Earnings Call: H1 2021

Jul 26, 2021

Good morning, and welcome to our virtual presentation of Anglo American Platinum's 2021 Interim Results. Thank you for taking the time to join us today. I am Natasha Foljune, the CEO. And I'm joined today by Craig Miller, our Finance Director. And together, we will present the first half performance. We also have time for questions and answers at the end of the session. I would like to draw your attention to the cautionary statement, which we will appreciate if you could read in full in your own time. Before we start, I will take a moment on behalf of everyone at Anglo American Platinum to pay our respects to the victims of the COVID-nineteen virus and the recent social unrest experience in South Africa. We support government's efforts to halt the lawless behavior, and we are committed to playing our part to rebuild our country. I would like to express my appreciation to all our colleagues at the operations, our medical facilities and corporate office. The past 18 months has been a real test for those that have lost loved ones and took on additional family responsibilities, all whilst continuing to contribute to the success of our business and protecting lives and livelihoods. We extend our deepest condolences to those that have lost family members, friends and colleagues. And out of respect, we will observe a moment's silence. Thank you. Turning to our first half performance. Our 6 month performance has been strong. We had no fatalities at any of our operations. We made a significant economic contribution to stakeholders and society, totaling almost ZAR40 1,000,000,000. We had a solid recovery in production despite managing through the effects of COVID. Through our focus on P101, We improved operational stability, leading to a recovery in metal in concentrate production and a significant increase in refined production due to the strong performance of the ACP. We continue to see a robust market for BGM with a record at price up 29% in rand terms. In addition to the significant contribution made to all our stakeholders And in line with our balanced capital allocation framework, we are pleased to deliver industry leading returns with a total dividend of ZAR46.4 billion for the first half, equating to 100% buyout. We are in full swing to deliver on our 4 strategic priorities, which ensure we capture maximum value. Our market development work is fundamental to ensure a sustainable market for our products. We are leveraging capabilities through our market development activities, And capture development work is fundamental to ensure sustainable market for our products. We are leveraging capabilities through our market development activities and capture value from adjacent value chains. We are embedding antifragility across our business with the aim to increase our ability to learn and thrive from major disruptions. This Strategic priority forms the basis of the successful execution of our strategy. We have a world class portfolio of assets in an integrated value chain. We are maximizing value by driving for benchmark performance and deploying technology and innovation to drive efficiencies and growth with targeted investments that will generate incremental value. Finally, we are building on our and performance to become a leader in ESG. We are embedding this at the center of our strategy to ensure a healthy environment, Helping Create Thriving Communities and Becoming a Trusted Corporate Leader. Our people make it happen. The creation of a purpose led values driven high performance culture is the foundation of our strategic delivery. Turning to our ESG performance. Due to our continuous efforts to achieve 0 harm, We had no fatalities at any of our operations. However, we saw disappointing deterioration in our injury rate to 2.7 in infection rates leading to higher absenteeism as our employees isolate or recover. This is particularly prominent amongst our miners and frontline supervisors. We have seen this at our Mondelebult and our project sites. As we have set up our own PCR testing equipment, our testing rates have significantly increased, as seen in the light blue in the right hand side chart, allowing us to keep employees safe and healthy by keeping infected employees in isolation facilities under supervision and away from the workplace. Our strong focus on health has not stopped at COVID, and we are actively managing cases of chronic illness, including HIV and TB. The response to COVID requires a collective effort. With our COVID protocols firmly embedded in the workplace and with the extensive physical and Mental health support available to our teams and their families, we are doing everything possible to keep our people safe. We are supporting our communities through food provisions to vulnerable households, water supply, support to schools, clinics and hospitals and investments in centers for victims of gender based violence. The company supports the vaccine program led by the South African government by facilitating registration on the national system for all our employees and contractors, establishing and running accredited vaccination sites so that every employee and contractor has access to a vaccine. We are also assisting the lymphopo health department in partnership with De Beers by providing equipment for the community vaccination program. In Zimbabwe, we are helping our employees to access the government led program. In the light of the impact of COVID and the recent social unrest in parts of South Africa, We are stepping up our support by committing ZAR400 1,000,000 to extend our We Care program. This will include mechanisms for financial for employees who need additional support, food relief packages and other necessities for vulnerable communities and projects to stimulate economic recovery so that we can continue doing what is right for our employees, our communities and for South Africa. We have made a meaningful Economic Contribution to Society. In the first half, this totaled almost ZAR40 1,000,000,000 and included paying taxes and royalties of ZAR16.6 billion, spending ZAR2.2 billion on products and services