining equity of RB Platinum, but we also funded almost ZAR 900 million worth of transaction-related costs, largely from Impala Bafokeng.
The second material item on our cash flow statement is really, and you'll see it, the significant increase in capital expenditure as we basically progressed many of our processing expansion projects, as well as the installation of solar at our Zimbabwean operations. Despite the lock-up in working capital, so you'll see our in-process inventory went up to three hundred and ninety thousand ounces as a result of constrained processing capacity, but also the late receipt of Impala Bafokeng data, which is really just due to contractual terms. I think what we're very pleased with is that all of the growth we managed to fund from our internally generated cash flows.
After three years of really elevated capital expenditure, following the decision we made to strategically expand our processing capacity, you should see the business return to more normalized levels of capital intensity. I'm particularly pleased with where we ended up on the balance sheet. We ended the year with strong adjusted net cash, with only ZAR 1 billion worth of, Nico calls it real debt. And that was largely on, you know, Zimplats drawing down to fund its peak capital funding requirements, but also, more importantly, ZAR 17.7 billion of liquidity headroom. When I look forward into FY 2025, I certainly think the company is going to benefit from the labor rationalization or restructuring that we did, which underpins our commitment to controlling costs. Secondly, reduced capital intensity.
This is because of decisions we made around the portfolio, around Impala Canada, and Marula, where we adjusted production and project plans, but also given that most of our operations are through the peak funding of expansion and replacement projects. And Patrick talked about our expanded processing capacity. I'm very pleased with that because that now gives us the opportunity to basically systematically work through the 390,000 ounces of excess inventory that we've built up over the last three years as we've rebuilt our Rustenburg furnaces. This, the unlock of the stock should support free cash flow generation and, more importantly, protect the balance sheet. I think all of this actually positions the company well to navigate through, and provides it with the flexibility to navigate through a period of low pricing environment.
I will now hand over to Nico. Thank you.
Thank you very much, and a hearty welcome to everyone, everyone here from my side. I just want to acknowledge Patrick and Meroonisha, who was far, far more eloquent than I could ever be. And also our silent weapon at the end there, Moses, who is the Chief Executive of Rustenburg, and he will assist us in answering questions. Further to that, Mark, Cathania, Sifiso, and online, Lee-Ann, as well as our chief executives, Tim from Canada and Alex from Zim. And on top of that, the management teams and the other 60,000 people that have assisted the company to deliver its, its results. I mean, we, we often say it, but it remains true: without our people, we are nothing. A company is not steel, brick and mortar, it is the people.
So it's wonderful to have them to share the load with me. From my side, I'm gonna restrict myself to just giving a broad 30,000 foot view of the company. I will start off with and I'll end with a bit of guidance. One of the key features of this year is the conclusion of the RB Platinum transaction, thankfully. On that note, it was associated with very important transformational elements, such as us joining hands with a new partner, and I'd like to welcome Lindani as well, and Imran as our new partners. They're sitting on some of our boards, and already they've added significant value to the conversation, so welcome to you as well. If you look at the left-hand side of the slide, it broadly depicts the market conditions.
I mean, we know that there's been a 30% decline in the rand basket price. From our point of view, the analysis that Emma assists us with, we see the markets in deficit certainly for the next year or two. However, we are also aware that the prices of PGMs are not determined purely by market dynamics. There's also the global economy, global sentiment. We see persistent high interest rates. It has a negative bearing on sentiment. And so if you want to think about it, how do you divide your attention to respond to that? On the right-hand side, if you just look at the elements, the company is really focused on a defensive posture. It's strengthening the internal business.
So our attention predominantly is not on M&A and growth and all of the wonderful things that we do when we are in a super profit cycle. It is about making sure that we can strengthen ourselves to the point where we can remain successful even at current spot, which for our company is around ZAR 24,000 an ounce. We are cautiously optimistic that there may be price support. We have seen some indications, some signals that interest rates may start to be lowered late in the year, certainly in the U.S., and that may be followed in other jurisdictions as well. So, if I look on the right-hand side, no mining company has ever been successful when they have had a large number of fatalities, a poor safety record.
So that's why I mean, Patrick spoke about two things. For us, it's really important that we make sure that every employee who arrives at work returns safely at home to their families. We have to develop a shared vision, shared behavior. You know, if you want to reduce the speed on the freeways, you can have traffic police fines, but ultimately it only works when the population desires safe conditions and desire to travel at lower speeds. So that's I think that's the challenge that we have, is to make sure that we've got a shared vision, a shared passion, and shared behavior towards this improved goal of zero harm. From an internal operational point of view, Patrick spoke about successes. We've had our three biggest assets, RBPlat, not RBPlat, Rustenburg, Zimplats in particular, we've seen strong performances.
