Good morning, everybody. Thank you. Oh, good morning. Thank you for joining us at the Northam Results presentation for the six months ended December 2023. Welcome to members of the board, and in particular, our longest-serving board member, Emily Abrahams . Welcome. Welcome to those of you on the lines, and a special welcome to those who've joined us in person today. The presentation, together with our interim booklet containing detailed disclosure of the company's performance, is available on the website this morning. Once again, thank you to Alet and her team for a very comprehensive report. As always, we like to describe the pictures in our presentations. This is a picture of iridium chloride, which is critical to the production of green hydrogen.
Iridium is one of the rarest elements on the planet, and because of the many colors of its various compounds, was named after Iris, the Greek goddess of the rainbow. Iridium, together with the ruthenium, were historically considered the minor metals, but their importance is growing, and together, these contributed over 11% of Northam's revenue for this reporting period. Here's the usual disclaimer regarding forward-looking statements that we might make today. Please read it when you have a little bit of time. Alet and I will endeavor to move quite quickly through the presentation in order to allow adequate time for questions. I'll review some of the key features of the period in which we have delivered a strong operational performance, in particular at our new Booysendal South mine, where we are now moving beyond the capital phase.
We've made further progress in our other projects, including Three Shaft at Zondereinde, the development of the Eland mine, and upgrades to our downstream processing facilities. Alet will then take us through the financials, and finally, I'll provide guidance for the remainder of the year. This picture is of the new furnace slag concentrator at Zondereinde, and this was commissioned last month, in January. It's a large 2-megawatt-to-million capacity and will target the excess inventory in slag-type products that we have been accumulating over the last few years. Capital cost, if I remember rightly, Alet, around about ZAR 650 million. A strong operational performance allowed us to once again post-record production and sales volume. Despite further weakening in metal prices, we did generate revenue of ZAR 15 billion.
The higher inflationary environment has continued, and in response, we have trimmed elective capital expenditure in a manner that minimizes our project milestones. In light of the weakness and the high degree of uncertainty in the current metal market, we have become very internally focused, and we place a high emphasis on safe production, efficient mining, and at the right cost. Cash conversion and cash preservation will be particular focus areas, and the board has considered the group's current and future liquidity position and declared an interim dividend of ZAR 1. This picture is a view down the barrel of the new Zondereinde Three Shaft, showing the equipping that has been completed to 500 meters.
Full equipping at 1,400 meters and commissioning of the shaft, along with the 3A vent shaft, is scheduled for May 2025, at which time the combination of a reduced, significantly reduced travel time for employees, as well as improved hydropower and backfill pressures on the face, will significantly de-risk mining. The pace at which we've been able to progress the Three Shaft project, we believe, is impressive given that we only started piloting in September 2019, and we expect commissioning four and a half years later than that at a fraction of the cost of a conventionally developed shaft. The addition of Three Shaft will allow us to mine this exceptional ore body well into the future. If I can move on to the mining operations and firstly safety, this remains a key focus for the group, and we're pleased to report an overall improved performance.
The group remained fatality-free throughout the 2023 calendar year, and both Booysendal and Eland continue to be fatality-free since inception. Nevertheless, our board remains vigilant and engaged on all matters related to the health and safety of our employees. Looking at some of the operational metrics now, firstly, at group level, tonnes milled increased by 7.4%, while mine metal production grew by 10.6%, and total refined metal increased by 8.3%. As we have said many times before, mine first, metallurgy second, and I'm pleased to report that the metallurgical upgrades are now nearing completion. This will allow for a clearance of the excess stock in the pipeline. Despite high mining inflation and the ramp-up of Eland, we've managed to limit the increase in cash costs per 4E oz to 6.7%. However, our cash margin has halved, reflecting significantly lower metal prices.
Chrome production improved by over 30%, with higher UG2 tonnes treated and improving chrome yields across all operations. If we can now move to the individual mining units and firstly Zondereinde. Bedding down Merensky mining in the Western Extension, as well as the migration of UG2 to the east of the mine, led to a marginal reduction in mill tonnes, but this was offset by great improvements, particularly on the UG2. We maintained production overall at 160,000 4E oz, and again, we expect to maintain this level of production into the second half. The completion of number three shaft in 2025 will lead to productivity gains in the future. Good cost control has allowed us to limit the increase here in unit costs to 5.5%, but a decline in metal prices led to lower cash margin at 18.5%, excuse me.
Capital expenditure at Zondereinde was applied to work on Three Shaft, as well as upgrades to the base metal refinery and the newly commissioned furnace slag plant. CapEx was restricted to ZAR 1.2 billion in the main by rescheduling work on number three shaft, which is off the critical path, halting development of the decline in the deepening section at the 17-level tip, and these measures have a minimal effect on our overall project program for the moment. Effectively, we're using up the float in the project schedule. Moving on to Booysendal, where we are rapidly approaching steady-state volumes and all sections of the mine are contributing. Mill tonnage grew by 9% in line with expectations, with improving mill feed grades from the south. Split Reef at the north UG2 persists, but we're managing it.
