Good morning, everybody. Welcome to Impala Platinum 's Financial Results Release today. You would have seen the results being released on the web earlier today. It's all in the public domain, and we really do value this opportunity to engage on a one-on-one basis with our investor base. You're very, very welcome. Shortly, we'll be playing a video, just giving a bit of context of the year in review. Afterwards, the CEO, CFO, and CIO will just highlight some areas over the last year that we can reflect on before we go to questions. I'll take some questions in the room, but there's also an opportunity for people who are watching us on the web to post questions on the web, which we'll read out and answer as best as we can. On the call as well, you can call in and obviously ask questions.
We'll do it in that way, and hopefully in an hour or so, we'll be able to wrap up. You're very, very welcome. With that, let's start.
It has been another robust year following the two previous years where I think the company has differentiated itself by managing its costs. That has been a key focus of ours. We have seen a strong reduction of capital in the last year, and I think the company has really differentiated and improved its competitive position with regards to overall costs per ounce.
For FY2025, Implats delivered a commendable production and cost performance despite facing a myriad of challenges. The team had to navigate labor structuring across the group, unplanned finance, maintenance, and utility supply disruption at our refineries. Despite all those things, you will see that our refined production came in flat year on year, and I'm glad to announce that we saw a 9% improvement at Styldrift . We have seen safety metrics improving. Our lost time injury frequency rate improved by 11%, and our recordable injury frequency rate also improved by 15%. Notwithstanding the eight losses of life during the period, we have celebrated 18 white flag days. We've also celebrated a quarter free of fatalities in Q3.
In FY2025, we had some exceptional achievements. The commissioning and the launch of our very first 35 MW solar plant at our Zimplats operation. While we were busy with that launch, we also got approval to expand with another 45 MW solar plant also at Zimplats. For our refineries in Springs, we were able to sign a renewable energy supply agreement that will see us receive close to 90% of our electricity from wind and solar. Given that the water in the Southern and African region is becoming a significant risk, this year we have also increased our recycling and reuse rates to 59%, and we have continued to spend on our host communities to improve well-being, building resilient infrastructure, and supporting our enterprise and supply development programs, while also making sure that the skills programs at our host communities are looked after as well.
We had a very challenging year, but despite that, I think we had a credible operating performance. We still generated free cash flow of ZAR 2.4 billion. We ended the period with a net cash position after debt of ZAR 8.1 billion, as well as unused revolving credit facilities of just over ZAR 8 billion, with total liquidity headroom of ZAR 19.7 billion, as well as 420,000 oz of excess inventory. Given our strong balance sheet position, our lower capital intensity going forward, as well as very supportive market conditions, the board decided to declare a dividend of ZAR 165 per share, or approximately ZAR 1.5 billion, which represents a payout of about 60% of adjusted free cash flow.
I think we've got reason to be very confident as a company. We've got a very strong balance sheet, and I think we are very well positioned to leverage into the more buoyant prices over the next year, and the company will utilize the opportunity to further strengthen its competitive position in the industry.
From my side, good morning to everyone, all the in-text people, market observers, friendly faces, the team sitting in front of us, all of the people that have contributed today. Special word of welcome to our Chair, Thandi Olane . I hope this will be a moment of interesting sharing of information. I'm very happy to stand here at the beginning of our 2026 financial year in slightly better times from what we did the two previous years. If you look at the journey of the PGM prices over the last, well, since the beginning of the 2023 calendar year, it has been ranged down between 24,000 or 24,500 and 25,000. It has been our view that it was slightly disconnected from the market fundamentals.
We had in our company determined deficits in all the metals, but it was global economic factors, the geopolitical conflicts, high inflation rates, therefore high interest rates that has created a downward pressure on the metal prices. Also the behavior of the people who were buying the metals. Emma can talk more on that. Now in a slighter voice, I will use the exact same factors to explain why the prices have increased. The world is still volatile, the world is still uncertain, everything is still democratic, yet we have seen this 30% increase in price. I think that there are two factors that we can lean on to explain that.
One is, as a consequence of all the uncertainty, the record high gold price at around $3,000, but then therefore gold fatigue and perhaps an opportunity for investing in another precious metal, platinum, which is seen as a massive discount, a record discount relative to gold. Combined with that, the change in trade relationships and the need to secure supply lines, particularly with relation to critical minerals such as PGMs, which is only produced in certain regions in the world. We've seen some physical stock moving out of Europe to the U.S. and to China. Fabricators in Europe that require metal for their inventories are finding slightly less physical liquidity. We think that combined with the discount to gold has created some upward pressure. Therefore, we have seen a 30% increase in the spot price, which now for our company is at around ZAR 32,200 per 6E sold.
In addition to the global economic factors, we have seen downward revisions in primary supply. We have seen suspensions or deferments in many projects. If you go in South Africa, Bokoni, Eland, Wesizwe . We've got in North America, our own Impala Canada. We've seen announcements of reductions in supply from Stillwater, and even in Russia, where we've got the Southern Cluster that has been suspended or deferred. Generally, from a supply point of view, you have seen forecasted lower ounces being supplied. The same applies to secondary supply where, because of the longer life of vehicles, there's been a shortage of inventory to recycle. At the prices, the economic incentive for recycling was muted, and therefore we have seen a lower secondary supply. On the demand side, we, as always, see continued downward projections for EV penetrations.