Canada has done exceptionally well under the current conditions. I mean, So, I mean, I know we've got our analyzed numbers in the financial statements, but in the fourth quarter, they produced palladium at $948 an ounce, which, I mean, when we acquired the asset, we spoke about a $1,000 an ounce objective, and soon after, I mean, our operating cost went up to a $1,020 an ounce. So for that operation to change its strategy, to improve profit margins on the ounces that you're producing and becoming that $948 is just an unbelievable achievement, and we are so proud of their effort.
Part of our thinking is to take the positive momentum that we have at the assets that we have, and to continue driving that and to bleed that into the other parts. Two big areas of improvement, Marula, you spoke about it, and naturally, Styldrift, which is our the latest part of our portfolio, it's got so much potential. I mean, we've now been part of it. There's nothing wrong with the ore body. It's exactly what we anticipated. We're currently producing 483, I mean, we produced 483. That mine has got the potential to go up to 650 by 2027. I've got absolute belief in the support of Moses and Patrick. I think that we will get there.
I'm very encouraged with the progress that we're making with developing our understanding of where all the critical constraints are on the business. So we have to maintain operating momentum where we have it, and then develop improved performance in the areas that we have that we've perhaps not done particularly well in. One of the things that I think the company did particularly well is cost leadership. We, I mean, our - if you - so if you exclude RBPlat integration as a company, our unit cost went up by 3%. You know, and that's below mining inflation, it's below inflation. On top of that, we made changes. We restructured the labor, so that's gonna assist us. When we get to the guidance later on, you'll see we're also guiding a 3% unit cost increase for next year.
I want to thank the team for assisting us. In the commodity industry, you have to compete on unit cost, and that's one of the things that I think we've done particularly well. There is, I mean, Meroonisha spoke about the strategic decision to invest in our processing capacity. Base Metal Refinery improvement at Springs, the smelters at Zimplats. We've got all three furnaces in Rustenburg operating. Massive opportunity to leverage that capacity. There is the processing of excess inventory. There is potential opportunity to look at partnerships, to utilize the surplus capacity, to expand, you know, through toll arrangements with other partners, to the extent that that's possible.
These are things that we, that we can focus on. While I've said that our posture, our focus is predominantly internal to strengthen the business, given the markets, through Cathania's thought leadership, we are keeping an eye out on our long-term competitive position. We want to make sure that we've got flexibility in our portfolio, that we manage the portfolio to suit the conditions. I mean, we do a lot of market analysis, as does the rest of the industry, but we know that we can only do it on the best information of the day, and this changes. When we don't quite understand the rate of technology development, whether it's battery electric vehicles or hydrogen, we take positions, and then that changes depending on how the technology evolves. We want flexibility.
One of the strengths that we have as a company is that we are exposed on the Eastern Limb, Western Limb. We have got some interest in the Northern Limb, and then in particular, we have got a very substantial footprint in Zimbabwe, and that's also where we believe future world-class assets is located. We want to make sure that we always consider the movement in markets and how we organize the company's asset portfolio to suit the prevailing conditions. The other thing that we want to focus on is, I say, growth. By that, I do not necessarily mean ounce growth. I mean value growth, and it is associated with portfolio management.
So we wanna make sure that we own and operate assets, that we are able to operate at a position below the prevailing price of today, and make sure that we've got the right balance to ensure longevity and robustness to prosper throughout the cycle. And then just the last comment I wanna make on that is organizational leadership. For me, it's very encouraging today to sit with the team. During the past year, we've had a number of critical changes. Mark came up from Rustenburg. He's now the Chief Technical Officer. Patrick joined us as the Chief Operating Officer, and Moses transferred from Marula to take the very onerous task of managing Rustenburg. And so during the past year, we've had, in those three positions, as well as in our safety, we've had the retiring of some very strong pillars in the company.
We've had positions move, and now, a year later, I think that we have established some maturity and continuity in those positions, and I think that's gonna help us in the next few years. I then just wanna talk to our group outlook. I'm gonna start with 6E ounce production, which is essentially the second blue line. Oh, my goodness! Okay. I will have to just talk to the slide as is. I had some fantastic animation, but, I'll have to forego that. So the group production, you see, we are guiding between 3.5 and 3.7 million ounces, and that's broadly in line with what we achieved in the past financial year. But if you look internally, there are a few changes.