Mill tonnages are currently exceeding milling capacity, and this led to an accumulation of run-of-mine stock in excess of 400,000 tonnes upfront of the mill. Work continues on expanding plant capacity, particularly at the south concentrator, in order to convert these stockpiles to cash. Overall, metal production at Booysendal improved by 15%, with an increase in unit cash cost of 6%. Booysendal posted an operating profit of ZAR 2.5 billion at a cash margin of 43%, despite the material decline in metal prices. Capital expenditure was ZAR 630 million, mostly sustaining. The expansion checkbook has been closed, and we expect annual steady-state sustaining CapEx of around ZAR 1.1 billion going forward. At Eland, the mining ramp-up has begun. We now have 22 production teams on the face, which will grow to 26 by June and 64 at steady-state.
We produce 32,500 ounces of in-concentrate, together with a further 25,000 ounces from third parties, at a cash unit cost of ZAR 33,600 per 4E-oz during this ramp-up phase. In order to preserve cash, we have temporarily stopped the decline development on five-level, which will reduce capital spend, and we will continue to build up mine-minable reserves in the 10 exposed strike sections. We recently holed the vent shaft at Kukama, which you can see in the photograph. This hole is 450 meters in length with a 4.8 meter diameter and specifically services the lower levels of the mine. The shaft was developed using the fully mechanized raise bore technique that we have employed at Zondereinde Three Shaft, thanks to the Murray and Roberts team in this case for a safe and timeous completion of the project. Look how beautiful the sidewall is.
This is an unlined shaft that you're looking at the host rock there. Damian tells me that the light at the end of the tunnel signifies higher metal prices shortly. Seriously, though, current mining conditions require a cost response. At group level, we have a moratorium on recruitment except for essential occupations. At Zondereinde, we've delayed long-dated surface infrastructure at Three Shaft, reduced the raised boring effort to just one machine. It was previously two. We've halted the deepening project. At Booysendal, decline development at the South Merensky and the BS4 module, which is a UG2 module, has been stopped. Whilst at Eland, Kukama decline development has been temporarily halted, and also long-dated surface infrastructure has been delayed. These measures for the moment do not materially compromise timelines. However, there is a compromise on the future cost of these projects as escalation kicks in.
The longer you take to do it, the more it costs. We will continue to apply strict but prudent cost management at all the operations. We'll be monitoring the market very, very carefully, and we'll adjust our response accordingly. During this period, there was a reduction in the frequency, duration, and severity of power interruptions. But just like load shedding at home, it's highly disruptive. Our view remains that the ability for Eskom to deliver power will continue to present a high risk to the mining industry. In addition, Eskom tariff increases remain significantly above CPI. The latest NERSA approved tariff hike is 18.5%. Quite incredible when you think how significant power is to the mining effort. This is a recent picture of the 6 4.6-MW generators being installed at Zondereinde.
The combination of this generator fleet, together with renewable energy initiatives, remains critical to both energy security and managing cost inflation at the mines. The first generator will be online by the third quarter, and in addition, we've just commenced construction of an 80-megawatt solar farm at the Zondereinde site. At the end of the year, we'll begin construction of our Western Cape wind farm. I'll now hand you over to Alet to take us through the financials. Thanks, Alet.
Thank you, Paul. Good morning, everybody. We produce metals that are critical for a cleaner, greener, and fairer world, but understand that mining, by its very nature, has an impact on the environment. And so we have consistently looked to minimize the impact across our business, adopting and developing techniques and practices that achieve this imperative.
The Carbon Disclosure Project, a global climate change and water management disclosure platform tracking the performance of more than 23,000 companies, recently reassessed Northam, and we were rated above the global average. I have previously spoken about our land and water conservation achievements, and am proud to report that the De Wilge Nature Reserve, a part of our Bateman’s Hope Conservancy Trust initiative at Booysendal, was recently designated as South Africa's 30th Ramsar Wetland of International Importance. Northam also leads the way in regards to recycling of the water that we use at our operations. The group recycles over 86% of all water we use, and over the past decade, we have more than halved the volume of water required to produce an ounce of salable metal. This is Mpho Sobhani, Zondereinde environmental coordinator at their newly commissioned reverse osmosis plant, which is further improving our water recycling efforts.
Looking at the key financial period, key measures for the period under review. As Paul mentioned upfront, under the prevailing PGM market conditions and without a clear signal for improvement, we are inwardly focused, placing greater emphasis on operational efficiency, productivity, and cost control. The scale, flexibility, and resilience afforded by our growth strategy have gone a long way towards allowing us to benefit from this focus. In spite of softer metal prices, our growth in metal production and sales volumes led to sales revenue of ZAR 15 billion, and our focus on cost allowed us to post an operating profit, albeit significantly reduced from the previous corresponding period. EBITDA was similarly affected, but despite this, the sale of our investments in RBPlat and M Plat allowed us to reduce net debt to ZAR 2.4 billion, whilst continuing to invest in organic growth.
Earnings per share and headline earnings for the period amounted to 1.37 and 1.21, respectively. The requirements for headline earnings do not allow the add-back of the loss on sale of Impala shares. This negatively impacted headline earnings by just over ZAR 2 a share. Looking now at revenue. Revenue for the period was ZAR 15 billion. This is a ZAR 5.1 billion or a 25.5% decrease on the previous corresponding period, which was wholly the result of a material reduction in the average U.S. 4E basket price, and is despite a 10.4% increase in sales volumes in line with our previous guidance, as well as a 7.4% weakening rand against the U.S. dollar. We caution that continuous weakness in metal prices is placing significant pressure on revenue and therefore profitability. The benefit of the full mine-to-market value chain for chrome is becoming apparent.