We have, for the first time in the last decade, seen an upward momentum in particular Chinese jewelry manufacturing. Even in the industrial side, for instance, in glass manufacturing, we've seen a return to a higher uptake of rhodium. If you look at the market fundamentals, there are some positive moves in market fundamentals that provide us with confidence that the PGM metal price for the next 12 to 18 months at least will be sustained at the rates that we see it. Given this backdrop, if you look at what the company's focus has been over the last two or three years, where we had this rangebound metal, it was a defensive strategy. Let me just go a step back. During the higher price environment, we announced a ZAR 50 billion capital investment program over five years, and we utilized that to strengthen the business.
We increased the capacity of our. We had two bottlenecks in the company. One was the smelting capacity, and the other one was the base metal refining capacity. We launched projects; both of them have been completed successfully. During that time, we secured Bafokeng adjacent to our Impala assets. We created long life for a critical asset in our company. I think the company invested effectively to strengthen the long-term business position. We had the downshift, and the company was focused on creating a lower cost position. Last year, our cost increase was 5%. This year, it is reported as 7%, which is factually correct. I just want to touch on that. If you look at the actual absolute cash cost, it increased by only 3% to ZAR 60.3 billion. The reason why the unit cost increased by 7% is by virtue of production.
60% production declined by 3% to 3.55 million oz. It's a combination. I think from a control of cash cost, operating cost, we did very well. Then on top of that, if you look at the capital expenditure, which reduced by 50% from ZAR 14 billion to ZAR 7 billion, if you then combine all of that cost into an all-in cost, we actually achieved a 3% decline in all-in cost down to ZAR 25,700. This has been part of the strategies to reduce operating expenditure, to curtail capital investments. Fortunately, we have been able to complete a number of the major projects. We also made decisions to suspend or defer some of the projects, such as the Two Rivers Merensky project and Marula Phase 2 project.
We even went as far as changing the operating strategy at some of our assets, such as Impala Canada, where we ventured into a high margin operation and thereby reducing the life to one year. In addition to this, we completed a portfolio review so that between the board and the management team, we knew exactly how to respond if the low price environment continued or, God forbid, even declined. That was all done. Fortunately, we can put that on the shelf, but we do have a response plan to react further from a portfolio point of view should we be confronted with a low price environment. That is sort of how we ended up at the back end of our 2025 final financial year. When I look at the road going ahead, we're now in a very strong position. We initially spoke about the ZAR 2.4 billion in cash.
That's great. Our gross cash, ZAR 11.6 billion, if you take off debt. Net cash, ZAR 8.1 billion. We've got 420,000 oz of excess inventory that can be released, but we are very careful and conscious, and we're trying to be responsible in terms of how that is released into a low price environment. I mean, we saw significant destocking in the industry last year to a tune of between 400,000 and 500,000 oz. We will, in our journey going forward, be conscious about the impact of our excess inventory release into the market, and we have lowered our guidance from around 130,000 oz per annum to 110,000 oz per annum.
We believe that we are going to go into a period where we will be a cash generator, and we will be in a position to effectively allocate the capital to strengthen the business, to reward shareholders, and to ensure a continued healthy balance sheet. If you look at the dividend declaration that was made this morning, we are paying ZAR 165 per share, which amounts to ZAR 1.5 billion, and that equates to 58%. They say circa 60% of our total cash generated, which is way above the 30% of cash that we have previously concluded as part of our policy. The reason for that is that we believe we have a strong balance sheet that we can further grow over time because we are confident about continued cash generation. We have concluded or suspended most of our capital programs, so we do not have a huge investment requirement.
I think over the next one to two years, you are going to see an allocation of capital which is going to be heavily biased towards shareholder returns. In line with our strategy to have stable operations and to focus on strong cost control, you can see all the metrics on production is more or less aligned as was in 3% of last year. I will go to the bottom line to say the all-in cost reduced by 3%. The financial stuff we've already spoken about. On my last slide, I would like to conclude just explaining why I think Implats is a very strong value proposition. If you just look structurally at the company, we are an integrated producer. I apologize. That offers several advantages. One, the ability to optimize processing capacity with various sources of ore is beneficial and can be optimized.
As an example, during the course of the past year, we rerouted 50% of Mimosa concentrate to be smelted at the newly commissioned 38 MW smelter at Zimplats. In doing so, we have avoided the additional export levy on unbeneficiated concentrate. That is the kind of flexibility that it offers the company. The second thing, if you are an integrated producer, it puts your marketing team in direct contact with customers. Not only do we have access to the market analysis, but we also have face-to-face contact with key customers that consume our metal. That puts us in this very strong position to guide our internal strategies towards the requirements of our customers long term. We are geographically diversified. We operate in every PGM jurisdiction other than Russia, North America, Zimbabwe, South Africa, and in South Africa, Eastern Limb, Western Limb, as well as Northern Limb.