There are two operations where we are forecasting an improvement. And the one is Bafokeng. So if you look at-- we achieved 483 and the other, so we are guiding 490-530, and that is as a consequence of our assurance that we are engaging with the process. I mean, as I said earlier, we want that operation to grow to around 650 in financial year 2027. So we are confident that we are going to increase production during this coming year. And the other one is Marula. As Patrick has mentioned, once we've dealt with the geological challenges that we've encountered, reestablish the available working face, we are guiding that to go up from 223 to between 230 and 250.
But then there are two operations where we are. There are two areas where we are guiding lower production. The one is Canada, if I can remember correctly. I just can't see Canada.
Oh, Canada. So it was 281 for this year, and we are guiding 250-270, and that's as a consequence of a change in strategy, where we are favoring higher profit ounces and foregoing some of the lower profit ounces. I mean, we can see the positive results that Canada has achieved as a consequence of that. And of course, then the last one is our third-party treatment, IRS. And so the way we guide on IRS is always based on the existing contracts. We had two contracts that lapsed in the past year, and so the guidance there purely is based on the existing contracts and the volumes associated with that. If you then look at refined production, so I'm gonna go to the top now.
Refined production, that is taking a step up. So, I mean, there's two ways I look at refined production. First, refined production in relation to group production, and you always have processing losses, so it's always gonna be a bit less. But you'll see that the guidance of 3.45-3.65 is higher than what we achieved this year, and in part, that is as a consequence of us guiding between 100 and 130 thousand ounces of excess inventory, given the fact that we've got all three furnaces in Rustenburg, plus the Zimplats furnace kicking in. And so we will have excess inventory coming through as refined production. Group unit cost, I have spoken to earlier.
If you take the 21,000 to 22,000, the midpoint, that's 21,500. That is essentially 3% higher than the 20,922 that we achieved this year. Then the capital expenditure is going to decline from ZAR 14 billion to between ZAR 8 billion and ZAR 9 billion. Also, for the next few years, we are estimating capital to remain steady at between ZAR 8 billion and ZAR 9 billion. I would like to thank everyone again for being here. We are very happy to take questions. Thank you so much.
Thank you, Nico and team. I think it's important and that you heard more voices and saw more faces, because truly, we operate as a team, and we deliver results as a team, so there is some microphones being passed around in the room, so let's start with questions in the room. If you raise your hand, please just introduce yourself for the people online so they can also hear who's asking the question, and then we'll just deal with questions here. For people on the call, you can start queuing so that we can see people on the call as well. We'll give you a second chance, and then on the webcast as well, there's an opportunity to type questions. I'll receive that, and I can share it with the audience in the room, but let's start in the room. Chris, let's start there.
Morning, Nico, Patrick, Meroonisha, and team. Thank you very much for the presentation. I'm gonna do what a lot of analysts always do, and just focus in on maybe one of the problem children. But before I do that, it's probably worthwhile saying well done on the cost, performance, and volumes. It was a very good year, all considered. So I'd just like to chat a little bit more about Impala Bafokeng. I think three questions around that. So obviously, you're guiding volumes higher this year. In that current environment, do you think that the mine can be free cash flow break even, Styldrift in particular, or do we still need to deliver more there in terms of volumes and costs to get that mine to a break-even position? That's the first question.
Second question, you talk about excess capacity. The 50% of the concentrate at Royal Bafokeng, that's at your option. Is it not time to maybe bring that in-house now? What are your thoughts around that? And then the final question, you note that you're looking at chrome and tailings processing at Bafokeng. Maybe if you could just give us a bit more info on kind of volumes, parameters, what you think that could bring to the asset. Thank you.
Thank you so much, Chris. I'm not sure, Moses, are you happy to lead in with some of the answers?
I'll take the lead, yeah.
Okay, cool.
Okay. So, I mean, the question is: will we be cash neutral this year? I think that's our intention, and if you look at the experience and what we are bringing from Rustenburg as a team, the capacity that we got in Rustenburg, that we are taking into Bafokeng, and if you look at the progress that we've made so far, I think we are on our way there. If you look at how we've taken our employees at Royal Bafokeng into account, because they are the ones who must make this difference. They are the ones who must improve. They are the ones who must have a buy-in. They understand the model that Rustenburg has used to produce.
They understand the credibility that Rustenburg have managed to achieve with the performance that they've done, and they are rallying behind us with the experience that we want to roll out at Royal Bafokeng, so that we can easily get to cash neutral as soon as possible. So the signs are there that we can get to cash neutral. I think the most important thing, as we heard what Patrick said and what Nico said, there's nothing that prevents us from producing that mine, in that mine. We just have to address a few issues which we are currently addressing, and we should be able to get to cash neutral. Thanks.