Chrome contributed 12% or ZAR 1.9 billion to our revenue, and we expect to produce around 1.3 million tons of chrome for the full year. Looking now at cost of sales. Sales revenue decreased by 25.5% compared to an increase in cost of sales of 13.8%. This led to gross profit of ZAR 2.4 billion at a gross profit margin of 16.1%. Given our large fixed cost base, we consider increasing production efficiently as our best defense against market pressures. Our capital allocation and treasury decisions have been guided by our growth strategy, and our results have benefited from our consistent approach of growing production down the sector cost curve. Movements in the individual elements making up cost of sales include a 10.6% increase in square meters mined, together with an average wage increase of approximately 8%, led to mining cost increasing by 18.7%.
Concentrating cost increased by 10.9% as a result of a 7.4% increase in tons milled, together with an increase in the cost of consumables. A 16.9% increase in tons smelted, together with the recent 18.5% rise in the electricity tariff, resulted in a 16% increase in smelter and base metal removal plant cost. Royalty charges decreased by 85.1%, essentially on the back of lower profitability. The total cost of purchase concentrate and recycling material increased by 32% to ZAR 2.1 billion, with 4E ounce volumes purchase increasing by 114%. Refining costs increased by 24.2% to ZAR 212.5 million, with refining volumes on a 6E basis increasing by 6.7%. All refining costs are denominated in either euros or British pounds, which negatively impacted the refining cost charged. And lastly, the change in metal inventory relates to an increase in the quantum of the metal ounces capitalized to the balance sheet.
Moving on to the income statement. Our accounting profit for the period has been impacted by the loss on sale of our holding of Impala Platinum that resulted from our disposal of our RBPlat investment. We acted timely to realize the cash value of this non-core asset and sold all 30 million Impala shares during August at a volume weighted average price of ZAR 103.95. This limited the loss on the sale of the RBPlat shares to ZAR 800 million. The group generated profit before tax of ZAR 1.2 billion and accounted for a tax charge of ZAR 708 million, of which ZAR 641 million was paid in cash. Moving on to working capital management.
By the end of December, inventory had increased to just below 460,000 4E ounces, with a carrying value of ZAR 8.4 billion, and after applying the basket price and exchange rate at the end of December, a sales value of ZAR 13.7 billion. More than half of non-current inventory relates to the furnace slag that we are now starting to process through the recently commissioned slag plant. We expect to work through the current slag stockpile over the course of the next four years. Overall, we anticipate that inventory will be relatively unchanged at year-end. There is currently significant volumes of lockup in our smelters, and the rebuilt of smelter 2 after a six-year campaign life has been brought forward towards May, and this will release a portion of this lockup.
Booysendal stockpiles have grown to almost 400,000 tons, and we will work through these following the completion of the expansion of the South Tailings Dam. Looking at the group's cash flow. Over the period, our cash balance increased by ZAR 6.4 billion. The items impacting our cash balance include cash generated from our own operations amounting to ZAR 700 million, which included a buildup of working capital relating to inventory, as well as a decrease in our payable balance mainly relating to payments to our employees in terms of the profit share schemes across the group. Investing activities included ZAR 2.4 billion spent on CapEx mainly in the execution of the group's growth strategy, and ZAR 12.1 billion received in terms of the RBPlat mandatory offer, bolstering our balance sheet and liquidity position, providing flexibility and optionality during these challenging times.
Financing activities included our made-in-dividend payment of ZAR 2.3 billion, and we also settled DMTNs and paid interest relating to our DMTN programme. These movements culminated in a cash balance at the period end of ZAR 11.8 billion. As mentioned, we have bolstered our balance sheet through the sale of the RBPlat and M Plat shares. This has reduced our net debt to ZAR 2.4 billion, including cash of ZAR 11.8 billion, and with a rolling 12-month EBITDA of ZAR 9.7 billion for the period resulted in a net debt-to-EBITDA ratio of 0.24. On top of this, we have undrawn banking facilities of ZAR 11 billion available to the group. Ultimately, the most critical consideration for any company is the appropriate allocation of capital. The long-term success of our business depends on achieving an optimal balance between growth, sustaining operations, and returning value to the providers of capital.
Management carefully considers the appropriate allocation of capital in these areas in order to achieve the group's strategic objectives. During the period, we applied ZAR 2.4 billion to grow and sustain our operations. This was in line with our trimmed capital schedule. We also returned value through the declaration and payment of a maiden dividend, and the board has resolved to declare an interim dividend of ZAR 1 per share.
A raft of global geopolitical issues have the potential for causing further disruption to the PGM market, and so we continue to monitor the market and will amend our capital program and capital allocation decisions when and where prudent, taking into account the changing landscape. I will now hand you back to Paul to take you through the operational guidance for the remainder of the financial year.
Thank you, Alet. This is a picture of blue concentrate. Actually, it's normally grey.
It's, yeah. Okay. Our production and cost guidance is largely unchanged for August, from August. PGM production from own operations will be between 850,000 and 880,000 4E ounces. Group unit cost to be between ZAR 24,000 and ZAR 25,000 on a 4E ounce basis. Sales will be higher than production in the range of 920,000 to 950,000 4E ounces, with deliveries from third parties being lower than expected. Our forecast CapEx for the year is ZAR 4.6 billion, allowing for Eland and Three Shaft. We present this guidance, as always, as our considered view, and wish to highlight once again that we're all operating in a heightened business risk environment on a number of fronts. The average basket price that we received for our metals, as you know, declined further over the period, bringing considerable pressure to bear on the sector.