That diversified geographic representation combined with our leading processing capability, and by leading, I mean two things. We are the second largest processor, but we are very cost competitive and we've got very high levels of recovery. The fact that we are in a number of jurisdictions combined with our processing capability and the fact that we've got excess capacity as things stand at the moment puts us in a position where we are exposed to every new opportunity that happens within the industry. Whether it's in Zimplats, Karos, GDI, South Africa, our own Waterberg, even potentially Ivanplats, it puts us in a position where we can leverage into our strengths, our structural strengths, and either convert that into off-take agreements or, as we have done in the past, into equity positions in these projects at the time that they become viable.
In addition to that, if I just look at company DNA behavior, I do think that we have shown that we are responsive to the market during the upside. We spoke about the ZAR 50 billion capital investment program and the strengths that we created through that investment program, alleviating the critical bottlenecks, securing buffering, and so forth. I do think that we have proven ourselves to be prudent allocators of capital. 50% of our free cash flow over the last five years has been allocated to shareholders. We have got a very strong balance sheet, and yet we've been able to increase the internal strengths of the company.
As I said earlier, largely, if I look at the company from a financial muscle point of view, the balance sheet, the ounces, the 30% increase in metal prices, the company has got the financial means to follow its ambitions and to create further strength for the next 10 to 20 years. We absolutely aim to do that, and in doing so, create superior shareholder value propositions. That's my story. I will hand over to Patrick to run through the details. Thanks.
Thank you, Nico. Yeah, let me start with safety. The safety of our employees remains central to everything we do as Implats . About 12 months ago, we reported about our new eight-point safety plan, and I'm glad to announce that we see that translating into meaningful reduction in our injury rates. You will see for the year, we have seen 11% reduction on health traffic rate and also about 15% on our recordable injury frequency rate. Yes, we have suffered eight fatalities in the year. We still have to see this improvement translating into a meaningful reduction in number of fatalities. I believe that this plan, as I said, is only about 12 months old. As we keep on embedding it, I believe we will start to see the reduction also in number of fatalities.
We remain resolute and firm in our belief that as a company, we can operate without any fatalities. During this period, there were also some green shoots that confirm we are on the right track. We have celebrated 18 white flag days. A white flag day is a day where all 60,000 of our employees come to work and return home unharmed. We believe if we can do it for a day, we can do it every day. Also, if you look at our operations, six of our seven operating assets were fatal free, some of them actually more than 12 months and counting. Even when you look closer at the Western Limb where the eight loss of life happened, six of the 12 operating shafts have been fatal free for some time.
There is enough green shoot that tells us if we continue with this work, we should be able to see this work translating into meaningful reduction in losses of life and life-altering injuries. Our area of focus remains embedding our safety-first culture. A lot of work has been done in this area, but I'm the first one to admit that a lot still has to be done. As you all know, change in the culture is not something that happens over a certain period of time. It's a multi-year process. We are committed to see it through because we're doing it for our employees and all our stakeholders. We continue again to focus on our top three risks, being fall of ground, winches, and also machinery. 75% of the loss of life incurred in FY2025 actually come from these three key risks.
Lastly, on safety, we are also starting to acknowledge that what happens outside the mine gate has a direct bearing on what is happening inside the mine gate. We are starting to look at mental health of our employees, really focusing on psychological safety in the same way we are focusing on physical safety of our employees. We are putting in place practices, procedures, and also facilities for our people to be able to consult when they have got mental health issues. We have seen that there's actually a good uptake on those facilities that we are providing for our employees. Moving over to production, as said earlier, both our mining and processing operations have delivered a commendable production and cost performance for the year. This follows proactive portfolio and labor interventions as a response, obviously, to the weak PGM pricing that we have endured for the year.
During the same period, our teams had to navigate more than usual rainfall, which affected some of our operations, and serious disruption to our utility supply, mainly at our refineries. Despite all this, you see that all our operations have delivered a steady performance. Even after adjusting our operating strategy, we have managed to deliver on our key deliverables. Styldrift, in particular, has been able to ramp up production by 9%. We reached sustainably 200,000 tons a month, May and June, and even in July and also in August, we are still remaining above 200,000 tons a month. That is 87% of the mine capacity that we are ramping towards. We are still confident by FY2027 Styldrift will reach its full-land capacity. Impala Canada, by us focusing on high margin ounces, as previously communicated, has been able to generate a positive free cash flow despite low palladium price.
Bimha Mine, one of our new mines in Zimplats, has now reached full production, which is about 3.2 million tons a year. In ounces, it's about 270,000 oz a year. Lastly, when I stood up here about six months ago, I did say that we are doing a lot of work at Marula. If we don't see the change, you know we'll have to take tough decisions. We have restructured Marula, stopped phase two project, and also went on a second retrenchment where we got about 600 people out. Marula, as we speak now, we are now building the pit room and giving ourselves two years to do that. After two years, then we'll have to look at a decision to reconsider phase two. As I said earlier, when I look at our processing division, we took a conscious decision to bring forward the rebuild of furnace number three.
When we took that decision, you'll remember it's just after we had commissioned Zimplats furnace, so we had additional capacity to do that. You'll see that until the end of February, we're still able to release our ounces. This decision was taken in the interest of the safety of our people and also to safeguard the integrity of our assets. The refineries at the back end of phase two, that's when we had all utility disruptions, coal because of the rainfall, water from the rainwater board maintenance, and also hydrogen supply. All this together, they've actually just locked up about 230,000 oz, which means that what we reported at the start of the year, excess vertical 390, has gone up by 30,000. We are going to be releasing this over the next four years, responsibly making sure that we take advantage of this buoyant market that we see now.