Okay, thank you. Chris, I think it is our ambition to get cash neutral, you know, get to that position in this next financial year. We don't want to have negative cash at any of our assets for any sustained period. It raises a lot of frustration within ourselves, and things don't go well if we don't have at least a likelihood of being cash neutral above. So as far as the excess capacity, Meroonisha, do you want to talk to the?
Yeah.
The agreements?
Yeah. So Chris, as you mentioned, in August 2027, we will get our 50% of material from Impala Bafokeng. If you just look at the guidance we've given on the excess inventory, we are guiding that over the next three years, we'll basically release all the excess inventory. So if you look, so FY 2025, 2026, 2027, once we're done with that, the backlog of inventories is through the pipe. So when the IBR concentrate comes in, that's actually perfect timing for us. It actually doesn't make sense for us to get the concentrate earlier and then stockpile. So I think the way things have worked out with the capacity expansion coming online, it actually works well for us. Thanks, Chris.
And, do you think you would wanna comment on the IBR chrome and tailings, or shall we ask maybe Mark or Adelle? Do you wanna give maybe a microphone to Adelle? Do you want to comment on that? Adelle is our Group Metallurgist, intimately involved in the chrome and the tailings treatment.
No, thank you. Thank you for the question. We are busy with a chrome project as well as a scavenging project, and both those projects will come online in financial year 2026, pending legal environmental approval. And yeah, we're looking forward to from the tailing scavenging operation to at least see a benefit of 1% on our efficiencies in the specific concentrate where we will apply it. And similar to that is our chrome beneficiation. And we look at to at least see some 200,000 tonnes of chromite concentrate to be produced and then sold. Thank you.
Thank you, Chris.
Yes, please go for it, Gerhard.
Gerhard Engelbrecht, excuse me, from Absa. Nico, maybe just a little bit of a long-term, longer-term strategic question. I see in the reserves report you show almost a hard stop to Rustenburg's production in 2024 , with options to extend that with projects. Question is, when do you have to start spending CapEx on those extension projects? Is it something that is at the top of your mind and that you're thinking about at the moment? And are they large mega projects or small things?
Thank you so, so much, Gerhard. That is a very, a very appropriate question. Those projects typically are not large, mega, multi-billion projects. We currently have two underway. We've got 11, 11 Shaft and 12 Shaft extension projects. These are typically mine replacement projects. They are much smaller. They are focused. There are some of our shafts where we are doing feasibility studies in order to do that. There obviously are the shafts, like 1 Shaft, which, you know, it has mined out its reserve, and, you know, similar to 6 Shafts when they. That is more likely to close. But, so there's a pipeline of projects that will kick in at the appropriate time to evaluate it. I mean, the challenge right now is to initiate any extension project and to have a financial return.
So, I mean, we don't wanna just, you know, present life extensions if we don't believe that there's gonna be some economic return on it. But, I'm happy that we've got a very rich pipeline of projects at various shafts to look at the extension of Rustenburg life in the event that we have supportive pricing.
Yes, Arnold, please go ahead.
Hi, it's Arnold van Graan from Nedbank. Two questions from my side. Nico, one of your focus areas for this year is reducing sustained business capital, and you decide without impacting the integrity of the assets and maintaining reserves and those type of things. But how do you do that? That's the first. How do you achieve that, and how long can you run at this reduced capital level before there's some sort of catch-up? Maybe the other way to ask the question, are you not setting yourself up for a big catch-up sustained business capital in future? Then the second question is on Styldrift.
Also, a bit of a bigger, broader, longer-term question, and you, and you emphasize that the ore body is fine, but there are lots of assets that we know about where the ore bodies are fine, but they just never get to the production point that you envisage. So are you comfortable with the mine design and the mining method? And again, another way of asking the question, what surety can you give us that we're not sitting here year after year and we're still talking about Styldrift's ramp-up? So is there a potential debasement of that production profile that would be sustainable? 'Cause, you know, you need a certain level of volume or volume level to, to maintain it. So, yeah, broader, big picture questions there. Thank you.
Thank you, Arnold. So firstly, when we talk about capital reduction, predominantly we are referring to expansion capital and in some cases, replacement capital. So we're talking about the Two Rivers Merensky project, the North Hill project, to provide life extension to Mimosa. Typically, it does not include material reductions in sustained business capital. Other than extensions that have been planning, but they, it's so far ahead. You've got a multi-year buffer where which is not entirely required. So I mean, those things have been advanced, it de-risks to some extent, but I mean, the length of buffer that you have is not required. And so when you go into lean times, you know, it's not necessary. So typically, it is not a major area of focus. So when we talk capital deferment, it is the things that I've mentioned.