The lower prices will herald significant consequences for the world's PGM miners, and the next 12 months will be extremely challenging should current price levels persist. The spot price this morning, the red dot there, is very similar to the six-month average. Today's price levels clearly do not incentivize production into the future, and we continue to forecast a contraction in supply for all three key metals over the coming two decades. We've stated previously that a protracted cyclical downturn in prices will lead to an acceleration in the depletion of mines. That's the blue line. The orange line is natural depletion. That's what all bodies unconstrained could support, and the blue line is a consideration of, very significant economic pressures that the sector is facing. Primary supply of platinum, together with the rhodium, is predominantly a South African story, and the country's mines are aging and reserves are diminishing.
This has a compounded impact on unit cost that is very difficult to circumvent. Some mine closures have already been announced, and we expect further restructuring across the sector. However, platinum remains in fundamental deficit. In mining terms, it's a slow-burning fuse. Ultimately, we will see a price response to this picture. Palladium-dominant mines are often combined with significant nickel production, and the weakening nickel price is further eroding profitability. Previously forecasted increases in palladium supply were dependent upon projects that are now unlikely to be pursued. We expect flat to waning supply over the medium term. Rhodium will follow the depletion profile of the South African UG2 mines, potentially leading to significant undersupply of this critical metal. This market will return to deficit quite quickly. The current price environment, however, may last for some time, and this, combined with general higher inflation, will pressurize the sector.
It's very clear from this chart that the current market conditions cannot sustain supply. Not all bodies are created equal, and in this market, we would suggest that South African UG2, with its higher loading of platinum, iridium, ruthenium, rhodium, and chrome, is strategically well-positioned for a future-facing market. At Northam, we have a UG2-dominant resource base, which is very well capitalised, and this places us in a strong position. Once again, safe production, efficient project execution, efficient mining, and a very firm grip on the checkbook will ensure that we mine at the best possible cost. Finally, I would like to highlight that balance sheet strength and liquidity considerations differentiate Northam as an investment case. Ladies and gentlemen, that concludes the formal part of the presentation. I hope you found it informative.
We can now move on to Q&A, and if we can start in the room, followed by the phone lines. Damian, please don't forget the webcast, which is easy to overlook. If I could ask that you introduce yourself when you receive the microphone and let us know which organization you represent before you ask the question. Thank you very much. Chris.
Morning, Paul, Aletta. It's Chris Nicholson from RMB Morgan Stanley. I've got two questions. Could I ask you just to comment a little bit more on Eland? I think particularly. Clearly, the ramp-up is still some way away at Eland. Just the capital allocation between continuing to invest in that mine versus pulling back at Booysendal, which obviously is a bit more profitable, significantly more profitable currently, how do you think about allocating between those two?
And then, I guess, more fundamentally, I mean, is Eland, if current pricing kind of conditions persist over a much more extended time period, can Eland really be profitable in this type of environment? So that's the first question. And then the second question is just on the inventories. I mean, mathematically, it looks like you're almost carrying about 6 months' worth of inventory currently. I understand that as production grows, your pipeline will grow too. How much of that is excess versus what you would normally be kind of expected for your current production run rate? Thanks.
Okay, Chris. I'll take the last question. It's the easier one to answer first. So a good benchmark would be about 30% of run rate, or about 4 months of production, not 6. So it's a good indicator.
If you translate that into absolute terms for us, a normal holding stock or pipeline stock would be about 320,000 4E ounces. We're considerably higher than that, if I remember the number, about 460,000 ounces. That represents the excess. I do want to maybe make a sort of a side comment from our point of view as a, you know, effectively a younger, growing business. We've come from a very, very low pipeline as we were when we were just Zondereinde. One can imagine, you can't run a business of this size without pretty significant investments in the working capital pot, and that's some of what you're seeing here. It's worth just reflecting on just how much money the company on behalf of the shareholders has invested into that pipeline. It's very, very significant.
And we've been able to handle that during this growth period, I would suggest, reasonably well. However, there is work to do on the excess. You've heard some of the big numbers there, 400,000 tonnes of Booysendal in ROM. We've got about 800,000 tonnes of slag at the smelter, which is also sitting around about 2.5 grams per tonne. So these are very significant physical volumes that still have to be worked through, but there's enough capital investment to be able to do that over the coming years. When it comes to, I'll come to Eland last, but let me just take Booysendal very, very quickly. When you're sitting on a stockpile of 400,000 tonnes, it is not a difficult decision to hold back a little bit in the short term on further development of Booysendal.
We're already exceeding the immediate capacity of the mills by some way. Alet did mention that we are throttling the South Mill at the moment to manage the rates of rise on the old Everest tailings dam, and there's a new tailings dam expansion underway at the moment, which relieves that effective mill throughput rate. It's not the mill itself that's causing the problem. We are deliberately throttling the mill to manage the tailings dam in a safe and proper manner. So that explains why we've, you know, felt it okay in the sense to just hold back a little bit of Booysendal on that basis in the short term. Things can change very quickly. In terms of Eland, we project Eland will have a superior unit cost position to Zondereinde. It will move beyond the middle of the cost curve.