In line with our ambition to be carbon neutral by 2050, we have commissioned this project, 35 MW Phase 1 solar plant at Zimplats. As previously communicated, we've also approved the 45 MW Phase 2 solar at Zimplats. We've also signed a five-year contract with Discovery Green to provide 90% of our energy requirement for the refineries for the next five years. Our ESG efforts have not gone unnoticed. We have also been included in the S&P Sensible Yearbook for now four years running. In line with our purpose of creating a better future for all our stakeholders, we have also spent over ZAR 230 million in our communities to build sustainable and thriving communities. In the process, we've created 3,700 jobs and 61,000 people stand to benefit from this work we're doing in our communities.
In short, as Nico said, we believe as a company, we are ready and really geared up, our operators are geared up to deliver into this buoyant market. Thank you very much.
Thank you, Patrick. You know, despite really good cost containment, which Nico talked about, and navigating through some operational challenges, particularly the constrained processing availability at our refineries and the impact that it had on our sales volumes, overall profitability and free cash generation was impacted by the flat rand PGM pricing, but also the impact of inflation on our costs. In our earnings for the year, there were several material items which I'll just touch on. Firstly, we ended up expensing the capital at our Impala Canada operations of about ZAR 500 million. This is in line with our accounting policies as the mine reaches the end of its life. We had restructuring costs of ZAR 635 million for the period, which includes a provision for severance packages at Impala Canada. Lastly, we had some ex-gratia and ESOT-related payments of ZAR 620 million in the earnings for the period.
All of this resulted in EBITDA declining to just under ZAR 10 billion and our headlines at ZAR 732 million for the period. Notwithstanding the pressure on profitability, we still delivered a very pleased. We delivered a free cash flow of ZAR 2.4 billion for the period. Our cash flow clearly benefited from the receipt of concentrate data, which was delayed in the previous year, which we received in this year, but also benefited from our much lower capital intensity, as Nico has spoken about. All of this, fortunately, offset the impact of the buildup on inventory that Patrick talked about, the 30,000 oz, and the impact that it had. Unfortunately, that happened in the last quarter of the year. As a result of all of this, our gross cash increased to ZAR 11.6 billion, but we also had a slight increase in our gross debt, net of the PIC loan.
Our gross debt increased to ZAR 3.4 billion, and that was as Zimplats accessed about ZAR 700 million of additional funding to secure the completion of its furnace. All in all, our net cash position improved from the ZAR 6.9 billion in the previous year up to the ZAR 8.1 billion in this year. This, together with the undrawn revolving credit facilities we have, provided the group with liquidity headroom of just under ZAR 20 billion. I guess looking forward, and Nico's talked about it, but when I look at the results and I look at the business going forward from a financial perspective, I really do think that the company is well positioned to capitalize on the market.
Given the portfolio and restructuring decisions that we've made, the normalized levels of capital intensity that we have going forward, and the ability we have to be able to further strengthen and invest in our business, but also the excess inventory of 420,000 oz, which not only provides us with operational flexibility to manage any disruptions we have at our processing assets, but also supports the generation of free cash flow in the short to medium term. If I then move on to capital allocation, after consideration of our strong balance sheet and liquidity position, really our confidence in where the business is at the moment, as well as the supportive market conditions, the board did declare a dividend of ZAR 165 per ordinary share, and that represents a payout of about 60% of our adjusted free cash flow, which, as you know, is double our minimum payout ratio.
I believe that this, together with some of the portfolio and restructuring decisions that we've made in the last year, basically demonstrates our disciplined capital approach and also our prioritization of returns to shareholders. Lastly, I'd just like to touch on our guidance and outlook for the year. The first one is really around refined guidance. You'll see our refined guidance is between 3.4 million oz- 3.6 million oz for the period. This does reflect improved processing availability at both our Zimbabwean and South African operations, but also the phased release of our excess inventory in line with our revised operating and maintenance protocols at our furnace. The next one that I'd like to touch on is really Impala Bafokeng. I'm very pleased that we're lifting the guidance in this year to 540,000 oz.
This reflects the progress we are making to ramp up Styldrift to its steady state, but also our expectation of improved performance at BRPM. You'll see that we've lowered the guidance for Impala Canada down to the 170,000 oz- 190,000 oz range. This really just reflects the change in operating strategy, which will see our Impala Canada operations cease at the end of this financial year. You can see that we've got Zimplats returning back to its normal steady state levels. Given the work that Patrick and the team have done, we expect Marula to have increased stability going forward. If I could touch on the capital guidance first, the ZAR 8 billion - ZAR 9 billion, you'll see, is higher than the ZAR 7 billion that we spent this year.
Included in the ZAR 8 billion - ZAR 9 billion is about ZAR 8 billion of sustaining capital, which does include the second phase of the solar at our Zimplats operations. Given the supportive market conditions and after providing for basically sustaining capital for the group, we have made room to allocate further capital to life-of-mine extension projects that will basically be value accretive to the group and meet our internal hurdle rates. Lastly, on the unit cost guidance, you'll see the midpoint of the range really is reflective of our expectations of inflation for the year, and the top and the bottom end basically whether we deliver at the top or the bottom end of production. With that, I'd like to hand over to Johan. Thank you.