It is the Base Metal Refinery in Zim. It may touch on aspired solar plants, but it's not so for, I mean, so for us, the integrity of infrastructure, and to be quite honest, I include in that the existing phase length, is critical. And I'm not convinced that you can cut sustained business capital and not increase risk exposure in your business. Patrick mentioned at the beginning, of the 19 fatalities that we had, 17 were engineering related. And we had the 13 shafts, we had conveyor, we had trackless mobile equipment, and two winches. Already, that is an indication that we have to be very intensely focused on all the integrity of our trackless fleet as well as our infrastructure. So I apologize if we've created an impression that we are focusing on the reduction of SIB.
And then the second question was Styldrift. Now, I'm not sure with what credibility I'm gonna speak, 'cause, you know, we spoke here about 16 and 20 short for ten years.
You know, today, in hindsight, you know, we probably took a decade too long to bring that into fruition. I mean, thankfully, it did. Let me just talk to the mine design. It is a bord and pillar mechanized mine design. To be quite honest, in mining, that's probably the only thing simpler than that is probably an open cast, but it's probably the one of the simplest mining methods that are out there. I mean, I always say it's like running a hundred meters. It's not running the comrades. You must learn how to run a hundred meters. It's not difficult. Most of us can finish a hundred meters, but not all of us can do a sub ten. And so, for me, that's the issue with mechanized bord and pillar.
The only complication is that you're doing it through a vertical shaft, whereas in some places, two of the other operations, we are doing it through a decline, so you're gonna have surface workshops and so on. So I don't think technically that the design is the issue. Also, if you look at the stoping work, that's matched to the ore body, you know, where it is at the moment. So I think that the mine design has always been absolutely perfect. That's not the issue. It has been the operating performance. So as leaders, our ability to do the things that we have to do properly. Now, what is the guarantees I can give you that we won't sit here at the end of next year? I mean, I can just give you our expectation.
I can give you every time we speak, we will give you assurance of our perceived level of progress. I think that we have made progress. One of the things that we've done, which I think is absolutely key, is that we have integrated IBR under Moses and his team. If you look at Implats, we have got a very small corporate team. The bulk of our technical expertise in the company is, in fact, based in Rustenburg. We've seen the early benefits of that through the 2% improvement in recovery in the concentrator plant. We've not quite seen it as far as mining volumes are concerned. We've seen a grade improvement, so that's another area that we have seen improvement.
But I would suggest that in the year that we have now been in control of it, you have not actually seen the trajectory change. I think that it's been a year of getting the teams and the expertise and understanding to develop. I believe that we've got the absolute right skills within the company to deal effectively with the issue. And the fact that we have taken 16 and 20 from a decade of, you know, ramp-up constraints, and we were we managed to overturn that into a success over the last two years. I mean, that gives me assurance 'cause all of those people are still part of the company. They are all based in Rustenburg. We're gonna apply the same methodology.
All right. Leroy in front, and then I'm gonna go to the conference call. So just early warning on that.
Thanks, Johan. I'd like to echo Chris's sentiments. Well done on your operational performance, especially at Rustenburg, where you had to deal with the tragedy towards the end of last year. That was really impressive. Just for my understanding, Impala Canada, the strategy there was to focus on higher grades. But when I look at the grade trend year-on-year, this year it's been pretty flat compared to last year. Is that still expected to change? And then on Marula, you had a very good year, FY 2022. I think last year the issues were community disruptions. This year it's geological issues that have affected your face length. I mean, do you believe you can deliver a similar performance than you did in 2022, and what is really required to get back there?
and then lastly, if you could please just comment on the IRS third-party material, the profitability of that operation as it relates to third-party material, please, 'cause, you know, we understand prices have come off, energy costs continue to increase, and your outlook for those, can you renegotiate some of those contracts?
I'll ask Meroonisha Kerber to prepare herself for a financial position on the IRS contracts. Marula, Patrick Morutlwa can start thinking about expressing a level of assurance or not on Marula. I think Tim Hill is on the line. Tim Hill is on the line, but let me talk to Impala Canada. I think Implats has used the words, "We are gonna change to a high-grade strategy," hence your question, if you follow the grades. I think the right interpretation, actually, Leroy, is we have gone to a higher margin production. If you look at the production zones within Lac des Iles, some parts of the ore body is deeper, but it's more expensive to mine. It takes more effort to track it from underground.
We are focusing on lower cost ounces, not necessarily higher grade ounces. If we have spoken about a higher grade strategy, that possibly, technically, is not entirely correct. It's a higher margin strategy, and where you can see it is in the cost reduction. I mean, I spoke about the $948. I mean, they. So they have come from over $1,200 an ounce to below $950 an ounce, not only because of the high-grade strategies, also restructuring and optimization and cutting some costs, but a big part of that journey has been the higher margin strategy.