We only have 20-odd teams in place at the moment, and full complement there is over 60 mining teams. It's a shallow, large UG2 ore body. So considerations for us at Eland, first of all, begin with the ore body. I made a statement there in the verbiage. A future-facing ore body today, to us, looks to have a chrome base with a high platinum and minor metal content. We think that will be quite a significant differentiator compared to, perhaps, the more bulkier base metal, in particular nickel-heavy, which tends to then go with palladium. Palladium is our least favourite metal. So we do think, first of all, inherently, because of depth, size, and the metal mix, Eland has a competitive position. Obviously, we do have to ramp it up, and conventional mines take time to ramp up. This one will take effectively to 2028, 2029.
We have, however, trimmed our approach to it in light of the market and through the business planning process. We'll be very, very careful how we treat Eland into the next year should these conditions persist. Thanks.
Thank you, Paul.
Thanks, Chris.
Good morning, Nkateko Mathonsi from Investec Bank. My first question is on Booysendal and very good production there, which has increased by 15%, and you actually have hit that steady state rate. But if we look at unit costs that increased by 6.2% year-over-year, it's even higher than the unit cost at Zondereinde. And I understand the operations are different with Booysendal being mechanized. But my question is, at what point do we see this stellar production performance translate into superior cost control within Booysendal? And maybe you can also comment on the Split Reef, which you said you are managing.
I'm assuming that is also a contributor to the performance that we're seeing as far as cost is concerned. How long? I think initially you said about 13 months to mine through the Split Reef. I may be mistaken, but how long will the Split Reef remain a bit of a challenge within Booysendal? That's my first question. And then the second question on it's more on the processing side. And you've talked about the slag finish and the commissioning and the inventory that will be liquidated over 4 years. But if you can give us also a little bit of color around the Base Metal Refinery and where you are in that process and whether that does not become the second bottleneck. And then my last question is on CapEx.
If you can give us a little bit of guidance on FY25 CapEx in light of the changes that you've announced to manage costs? Thank you.
Thanks, Nkateko . I'll take them in reverse order. They're easier to answer. And remind me if I forget, because I think there were four questions there. The first one, CapEx for 2025, probably ZAR 4 billion is a very, very good number. And just bear in mind, we haven't yet approved the business plan at board level, but that's the sort of number we're targeting, and I think we can achieve that from our first blush at the business plan run. Let's go to the Base Metal Refinery. The upgrades there are quite organic in nature. There's a technical piece of equipment called a crystallizer, which makes nickel sulfate crystals.
The civil work has just begun, and that will be about a, if I remember, about an 8-month project to completion. We're pretty much then done on the BMR. I can't remember the capital cost there, but it's not massively. Is it 80 or something?
Yes.
And it's about a ZAR 80 million investment, that one. So the nature of the BMR is it's quite organic. It's not like you're putting a new line in or a new autoclave or brand new electrowinning circuits. Let me go then to Booysendal quickly. Booysendal, as a mechanized mine, has a very, very different cost composition to conventional mines. The cost drivers are very different. So as opposed to power, it's diesel as a good example. As opposed to large numbers of human beings, it's the machines themselves that are undertaking a lot of the effort.
These are imported machines, and the machine costs, I must say, are, you know, it's not the rates of—it's like a car, is a good way of saying, like a bakkie. If you were to buy a bakkie, let's go back about three, four years ago, you'd probably pay about ZAR 500,000, if I would remember, something like that. That has doubled. And you know so along with that goes the parts for the machines and the replacement machines. It's not, everything in mechanized mining is not necessarily always cheap. And one must just bear in mind, these are imported euro and dollar costs. And that's really what you're seeing at Booysendal. There's certainly not a lack of cost control there. It's actually excellent, in my opinion. As you say, the run steady state run rate has been achieved now.
Perhaps there's a little bit more, but not much more. We'll run the mine to the mill. Once the mill capacity has been relieved, I answered that question with Chris in terms of the tailings dam, we'll see what we can do with a bit of a little bit more volume. On the inventory side, I think what did we say there? Really, just to expand on that, Alet mentioned there's a furnace rebuild coming. It's our number 2 furnace, which has now had a campaign life of 6 years. It will go a bit longer if we choose to, but we're going to bring it forward to May because we want to release that metal that's inside the box and have a good start for the new year, FY25. So that's a good point on the inventory. The last one.
Split Reef.
Split Reef is a permanent feature of the ore body in that region. I think, Damian, is it 6 or 8% on average? 8%. 8% on average is split reef. So you know you have it's a patchy geological occurrence. It's not a continuous thing. And we deal with it as we see it. But the most important thing to realize, we've mined a lot of it now, and we can mine it quite effectively. We struggled in the beginning, but the teams have figured it out. Do you have to mine it anyway because it's a part of the sequential activity of mechanized mining? You can't really go around it. Look for the next questions. Arnold?
Yeah, good morning, everyone. It's Arnold van Graan from Nedbank. Paul, two questions from my side. The first one is on the Eland decline.
How long can you idle that before it starts to impact the planned profile of that mine? Then the second one on the smelter rebuild. You said you want to do that before May, and there's ounces coming out. So two things. Is that rebuild or bringing that forward a financial decision or more technical decision, or I'm assuming a combination? And how many additional ounces could we see hitting sales on the back of that? Thank you.