Roonisha, we're going to Q&A now, so we'll have an opportunity first in the room, and then I'll go to the call. I can see there's already three people that have queued themselves for calls there. I'll hand over at some point to the facilitator to do that. Also, on the webcast, I'll be able to receive your typed questions, and hopefully we have time to also do some of that. There will be some roving microphones in the room. Let's start. I can see a couple of hands here in the middle. Just state your name so people on the call can also hear who's asking the question. Gerhard, please.
I'm Gerhard from Absa CIB .
Did I give it away?
Absa CIB. I've got a couple of questions. One is around the ex- gratia payment. If metal prices have gone up, the outlook is most likely improved. Do you expect further such payment in the future? I guess, tough question, but do you know if there's an expectation from your labor force to continue with such kind of payments? I guess that's the first one. I want to maybe just explore the maintenance and rebuild of the furnaces. It's been a couple of years now that processing has been either interrupted through planned or unplanned maintenance. Is this becoming a theme? Nico, you're talking about interventions. What exactly are these interventions? Can we bank on stable processing in the future? Lastly, maybe a more strategic question. If I look at your CapEx guidance to 2030, it's actually going down in real terms.
You're talking about we are confident in metal markets and metal prices, but yet after 2030, your production at the lease area looks like it could decline quite quickly if I look at your reserve and resource statement. How do I marry those things? Is there some CapEx maybe after 2030 that we should be aware of? How do you even plan to sustain production at the lease area?
Thanks, thanks Gerhard. Let's first talk about the ESOT payments in gratia. Now we do have Lee-Ann here. Is it possible to hand her the mic?
Yes, I can get a microphone, absolutely.
Because she's the architect behind these payments, she also will comment on the structural changes that we have made to the ESOTs to prevent ex- gratia payments on an ad hoc basis.
Thanks for the question, Gerhard. We have redesigned or restructured the ESOT to bring in another mechanism, more like a supplementary mechanism to the ESOT, which is a gross profit after tax. We've reviewed it in line with market practice. We looked at what Sibanye, Northam, and the other companies within our peer group are doing. I think what's important to note around the ESOT is that we introduced the scheme in 2014. Since 2014, I think the first dividend payment that was made was around 2020, 2021. Our workers had worked for many years without getting any economic participation in the ESOT. Unfortunately, because of the cyclical nature of our business, we had to think about how we create a smoothing mechanism in times when Impala doesn't declare a dividend.
We've now implemented a gross profit after tax, which is aligned to the ESOT, which is also 4%. The ex- gratia payment was made in light of the implementation of this supplementary measure. Going forward, we don't believe that there will be additional ex gratia payments. Expectations around receiving something in terms of a dividend or profit share are there, and we're continuing to engage the union on it. We believe that this additional mechanism now will negate the need for ex gratia payments. Thank you.
Thank you, Lee-Ann. Our technical expert, Patrick, will talk to the change in mineral flow into our smelters, how that has affected the acidity of the mats, the influence that it has on the erosion of the bricks, and therefore the redesigns and everything that is required.
Thank you, Nico. I think you'll remember that we did say that there was a change in our blend, in a fit blend into our furnaces with more UG2 , which is much more of a more corrosive material. At that time, we also said we will do some studies, also taking lessons from the designs of our new furnace in Zimplats. High level, the things that we're doing in terms of changing the design, we're lifting our tap hole to protect the hearth. We're increasing the cooling, and also we're looking at different refractory bricks that will be able to sustain this corrosiveness of our blend. We also change in terms of maintenance regime. We have now rebuilt furnace number three, incorporating these changes. December is to be furnace number four, and sometime next year it will be furnace number five.
Then all of our Rustenburg furnaces will be on the new design. Maybe let me also add that in terms of the release of the excess inventory, it is not a capacity issue. It's more of a timing issue. Like I said earlier, even with furnace number three down, we'll still be able to release the material as planned. It is when we had furnace number three down, and then we had a tap hole repair of furnace number five. Now, literally, you were left with one furnace in Rustenburg. Obviously, when the furnace started running, we had that confluence of utility disruptions at the refineries. Again, we do have capacity, but we just didn't have the runway to catch up what we've lost. I guess, high level, that's what we're doing on the furnaces.
Lastly, the CapEx guidance. If I break it down as far as to say our guidance is roughly ZAR 8 billion per annum going forward. If you look at the composition of that, 95% of that in all the years is SIB. It makes no provision for expansion or replacement. That's just by virtue of the time period that we constructed this guidance. When we did the business planning, it was done at a low price environment. It does not account for, for instance, life extension projects in the lease area and so forth. The only replacement or expansion capital that it provides for is around ZAR 500 million for Mupani Bimha for the next two years, and then that concludes. Thereafter, it becomes almost 100% SIB, except for the very last year, five years out where we bring Portal 10 in Zimplats in.