from local and doorstep community suppliers. Investing ZAR300 1,000,000 on social and community commitments, including COVID support and paying ZAR5.5 billion on wages and salaries, including for vulnerable employees not capable to return to work due to COVID. We've invested ZAR5.2 billion on capital projects and are paying ZAR9.4 billion in dividends in respect of the second half of twenty twenty. We remain committed to making a meaningful contribution to society and being a trusted corporate citizen whilst ensuring meaningful returns to our shareholders. We have set 2,030 targets to improve energy efficiency and reduce absolute greenhouse gas emissions by 30% against the 2016 baseline and to achieve 0 Scope 12 emissions by 2,040. Our total Scope 1 and 2 emissions in 2020 amounted to 3,940,000 tonnes of CO2, with the majority coming through the use of coal powered electricity as well as the use of diesel and coal at our operations. Just under 1,000,000 tonnes came from Mogalakwena, where most of our diesel associated carbon emissions are generated from our truck and shovel fleet. So to reach our goal of 0 emissions at Mogalakwena, we've broken down our plans into 4 areas. Firstly, business improvement and B101 opportunities that addresses efficiencies are underway. We are selecting a developer for Phase 1 of the Mogalakwena Solar PV facility, which will be approximately 100 Megawatts. We are trialing our 300 tonne hydrogen fuel cell mine truck, and the technology will be rolled out across the rest of the fleet. And finally, as part of the Anglo American group, as a result of our geographic distribution across South Africa, we are Collectively Evaluating Options to Access Multiple Forms of Renewable Energy. We are very excited about the progress we've made towards our 0 emissions mine solution at Mogalakwena. We've completed the design and build of the infrastructure required for the production of hydrogen, its storage and refueling. We have done significant testing of the haulage truck's fuel cell and the integrated drivetrain with delivery to site in the Q4. We've done the high speed hydrogen refueling test and installed the relevant hydrogen storage capacity. And we are currently installing the and installed the relevant hydrogen storage capacity. And we are currently installing the electrolyzer with first hydrogen production due towards the end of the year. Moving on to review our production performance. In total, our PGM production in the first half increased 28% compared to the prior period. Now as H1 2020 was materially impacted by COVID, we have rather compared ourselves to the performance of the first half in twenty nineteen and took into account the end of life sections of Amandelbult. We were able to maintain our production levels. We are realizing the benefits of a diversified portfolio of assets. As you can see on the right hand side, We have a strong contribution to mining EBITDA from all our own mine operations and our Mandelbult, in particular, due to the high rhodium content. We saw a strong recovery in metal in Kong production despite managing for COVID. Our focus on embedding antifragility, which includes asset reliability and implementing the operating model, has resulted in increased stability and productivity, and we'll continue to progress this throughout our operations. Mogalakwena had a solid mining performance with minimal disruption from COVID. Operational efficiencies, including higher concentrate throughput, resulted in production up 14%. Total BGM production at Amandelbult increased by 57% despite staggering the return to work in January and high levels of labor absenteeism due to COVID. Lower concentrator availability at the end of the period resulted in stock buildup in front of the concentrator, which should be released in H2. The turnaround program targeting stability to address safety and productivity is underway and has delivered encouraging results. This will support the life of asset planning work that is reviewing the optimal solution to take this operation to the first half of the cost curve. Mototola production increased by 45% despite also encountering a slow start to the year due to COVID. Ungi continued setting benchmark with another strong performance, increasing by 23%. During the period, they set new operational benchmarks for mining increased square meters mined per month to 4,000 by the leading mining teams. We also had a strong refining performance, particularly from the ICP, following completion of the rebuild in 2020. The chart on the left hand side shows the average daily tonnes converted It's much higher than the previous numbers achieved. This allowed us to smelt more matte, particularly from Polokwane, where we built up higher levels due to the good performance of Mogalakwena. The furnace mat from Polikwane is lower at PGM grade due to the higher base metal content in the Mogalakwena concentrate. And with lower ICB converter capacity in 2020, we deliberately targeted our Higher Grade Furnace Mat for Processing. The ICP Phase B rebuild is due for completion in the second half. We are progressing the feasibility studies related to the open pit mining and concentrated capacity at Mogalakwena. That should be completed by the end of the year, and we will seek necessary approvals shortly thereafter. In addition, work continues on all work streams with notable progress. We are improving our engagement with communities, rebuilding trust and resetting the relationships, which is crucial to a guaranteed social license to operate. The operational efficiencies focusing on load and haul delivered a circa 20% increase. In support of the underground opportunities, we have fast tracked early works on our exploration decline. This twin decline will deploy both a tunnel borer and modern drill and blast mining methods. A full scale bulk ore sorting plant has been commissioned, aligned with our accelerated deployment of technology with integration and optimization ongoing. The modernization program at our model build commenced in 2018 with plans to use Modern Technologies to Improve Safety, Mine Productivity and Simplify Operational