Yeah, on the Eland question, we only have six months of float in that program. So beyond six months, it's going to start to hurt. That is true. And we would, inside the ZAR 4 billion I've spoken about, our first blush look at the business plan, we have allowed for a restart of the decline at Eland in July. On the release of metal out of a smelter, we'll see.
it's very difficult to say exactly what is in there. We've got obviously our mathematical calculation that says what's in there, but it's very important to break it out and value it before we commit on that number. Let's have a look. These things do tend to be quite, they're like sponges. T hey do tend to eat up a bit of metal over time. Of course, when we shut it down, we break it all out. You quickly reprocess it, actually. It's not that it gets stuck there. It goes through quickly, but then you put the furnace back online and you build the stock again. So just bear in mind, it's sort of a release and then a slow absorption again over the campaign life of the furnace. That's how it works.
And then the driver behind that, the accountants or the metallurgists?
It's really actually, it's a strange thing. It's a reporting period thing. You want to just make sure you get your June numbers. And remember, we have sort of a 6-week pipeline on the refinery. So once you get to middle of May, any production out of that furnace will not hit the end of June in terms of the financial outturn. So we're timing it for that reason. It's about a ZAR 100 million, job. It's a normal rebuild. It's nothing unusual. But it does have the effect of releasing metal.
The amount of metal in the furnace, by the way, relative to the rebuild cost, you're talking, I don't want to give a number so much, but it's certainly north of ZAR 1 billion versus the ZAR 100 million we're going to use to break it down and re-establish the brickwork there. So it is, not a difficult decision from a technical point of view to make. It's just a timing consideration.
Thanks, Paul. Thank you. Paul,
do you want to say something? Yeah, we've still got questions in the room.
Thanks, Paul. It's Leroy Mnguni from HSBC. You mentioned that the drivers of the increase in chrome production was more UG2, but also increased recoveries. What is driving the increased chrome recoveries, and is there scope for that to improve any further?
Then my second question is, you've previously mentioned that Amandelbult would be a good fit in your portfolio, or that that's one of the assets that you would consider in the market if it was to come up for sale. Could you please detail for us some of the synergies that you could realize from sharing a boundary with them, and whether or not it comes with Mortimer smelter, would that kind of make any difference to your decision?
Thanks, Leroy. On the chrome market, it's worth mentioning the chrome market itself. It's the stainless steel input, primarily. Stainless steel looks very strong, CAGR 4%-5%. The price of nickel coming down has brought stainless steel closer to mild steel, as we know it. And the consumption of stainless steel is looking very, very strong.
So we favour chrome as a product fundamentally, and we've done everything in our power to make sure the yield we talk about because it's in percentage terms now, the amount of chrome we can extract from the ore body that we mine is as high as possible. So you use the word recovery, we use the word yield. It's the same thing, really. We've put some small monies into improving the spirals and the classifiers and all sorts of other technical things that go with that spiral plant. T hese spiral plants, what they look like. It's a stacked, high steel structure with a gravity separation, a metallurgical process involved. And there are things you can do to maximize the yield, which we've been doing right across the business.
I remember when we started the strategy 10 years ago, we used to say we did get laughed at at the time, if I remember, that one day we'll be a million ounce producer and a million tonne chrome producer. We've already achieved the chrome production that we said we would do, and the PGMs is on the way. But chrome is a very, very important base metal, and we mine it. We need to maximize it, and that's effectively what we're doing. So it tends to be relatively small capital. And what Northam did, which is very important from a strategic point of view, we have secured the mine-to-market participation in 100% of the chrome production at Northam. That's not always the same model applied, but it's certainly the model that we apply, and we think it's quite important. It's also a good differentiator.
On the M&A question that you answered, I'm really not going to comment on it too much at all, Leroy, on the specific question you asked. I'll just talk generally. In this market, we are very internally focused by necessity. I think one must realize that the job at hand here now is very basic safety, production, cost, project execution, and that's what we occupy ourselves with. The difficult market conditions may, in the future, present opportunity, but at this stage, I don't think it's a current discussion. this market is of such a nature that if, once again, I'm digressing a little bit, but if it persists, and that's a big if, it's not that we can be absolute and all-seeing on the market, but if this market persists, it's going to bring significant change in the industry.
Northam has positioned itself to be able to participate in that change as a sort of a, you know, we're not no longer the smallest company. We're a medium-sized mining company, and we will work for our shareholders in terms of maximizing opportunity in the PGM space. We see ourselves fundamentally as a South African PGM miner. That's what we are. We're not a diversifying strategy. We believe there's enough opportunity remaining in PGMs for our company, and we'll participate to create value where we can. The best way I can answer it.
Understood. Thank you.
We've got one from Bruce in the front. Then we'll perhaps come to the lines from there just for the sake of time efficiency.
Morning, Paul. Bruce Williamson, Integral Asset Management. You talked about greater productivity once the Western number three shaft is fully commissioned and the crews can go down there. Can you try and quantify that by giving us some numbers?
Yeah. The best way of thinking about it conceptually is Zondereinde is mining laterally 4 kilometers from the current shaft system. So our people every day go down the shaft. As you know, it's a deep-level shaft. And then laterally, we travel in the haulages 4 kilometers to get to the face in the Western extension. That's a very long way for any mining operation for many reasons, but in particular, you could imagine people. So it's fatigue, safety issue, you know. And then on the productivity question, it takes time. So that traveling time is about 1.5 hours one way.
So we are removing, by having to do that at the moment, we're taking 3 hours off the workday. Instead of a full nine-hour shift, our effective time is six. So you know if I gave you, Bruce, an extra couple of hours a day in your workday, I think you would be you know your output will inherently should be higher unless you drink coffee all day, but I know you don't. So but you get my point. It's a nice way of thinking about the face time. For we're talking thousands of people, of course, will be greatly enhanced. The fatigue issue, the safety with respect to lateral transport, this shaft will drop the shift down to 20 within 20 minutes, you'll be on the face. It's going to be quite a change. And everybody at Zondereinde are really looking forward to this.