I think that there's every chance should the increased metal prices remain that you will see a revision in capital ambition from the mine, and that you will see some life-of-mine extension projects being added to the existing projects, to the existing capital profile. The one that we've given so far excludes any potential for that. The one area where I think it probably doesn't apply to Two R ivers, we've spent over ZAR 5 billion on capital. If we were to initiate with our partners the Two Rivers Merensky project, it does not require the initiation of a big capital chunk. For the others, just the guidance that we've given, it excludes any life-of-mine extension projects. You are right. If you look at the end of our five-year window, we do see a production decline at the lease area.
I think given the ore body, the ore reserves we have, there's every opportunity for us to extend that.
Thank you. Next question. Do you have a microphone there? There's one on your other side.
Good afternoon. It's Arnold Van Graan from Nedbank. Two quick ones. The first two are related to the processing as well. Why is it taking so long to get the metal out? It's four years now. Feels to me previously it was three years. Maybe I'm wrong on that. Just give us a sense of why so little metal each year. Just the corrosiveness. Sorry if I missed that, but where does that come from or what's changed there? One for Meroonisha. You mentioned some life-of-mine extensions on the CapEx. Can you just give us a sense of which shafts or assets will get that through? Just to form an idea of how that profile could look. Thank you.
Can I talk to the first point? The corrosiveness and sulfurize, that's more technical for you or for someone who actually knows the answer. You can take on the last one. This year there were three factors. Every year there are factors, as you correctly point out. Largely the way to see it, it latches on to Gerhard's earlier question. We have had unexpected deterioration of life of the refractories of the furnaces. Genuinely, not only Implats , but generally the industry. If you follow other companies, you'll find that they had similar issues. Let's agree that we probably as an industry should have responded much earlier to the change in ore blend going into the furnaces, propensity for a higher proportion of UG2 relative to Merensky. I think we are now catching up to that event.
In this year in particular, there are three things that contributed. The furnaces, I think, is the least of it because we made a decision to pull the rebuild of number three earlier by seven months. We did it in December at the time. We could have possibly gotten away with doing things later, but it was a time when there was significant restocking of metal in the industry, and we felt it appropriate to utilize that time to rebuild the furnace. It's not the furnaces that created the constraint. We had two other events. The one, and the one feeds into the other one. The one is that we had an issue at Mimosa where we could not agree with government on the export levy because we had given an undertaking that 50% will be taken to Zimplats.
We elected to discontinue the dispatching of concentrate from Mimosa until that issue was finally resolved. That happened so that we discontinued in February, and I think we started dispatching to Zimplats in March, April, May. Just so you said, okay. By the way, when you look at our excess inventory, when we talk to the market, we declare a closed system. It's purely the smelting and refining complex in Rustenburg. When we have inventory buildup at Mimosa, it doesn't count as inventory because it's concentrate at origin. In the last quarter, Sifiso decided to have heavy rains in. I mean, we had quite a lot of flooding incidents. As a company, we had to make a choice. When we had this unseasonally high rainfall, we have got two choices. We can either allow the heavy rainfall to go into our water treatment facilities, and it was so much rainfall that it would spill out of that, so it would create an environmental incident. That was the one choice.
The other choice was to increase the water in our reagent circuits and thereby dilute the reagent circuits, impacting on the efficiency of the refining process. We opted for the second choice to prevent an environmental spillage because ESG, whatever incident, is important. It was that combined with, as a consequence of the heavy rain, our coal supply being wet, and we had a disrupted hydrogen supply from Sasol. We had at the back end of the value chain in the last quarter this operational disruption. It's quite unusual for us to have the refinery as the key constraint. At the same time, we all of a sudden had this dispatching from Mimosa with the stock that is generated.
Therefore, for this year, the lack of release is purely a timing issue because if you look at the way the inventory is kept in the value chain, it has moved from the smelters, which has normally been the constraint, down to the refinery. I do not believe that we are going to sit with an inventory buildup. I think that there will be an inventory release fairly early. We've now done the stock take, so we are now in the process of taking it down. I think you will see an inventory release. We're also getting a better handle on the furnaces. Okay, sure, that was a long answer. Furnaces.
No, the question was about the corrosiveness. I think you've touched a little bit on the other expand. You'll remember that, I mean, when we started our furnaces in Rustenburg, it was predominantly Merensky. We used the base metal ore from Zimplats to dilute that. Now, all of that will then go to Zimplats. We're now left with UG2 that is corrosive by nature, which is why we're now redesigning our furnace to accommodate that. There will be less of this diluting base metal rich material from Zimplats. It is the UG2 that's causing the corrosiveness.
Any further questions in the room before I go to Chorus Call?
I think maybe just, Arnold, I think you asked about the life-of-mine extension. The ones that we have at the moment, Nico's talked about Marula, that we could do Marula and be looking at doing Marula in probably smaller phases to give Marula a life extension. At Rustenburg, I know at 14 Shaft, they are looking at a project that potentially at these prices will pass our internal hurdle rates. Two Rivers, Nico has alluded to the fact that basically we've incurred all the capital for the Merensky plot. Really, it's the mining that we would need to allocate money to, and that could be up and running fairly quickly. Those are the obvious ones that are on the table. Thank you.