We are nevertheless expecting marginal grade improvements in the next year, but I caution it is the strategy should not be interpreted as a high-grade strategy. It's an improved margin strategy. Okay, so, Patrick, do you wanna talk about Marula?
Yeah, yeah, let me talk about it. So, I think it is not uncommon for, you know, a mine to lose face length because of some geology that we do not anticipate. But I think it is how quickly do you bounce back from that setback, and I think Marula was also hampered by a high turnover on critical skills, given the location of where it is. So we have worked very hard to appoint the right people so that we give ourselves the ability to execute the plans. And I'm very confident that, you know, we have filled all the critical positions. We have made capital available to be able to access the new areas and to bring those we have lost through redevelopment.
But like I say, it was also exacerbated by the fact that the high turnover, we did not have the people constantly there to execute the plan. So I'm very confident that we will see the pace coming back. As a matter of fact, I can report that you know, six months ago, we were sitting with you know, a PGM to crude ratio of around zero point five. It has now improved to just below one. We want to be around one point one to one point four because then we have flexibility. So we are seeing exactly that, but we're also looking at broader issues, infrastructure, as you know, recall that Marula is now mining at the lower levels.
But it is all anchored on having stability on the leadership front, which I believe we have now.
The Eastern Limb is very interesting. We got the Steelpoort Fault, and all the mines to the south of that generally perform well. Booysendal, Two Rivers. East, historically, everywhere south, all bodies are more benign. Communities generally are more mining friendly, and to the north of the Steelpoort Fault, Modikwa, Marula, and everything north has always been challenging. One of the difficult things there is to attract and retain the right skills, because north of the Steelpoort Fault, you know, you start moving to Steelpoort, Burgersfort, which is not deemed the most attractive. If you're a mining professional or, you know, people prefer to live south, you live in Lydenburg. And so the regression happened when we transferred Moses to Rustenburg. We have threatened him that he could move back.
If we don't, you know, he must leave a lasting legacy and not allow it to. So I think, so Patrick has worked with Lee-Ann, I think that they, so the changes are. I think the appointments that they're looking at now are people that have been there, that we have got assurance of. They've been there for a long time. And so I think in the Eastern Limb, northern Limpopo, I mean, we can talk about community, and there's, I mean, it was my view that in the lean times, we probably underinvested in some aspects of Marula, for instance, the mobile fleet.
But essentially, it's got to do with the strength and the continuity of leadership, and I think that we are at a point of changing that and creating consistency there. So I share his optimism. I think it can get back to 2022 levels, and it can be maintained there.
Yeah. So if you look at IRS margins, even in a low price environment, because your material is bought at a cost that's related to the market, typically, your margins will still be stable because we conclude them as purchase of material contracts. So I would use margins of between 9% and 10%. So similar margins to what you've seen in this year. Clearly, when prices are on an upward trajectory, then the margins have the, you know, depending on how you the timing of purchases and stock releases, those margins can then vary either up or down.
But perhaps one truth that you touched on, it's not that. It's not necessarily got to do with pricing, but we as a company have invested significantly in upgrading our processing capacity. So if you look at historical terms of these offtake agreements, it was purely based on the marginal increase in cost associated with treating that processing. But right now, for us to consider new offtake terms and agreements, it's not just the marginal increase in cost, it's also the recovery of that proportionate share of capital that we've invested. So I think the existing contracts, they are what they are, but for all new contracts, we have to consider a different financial position in offering terms to the new customers.
Thank you, Leroy. We've got five or six minutes left. I definitely wanna go to the call, where we've got 50 participants. I see somebody is already queued, but I'm just gonna hand over to the operator to just talk you through, and then we'll take some questions from the call.
Thank you. Ladies and gentlemen, on the conference call, if you would like to queue for a question, you may press star and then one on your telephone keypad. The question we have is from Adrian Hammond of SBG Securities. Please go ahead.
Good afternoon, everyone. Thanks for the opportunity. I'd like to ask a few questions. Firstly, Nico, you talked about long-term competitive positioning for the business with capital allocation options within the portfolio. But you did allude to Zimbabwe as having quite a few options. Do you plan on investing more in there? And could you expand a bit more on whether that will sort of be base metal-based? And maybe tie that up with the expansion capacity you're currently doing. Does that allow? How much capacity spare do you have, and was that also earmarking the growth you expect to get from Bafokeng to 650,000 ounces, I think you mentioned by 2027.