So I mean, what does that do to rent per ton or square meters per crew?
Well, square meters per ton will go up, and so will tons per crew. So square meters per crew and tons per crew will go up on that basis because they'll be more likely, on a probability basis, to complete the cycle in any one day. So the monthly face advance can increase. Okay, thank you. I think we probably should now go to the lines again for the sake of time. If we can start them or with the telephone lines first, and then we'll come to the webcast.
Thank you, sir. We have a question from René Hochreiter of Noah. Please go ahead.
Hello, René. Hello, morning Paul. Morning all. Thanks for the opportunity. My question is on the current production of Zondereinde, Booysendal, and Eland, the operations.
You're running them at just, my estimate for this year is just under a million ounces of 4E. At this point in time, the market doesn't need any more supply. Is there any more sort of planned or natural production going to come out of Zondereinde, Booysendal, and Eland over the next two or three years? I'm thinking about three shafts coming in. It's going to be more efficient. You're probably going to push up production at Zondereinde. Booysendal, I don't know if you've totally hit the plan of your expansion there. And Eland, you said you're going to triple the number of crews. So I'm just worried about the extra ounces or extra production that's going to come out of Northam over the next two or 3 years. Yeah,
Thanks, René. I think on Booysendal, the natural run rate for the current capitalized portion of that ore body is 500. That's , ore bodies, as you will know as a miner, have a natural sensible run rate. They should not be undermined because that's capital inefficient, and they should not be overmined because that will give you a bad unit cost outcome over time and not necessarily a sustainable outcome. So the natural run rate for the capitalized portion of Booysendal is 500. It also matches the current milling capacity. So we would not be, at this stage of the market, putting further capital into the Booysendal ore body above and beyond 500 for the moment because of this market condition. I made a half-hearted joke in Cape Town.
If somebody were to initiate either a greenfields project or a large brownfields project in this market, I think make me an appointment of the doctor. It's not really an advisable thing to do because of the level of uncertainty that we're facing. At Zondereinde, you're quite right. There is a capacity to increase production there at the Western block, which is a very substantial block. We're only just scratching at the moment from the original boundary. So but the three-shaft projects, as you point out, will give us efficiency, cost efficiency, and human efficiency, and actually a safety benefit as well. So that one we are going to do. It will give us organic growth at Zondereinde. That is true, but don't expect step change growth at Zondereinde.
As far as Eland is concerned, it's a very new, as I said earlier, very new; it's a baby in mining terms, actually. It's very, very young. And it has the ability to position itself quite nicely on that margin curve that I showed on the last slide. In fact, it's already moving up the margin curve. If we can just flick back one, I don't know if that's possible, Damian, but even in its current form, which is very, very a small number of crews, at 20 moving to 22 crews, you can see that Eland is already progressing its way up the margin curve. And we believe that Eland, because of its depth, it's a very similar ore body to Zondereinde, but it's a lot shallower, will be able to reach and exceed or improve its position against Zondereinde.
And why would we not do that from both a competitive point of view and from our own internal point of view? I think it's the right thing to do, and that's what we're going to endeavor to do. We're not blind to the market, René. I think I've said that before. We are obviously not blind to the market, but as we see it at the moment, we will progress these projects to improve the overall position of Northam on the profitability curve. It's our only defense, actually, against this difficult market condition because the classic commodity theory would tell you that the pressure lies here, clearly lies here. Thanks, René.
Just one more follow-up. Is your chrome production a function of your PGM production, or can you exceed the 1.3 million tons that you are hoping to achieve this year?
Yeah, I will go as far as to say that we could ultimately get to about the 1.5 level, not quickly. 1.3 this year, but there is potential for growth. Eland is a very wide chrome ore body. It's 1.6 meters chrome width, and of course, a lot of chrome can come out of Eland. Mustn't forget that it will be a substantial contributor to Eland.
Thank you. The next question is from Adrian Hammond of SBG. Please go ahead.
Hi, Paul, and Alet. Yes, I have a question for Alet. Firstly, Alet, a lot of your figures are put up adjusted HEPS. Is there a number that you can give us that you would adjust your published HEPS by? Also, the dividend declaration, could you relate that to the dividend policy as well?
Then for Paul, I'd just like to know a bit about the slag concentrator, increase in overall recovery for the group. Obviously, you've got a lot of inventory to work through, but what does that do for current arisings? And then a bit about the market. I'd like to know what you think about the stocking cycle at the moment, what you're hearing from your customers, perhaps. And then so notice your U.S. recycling is down 71% again, year-on-year. So could you perhaps give us some trends that you see here, which is a major source of supply at the moment? Thanks.
Would you like to take the financial questions?
Let me stand up. Thanks, Adrian. In terms of the cycle circular dealing with headline earnings, the loss on the sale of Iron Parlour shares could not be added back.
We definitely don't believe that that's part of our normal business operating procedure to sell shares. So we've added it back. And if you then add it back, the headline earnings would be around just over ZAR 3.40 a share. In terms of our dividend policy, it's a minimum payment of 25% of headline earnings. So if you take that number, it's roughly about ZAR 0.84 a share, which the board then believed should be rounded up to ZAR 1 a share. We have done a detailed assessment with regards to the liquidity and solvency of the company as well as the cash available and the cash generation going forward. And we believe that it's affordable at this point in time to return value to shareholders as part of our final stage of our strategy of ZAR 1 a share at this point.