Maybe just to add to that, subject to us concluding final negotiations with Valterra, there is also a cross-border opportunity. For instance, at 20 Shaft, we have the ability to mine into cell two. Between 6, 8, 20 cross-border opportunities, there are also life-of-mine extension opportunities there, which we generally do not talk about. We've not been public about life extension opportunities there.
All righty. I also want to give an opportunity on the Chorus Call. I'm going to hand over to the operator there. I see there's already three people that have queued. Can I hand over to Chorus Call to just take some calls off the call as well, please?
Thank you, sir. The first question we have comes from Chris Nicholson of RMB Morgan Stanley. Please go ahead, sir.
Hi, Chris. Can you hear us?
Apologies. It seems Chris ' line is muted. The next question we have comes.
Please go ahead.
The next question we have comes from Adrian Hammond of SBG. Please go ahead.
Thanks, operator. Good afternoon, everyone. Nico, just two questions. I'll start with the first for now. Just on the inventory that you've got in excess of 420,000 oz, to me, that sounds like a lot of metal. Where is that metal visibly located? Is it in concentrate form? Because it's quite a sizable amount.
If you're answering that question, the inventory that we declare does not include any inventory held at source, so at the mine. To the extent that we have got less stock broken or underground in silos or parcels, even concentrate stockpiles at the mines, that's not included. The only time that we include inventory that is part of our calculation is whether it's either in concentrate form before the smelters, to be processed, but it must have been delivered to the smelters. It's either the concentrate before the smelters, or it is work in process inventory in the smelters, or it is matte that has been delivered from Zim to the refineries or from Rustenburg to refineries. It's in matte form ahead of the refineries or as work in process in the base metal and precious metal refineries. That's the closed circuit that we declare.
I just had the pleasure of our team working with the external auditors, touching and recording all of that metal. If you've got some free time, you're welcome to join us, Adrian.
That would be a picture of it. That would be a lot of concentrate.
Not a lot of concentrate.
It's more the refinery now. Remember, we said that it's actually moved from the furnaces into the refinery. It's actually down the value chain.
Okay, thanks. Second question on the CapEx profile that you've given us on slide 39. I'm impressed with your flat profile going forward. Most of your peers are increasing CapEx just to stay still. You have a flat to almost declining sustaining CapEx profile. How confident are you that that is what's required to stay still at least? Is it safe to say that the strategy is somewhat catchy for the group where you perhaps are entering a harvest strategy and that is the decision you've made?
The way I would interpret that is that is a capital profile that is linked to the current life-of-mine profile of the business. You have to read the two in combined. Now, as I said, Adrian, the capital profile converts to almost an exclusive sustaining business capital. There is no life-of-mine replacement or expansion projecting to the debt. There is every possibility that if the metal prices hold or improve, you are going to see a reinvestment in the business. To the extent that we do not enter into new life-of-mine projects or expansion projects, you are going to see, if you follow the life-of-mine profile, there is a life-of-mine profile decline that starts in year six from this year. That is true. In order for us to reverse that, we always talk about what is the incentive pricing for new projects.
At the moment, it's premised on the fact that in the long run, the market generally is aligned with the industrial balance going into a surplus. In order for us to make this reinvestment, we need to see scenarios where there are supply corrections, be it primary or secondary, demand improvements that will yield the returns over the life of these life extension projects. We are not excluded. We are not saying that that won't happen. To the extent that we do as a board, as a company, agree to that, we will come to the market and we will revise the capital. If you wanted to model the company and we included a CapEx profile that was misaligned with the current production profile, then you would have calculated incorrect returns and therefore your model would yield the wrong result. We will do two things.
To the extent that we approve these projects, we will advise of a revision in capital and at the same time, we will advise of a change in life-of-mine profile because those two things have to happen together. If that makes sense.
Yeah, that's clear. It's interesting because in the Africas, you painted a strong picture for high prices. Yet we sit in South Africa with a long lead time to bring new ounces to production. As a group, how do you, what sort of margin, pre-capital margin, do you require to go to your board and say you need to, this is enough for us to, or incentive for us to reinvest?
No, that's the age-old question about incentive pricing. I mean, there's no singularity. There's no single correct answer because it's not a single price. Let me say this. If we had metal prices at spot right now, ZAR 32,000, ZAR 35,000, that surely will provide sufficient. If we as an industry are confident that that is the price that will hold and that will appreciate along with inflation, I believe that that is sufficient margin to create an allocation of capital that will reward shareholders adequately and will provide reinvestment opportunities within the business. I think that we are there or thereabout. The question, and so Adrian, you were to.
No, as I say, I think, I mean, the spot is right now at roughly ZAR 32,000. From ZAR 35,000 on, I think that you have sufficient operating margin to incentivize, but that has to be not the spot of the day. It must be the spot of the day with an expectation that it will hold true going forward. You're talking about deficits. If you follow the analyst, it depends on whether you look at industrial balances or full balances, including jewelry and so forth. At the moment, consensus is that we come out of a period of market deficits, but that these deficits will perhaps hold for the next two or three years. There long term, it goes into a surplus. Therein lies the insight that is required for companies like us and the other PGM producers to develop an understanding of long-term pricing.
When we develop these projects, it takes a long time for these answers to come to the market, and you better make sure that the prices at the end yield the kind of economic returns that were intended when the project was approved.