And then just to qualify that, should we be modeling that now in our forecasts, going forward, for Bafokeng? And is that in the CapEx guidance you've given, which is pretty flat for the next couple of years, does that accommodate for that growth? And then also, just perhaps you could just give us a feel of how you've integrated, Bafokeng into the business, given particularly on the labor front, you do have two very different unions, with very different leadership styles. And how is that going to be managed? And do you intend to ever consolidate Bafokeng into the group, into, sorry, into Rustenburg, such that you could actually realize further synergies, with those two legal entities?
Then perhaps if there's time, if Johan can comment on the market dynamics. You did mention in the past there was some increased buying from your clients. Perhaps you could give us some color where that sits today, and where do you think the destocking cycle is? Thank you.
Goodness me! That is a mouthful. What I intend doing is sharing the load, so let's just allocate. I'll talk about Zimplats and posturing and investment appetite. Mark or Adelle, between the two of you, they need a mic. If you wanna talk about processing capacity and what capacity we have. There was a question about the, I think-
Integration.
Sorry?
Integration.
No, no.
The guidance.
No, there was the ZAR 8 billion- ZAR 9 billion capital, and whether that provides the growth. I can touch on that.
The 650 .
IBR integration, perhaps you wanna lead, but Lee-Ann is online. She can also assist. So as far as our investment appetite or investment posture is concerned in Zimplats, we've been present in Zimbabwe since 2000 or just after 2000, so it's in excess of 20 years. It's always deemed a high-risk jurisdiction. For us, it has been an exceptionally positive experience. We understand that there have been policy changes that happen from time to time. We frequently engage through Zimplats with the government. We are aligned with them. On top of that, they have the remaining world-class assets, shallow, the Great Dyke associated with mechanizable bord and pillar. Shallow assets. So in my mind's eye, if I look at the globe's PGM opportunities, I mean, that has to be the most attractive.
So I would suggest that if there's gonna be any new developments in future in PGMs, if you're gonna rebalance the assets of the industry, I am predicting a higher probability of us having new production emanate from Zim. We are not planning any new growth in Zimbabwe. We will do everything that we can to extend the lives of Mimosa, North Hill is not happening, and Zimplats, when the new portal studies are in process. Our current position is to maintain life. We've got 50% of the group's reserves in Zimbabwe, and so we see long life. But we do have the processing capacity, which historically was a constraint. So now we've got the.
Mark, you know, I can talk to the exact excess capacity, but at least we've got the ability to consider treating Mimosa's material or part of the material in at Zimplats, or potentially any new production that may emanate in that country. So don't take my comments as us having an investment option on the table that we are gonna announce to the market. It's more a long-range strategic direction comment that I made. Capacities. Adelle, do you wanna talk about-
Thanks. Thanks, Nico. Yeah, we're in a very fortunate position to have good capacity available at the moment. Based on our roadmap on how we're going to use the capacity, as Meroonisha already mentioned or alluded to, for the next few years, we will use the capacity to destock some of our concentrate stockpiles. After that, obviously, we will get the Bafokeng material in, 50% of that, and that is part of our roadmap.
And then we will have excess capacity going forward for our own growth or for more third-party concentrates. And if I need to give - if I must give an estimate in terms of how much capacity will be available, depending on the base metal content of the concentrate, if we look at 6E ounces, I will say capacity-wise, in the next three to four years will be between 600,000 and 800,000 6E ounces that we will have available going forward over the next four or five years after depletion of our stock levels. Thank you.
Thank you. And then the capital, the question on capital growth, the growth that I see happening in the company is from existing infrastructure. So it's in the form of Styldrift, Marula, bit of expansion at Zimbabwe. There's no new capital projects required. It's from existing infrastructure that has the capacity to yield this increase in production. So I'm not concerned if they, Adrian, that it requires more capital investment in order to. There's no expansion capital required in order to get there. IBR integration, are you integrating or are you not?
Yeah.
If so, what are you doing?
Nico, I can comment on that, then maybe Lee-Ann can add. I mean, Adrian's question is really on how do we integrate the two entities and take into account that they've got different unions. I think our objective is very clear. We basically want to make sure that this integration makes sure that RBPlat makes money. I think that's very clear. And we obviously know it's a good asset. It will extend the life of mine in Rustenburg. I mean, we take that into account during this integration. Nico spoke about a few projects as well earlier on, and we obviously are aware that we want to make sure that people's jobs are secured. So if we look at the operating model that we've put in place, we've taken these three points that I've mentioned into account.