Thanks.
Thanks, Adrian.
I think let's do the slag plant quickly, the technical one. There's two things to think about with the slag plant. One is we haven't been milling and floating slag since we began the growth strategy because the original very, very small slag plant at Zondereinde only catered for a small amount of the Zondereinde production historically. So it was a very suboptimal, tiny, tiny mill. So two things to think about. The new mill will now, on an everyday point of view, from an everyday point of view, be able to process the current arisings of slag. On top of that, we've doubled the size of it such that we can also catch up the backlog, which, as I mentioned, is about 800,000 tonnes of slag. So it's running today, it's running about 50 tonnes per hour as we are standing here.
It can go a bit higher than that, but we're early commissioning 50 tons an hour. The grade is about 2.5 grams a ton, and the recovery is about 70%. So you can perhaps just do. I haven't got the ounces in my mind, but you can do a sum of that basis. 50 tons a day, 94% running time, 70% recovery, and 2.5 grams a ton is a very good number. And there's 800,000 tons of the stuff to get through. So it will take us a little while. In terms of the market, it's very quiet out there. There's no. I can give you no news that we know that we wouldn't have told you already as the audience. It's quiet. So we have not yet seen good buying signals from the market. There was a little bit of nibbling on rhodium last week, you may have seen.
But it wouldn't be. It's not getting as excited at this stage. On the recycling question, you're 100% correct. Not only is primary supply under pressure, but you can't make money in the recycling market at these prices. It's not possible. So all the recyclers are also losing money. And of course, the recycling volumes are significantly down across the world. You will have seen some pretty high-profile numbers coming out of the North American market, which is the largest recycling market in the world. Recycling is down. You can't make money at these prices. Thanks.
Thanks, Paul.
Thanks, Adrian.
Thank you. There are no further questions on the conference call.
Thank you. Damian, can we move to the first one? Maybe Alet. Do you want to speak to your debt maturity profile and any refinancing plans?
So at the moment, our DMTN note programme has been scheduled over a number of years. For the remaining of this financial year, we will settle DMTN note to the value of ZAR 3.6 billion in May. For the next financial year, it is around ZAR 4.2 billion. So it's spread evenly as our production profile will increase. We also have facilities available to the value of ZAR 11 billion in an RCF and a GBF, which is fully undrawn and available to the group.
Great. Thanks. Sorry, that was from Patrick at Mergerm arket.
Thanks, Peter.
From Thando Sobhani, do you think the basket price has found its bottom?
That's a great question, Thando. Yeah, it's you know, I mean, really, you know probably the way we would think about it is that this is not a sustainable this is not a sustainable picture.
The current basket price puts many sizable, quality, long-dated assets underwater to a significant degree. That is not a sustainable situation. If the world wants PGMs, and we believe very firmly that the world both wants and absolutely needs these metals, they're such a special group of metals, we the world the basket ultimately will have to support the production effort and give commensurate reward for the risk that the mining industry takes. That's the best way of answering the question. I would like to believe we've reached the bottom, but this already is a very bloody picture.
Adam Esat, I think you've answered this question, Paul, but Adam Esat from MIRF asked in respect of slag treatment, do you have a metallurgical solution? I don't think the answer who gave the answer was yes on that one.
Yeah, I'd just like to thank the contributors, both of you, for those questions. Thanks.
From Sandile at Tom Wealth, have you considered diversifying PGM earnings? And he's asking specifically about would buying chrome assets make better sense to you than paying a dividend at the bottom of the PGM cycle?
No, we have enough chrome resources. And we're not a diversifying strategy. We believe and still believe that our strategy should be solely focused on Platinum Group Metals. There's enough opportunity for our company.
And also from Sandile, and I think you've also answered this, Paul, is there a level of PGM basket price that where it would make sense to limit or sacrifice tonnage from Booysendal?
I think Booysendal is the most profitable mine in the business, clearly. We will not be limiting Booysendal on its 500,000 ounces.
No, Sandeela, it wouldn't make sense. It's the cash cow of the group.
And then last question I have at the moment, Cameron Needham from Bank of America,
have you had any engagement or are you aware of any engagement with Western authorities regarding the potential rolling purchasing programmes or stockpiling in order to keep prices supported and help keep North American and South African assets running? PGMs are still classed as critical minerals in Europe, so I can't imagine U.S. and EU autos wanting to be reliant on Russian supply.
Thanks, Cameron. By the way, the critical bill in Europe did not well, let me put it this way. It sort of refused the hurdle, and it probably now will not make the current EU Parliament timely enough. So the critical minerals bill on that side didn't make it or won't probably make it.
I'm not aware of any government initiative to help with stockpiling critical metals in the sense that trying to help to sustain mining operations. I'm not aware of any of that taking place. I'll repeat, a short conversation with our Russian colleagues; even there, it's not the case, as far as we understand. So I would say that's not happening, and the mines are fully exposed to these metal prices.
And that's all the questions.
Okay, thanks, Sandeela, for those questions. Thanks, Cameron. I think we've now exhausted the questions, so we've got one last slide to leave you with. Please, as you're walking out of the room, bear a thought for the kids of Krauser Primary School at Northam Town. They've got a mathematics class this morning. Thanks very much, everybody.