Thank you. Unfortunately, time's only going to allow us one more question, so I'm going to close off with the next question. I see there's two more questions on the web and two more analysts on the call, but we will reach out to you and make sure that we answer whatever questions you have. Operator, if we can end with Nkateko, who I see is the next lined up for a question.
Of course. The last question we have comes from Nkateko Mathonsi of Investec . Please go ahead.
Thank you. Good afternoon. Thanks, Johan, for allowing me to ask the question. I actually have a follow-up question on your smelter maintenance problem as a result of the corrosiveness of the UG2 concentrate. By 2027, my assumption is that you will get concentrates from Royal Bafokeng Holdings. Are you changing the maintenance program to address the UG2 corrosiveness that will in any case be addressed when you actually get 50% of concentrates from Royal Bafokeng Holdings? My other question is that your prices having improved, specifically flattened down, how are you and your JV partner now thinking about the reverse Merensky projects and that decision to place it on care and maintenance?
Lastly, if you can also talk to the Bafokeng, the Impala Bafokeng asset and the integration with Rustenburg and the synergies, if there are still any synergies that you see with that integration, especially as you are guiding to actually reach steady state of shaft drift by FY 2027.
Thank you, Nkateko. Can we start getting a mic to Adelle? There are a lot of questions about UG2, sulfides, and corrosiveness and so on. Adelle, if you can prepare your expert answer on that front, that would be fantastic. Let me address the Two Rivers Merensky. Sorry, Patrick, I mean, I should probably pass to you, but that's a fairly easy one. There are zero capital barriers to reinstate the Merensky. We have to equip two levels. We've already got the fleet. It's a matter of appointing teams. I think that there's a very high likelihood that the Two Rivers Merensky project, which is currently going through an evaluation process, will be launched should prices remain. I think it's almost a given that that will be the easiest opportunity for us to bring to bed with our partners. We're going through the valuation process.
I would be very disappointed if there is no outcome on that. As far as the Bafokeng is concerned, Leanne, you got an opportunity to speak to us, but Moses has been sitting here without having said anything. If we can ask Moses potentially to just talk about how the integration consolidation is going and what synergies you see in your path.
Yeah, thanks, Nico. Thanks for the question. I'm also glad that you've mentioned that we are on our way to reach steady state for cell drift in 2027. Regarding the synergies, perhaps there are two that we've already reaped the rewards. It's on the recovery side, on the processing, as well as on the restructuring side, since we've consolidated and combined the leadership and blended as one asset. Perhaps on the recovery, just remember that when we took over the assets, the recoveries in those plants were sitting at 79%. As we speak today, we are sitting at 83%. Already you can see that the leadership that we put in there, the experienced team that we've put in there, start to yield on the recoveries from the synergies point of view. Perhaps there are two other synergies that will still realize in the near future.
The amount of work that we are putting through just after the consolidation, we've earmarked some certain amount of money that probably will have to be saved. It's mainly because of the integrated team from the structural point of view and from the leadership point of view as well. Lastly, Nico speaks a lot about the CapEx with regards to what will unfold if the price stays the same. He spoke a little bit about 20 Shaft extending perhaps into cell drift, depending on how we are going to unfold that work because it's currently on the feasibility study as well. There are other two projects that we'll probably talk about next time, perhaps when we sit here, depending on the price stays the same. Is the BRPM not? And t hose deadlines, there's also potential that we can extend those deadlines into 20 shafts, as well as the eight-shaft block, which actually will assist us a lot. Remember, maybe last year I can close it off to say six shafts was about to close, in two years. With regards to us integrating, we're also seeing opportunities which we'll most probably talk about when the time is right. Thanks, Nico.
Thank you. I think lastly, if you can ask Adelle to perhaps explain the change in ore blend, usually to sulfides' corossiveness, and then our response from a maintenance point of view and rebuild and redesign.
Yeah, thank you. Thank you, Nico. Coming back to the question in terms of Impala Bafokeng , we will be receiving 50% of that material from August 2027. That is not only Merensky, it is a blend of Merensky and UG2 concentrate we will receive. Going forward in our profile of the feed to the furnaces, our UG2 content in that feed blend will go up consistently year after year, increasing the corrosiveness and the way we have to manage our furnaces. We must always remember that concentrate from the Great Dyke has double the amount of base metals compared to our Merensky concentrate. It is not a direct replacement, and we will never be able to replace the base metals by substituting with Merensky.
That is the reason we are currently redesigning our furnaces to cater for a more corrosive blend that will go into our furnaces, make our infrastructure more robust, making sure that our blending system into the furnaces is of such a nature that we can consistently blend to cater for our feed into our furnaces. We will follow a holistic approach going forward, looking at the blend to the furnaces, minerals associated with that, and then cater for the necessary expertise to handle the change that we will see coming very, very soon. Thank you.
Thanks, Adelle. Apologies, Chris and Renee on the line. We will reach out and make sure we answer whatever questions you have. Kulani and David on the webcast as well, I can see the two questions. We will definitely get back to you. Just leave it for me to thank you all for attending today. There is an opportunity now outside as well to spend some time with the team, maybe have a cool drink or two. The rest of you, I'm hoping to meet up with you soon over the next two weeks or so on the road. Thank you very much.