So IBR, as an entity, now reports to me. I've spoken earlier on with regards to what we intend to take to IBR from the experience point, from the performance point of view, and I think we should be able to cover those three areas that I've mentioned. There's a program office that we've set in Rustenburg. The intention of the program office is really just to make sure that the low-hanging fruits from the synergies point of view is rolled out as quickly as possible. If it has to do with cost saving, we need to do it as quickly as possible so that we can just get RBPlat to cash neutral. I think that's from the operational point of view.
If you move on and you look at it from the key stakeholder point of view, we've got a framework, and I think Rustenburg has in a long time implemented a strategy where we engage unions openly in robust discussions. We've made sure that we've set it up as such at IBR to make sure that if there are issues on the floor, the forums and the ability of allowing people to raise openly issues in those forums are actually addressed. Those issues are. It's actually addressed. I think that's what we intend to do, Nico, from the IBR point of view. I'm not sure whether Lee-Ann has got anything to add.
Lee-Ann, do you have any comments?
Very well. I think, the one thing that I would like to add, to the question specifically is that while the, it remains two separate entities, we will maintain and honor the recognition agreements that we have in place with the, the two majority unions there. At IBR, they do have the closed shop agreement that, doesn't allow for other unions, to gain recognition. And we are working through a CCMA-facilitated process at the moment to look at the closed shop agreement. But once the, the business becomes one entity, then we are going to have to get the NUM and AMCU around the table so that we can go into a different recognition agreement.
We foresee that it will happen before the end of the financial year, but we have been engaging all of the unions with regard to consolidation and how it will affect the recognition agreements. Thanks.
Just to end off on that issue, when we acquired the asset, we made certain undertakings to management unions. I, it was,
Competition.
Competition.
Yes
Competition Commission and so forth. Our undertaking was to provide job security and to make sure that there are no changes due to the transaction, and that was absolutely correct. The asset made a ZAR 3 billion loss last year. At the time that we were doing the transaction, we were at a different price point. I mean, it presented the ability and the security for us to provide that assurance. When you make a ZAR 3 billion loss, I mean, it changes things tremendously. It changes the landscape very rapidly. We have to choose between production improvements, but clearly, a ZAR 3 billion loss on an annual basis is not sustainable.
Yeah.
It has to change. We are either gonna change that or we're gonna close it. It's one of the two. I mean, no company can support a three billion loss continuously. So it has always been our intention to, over a long time, to integrate the two and even to consolidate into a single company. But the undertaking was not to do that in the initial few years. So our ambitions has sped up, the position has changed, the urgency with which we do it has changed. There are many aspects. At the end, Moses spoke about the union. So you've got, you've got the bargaining units and the unions represented, you've got terms and conditions of employees, you've got management structures, then you've got processes. And I think that there are massive opportunities for us to do different things over different time periods.
I mean, so to integrate SAP procurement systems, that probably is gonna take some time. But we had our, we had the two concentrators report into our mineral processing division within the first month. We've seen a 2% improvement in recovery because there are skills that can join hands and work together. And I'm not saying that we are superior, I'm just saying there are more minds that can be applied to the position that can support one another. I think those opportunities is exist in other areas, and I do think ultimately we will see a consolidation into a single formal company, the two assets, no doubt about that.
Yeah.
Markets between yourself, Sifiso, and our client customer-
Yeah, I think maybe we can just close on that. We are a little bit over time. There's also some questions on the webcast that I've taken note of from JP Morgan, Bank of America, Citi, Noah, and Visio. Sorry, guys, I will make sure we get back to you, but maybe just we haven't spoken much about the market. I think the important thing is that, I've spoken to Sifiso, we are seeing strong buying from our customers. So all accounts, the market remains constructive. We are hopefully seeing signs that we're nearing the end of the destocking period. With prices coming down, it's obvious that people have been putting metal back in the market. Sifiso and his team are engaging with our extensive customer base, and they're gonna be looking at signing new, annual contracts.
So we are confident that we're gonna see a request for stronger metal into the next year or two, and some of the buying action that we've seen and some of the destocking that's run its course. But we'll be in a better position to report on that, and I'll certainly welcome any conversation on the market where we have more time, and we can bring in some of our local experts to perhaps add to that. So, I think there's clearly still a dislocation between what we're experiencing in the physical buying and the prices. And maybe we can explore that when we get together. So thank you for that, and thank you for my team, and thank you for everybody that has joined us today, either here or online.
Please, as we close now, for people in the room, the whole executive team is here. We would welcome some further engagement and conversation beyond this call, and for the people that we're gonna be seeing in the next two or three weeks on the road, looking forward to meeting up and then perhaps exploring some further these issues that has been raised. Thank you very, very much, and with that, we'll just close the proceedings.