Logistics. This program was designed to transition Amandelbult from purely conventional mining methods to a hybrid mining method utilizing a suite of modern equipment and continuous operations. Early safety enhancements were achieved through the use of improved LED lighting, full coverage, geotechnical design safety nets and ground support indicators. Success is now being demonstrated through the introduction of cycle mining on each half level of the mining operations. This is the reorganization of labor to work systematically through the mining cycle within stoping horizons. When fully implemented, this will bring a significant increase in LIBOR efficiency. The trial of alternative drilling patterns with the use of emulsion explosives. As demonstrated, improved in stope material movement. Throblasting in stopes, when used in conjunction with newly developed winch proximity detection systems, results in a much safer working environment. New remote drilling technology has been developed, providing improved penetration rates and reduced operator exposure. The new mining system design has resulted in an illuminated decongested workplaces that will allow for work to be executed safely and sequentially within a more efficient mining cycle. These should be in place by the end of 2022 when we should start to see the benefits come through. Maximizing value from our core is a strategic priority. As we detailed in our strategy update in February, We have a number of deliverables, which will see our overall PGM production increasing to approximately 3,600,000 PGM ounces by 2,030. We are progressing the operational efficiencies, including the concentrated debottlenecking at Unki and Ot Mototolo, each contributing an additional 50,000 PGM ounces. We are improving loading and hauling at Mogalakwena and the benefits of the modernization and cycle mining at Armando Belt, amongst others. As we continue the feasibility study at Mogalakwena, we can increase PGM production by up to 600,000 ounces with associated increasing base metals, again highlighting the benefits of this world class operation and polymetallic orebody. Beyond this, we are assessing future projects, including the growth at Mototolo and the ongoing mechanization development at Amandelbult, currently being trialed at Tumela 15 East. Together, this could drive further value from our portfolio. I will now hand over to Craig to take us through the financials. Thank you, Brake. Thank you, Natasha, and good morning, everyone. I'm pleased to be reporting a very strong set of financial results. Revenue of ZAR107.5 billion is up 155% on the prior year, underpinned by a robust PGM market, driven by 29% increase in the rand PGM price as well as recovery in refined production relating to the ATP incident in 2020. We're reporting record EBITDA of ZAR63,300,000,000, Realizing an EBITDA margin of 71%. Headline earnings increased 573 percent to ZAR46.4 billion, and we achieved a return on capital of 207%. The company's balance sheet remains strong with net cash of ZAR57.6 billion, up ZAR39 billion from December. On the back of these strong results and in line with our disciplined capital allocation framework, the board has declared an interim dividend of ZAR46.4 billion or ZAR175 a share, which equates to 100% payout of headline earnings. Turning to EBITDA. EBITDA of ZAR63.3 billion, a 3 85 percent increase From the first half of twenty twenty is a new high for Anglo American Platinum. This increase is mainly due To the higher U. S. Dollar PGM prices, particularly rhodium, which more than doubled and platinum, which was up 34%, contributing ZAR43.4 billion. The increase was partially offset by the stronger randdollar exchange rate, Inflation and higher royalties, which reduced EBITDA by ZAR14.1 billion. EBITDA Also increased as a result of the 109% increase in sales volumes following the improvement in the availability and the stability of the ACP leading to greater throughput, refined production and sales. Trading volumes returned to more normal levels In 2021, with activities focused on realizing value from all our products. During the 1st 6 months to June, EBITDA generated from trading was around ZAR0.5 billion. The overall group EBITDA margin increased from 32% to 59%. Trade working capital At the end of June was ZAR9.9 billion, a reduction of ZAR700 1,000,000 in the 6 months. On the back of the improvement in refined production, there was a release of about ZAR2 1,000,000,000 or 200 1,000 work in progress PG amounts. However, the value of inventory, being metal or stockpiles and stores, Increased by ZAR7 1,000,000,000 as a result of an increase in prices, mainly affecting purchase of concentrate stock value. As previously guided, the buildup in work in progress furnace mat is expected to be released by the end of 2022. The net decrease in working capital was also attributable to the increase in the customer prepayment of ZAR7.6 billion, Taking the net value to CHF26 billion. Our cost performance is a disappointment in the half, with cash operating costs Per PGM ounce produced, in line with the comparative period at ZAR12572 per PGM ounce. Mining production increased by 28% compared to the 1st 6 months of 2020, reflecting the reduced impact from COVID. However, input cost inflation increased significantly above CPI to about 8% due to price increases in electricity, Materials and consumables on the back of higher steel prices and oil price rises as well as wage increases exceeding CPI. COVID production related losses of 40,000 ounces in the first half and the mitigation plans to Protect production, particularly at Amandelbult, resulted in a ZAR290 per PGM ounce increase in unit costs. The cost increases were further exacerbated by additional labor and maintenance costs to ensure asset integrity across our operations. In order to address these increases, we're doubling our P101 improvement efforts to drive greater efficiencies and throughput from our assets, Reviewing our mine plans and cost base, ensuring greater asset reliability and improved planning through the implementation of the operating model. The continued impact from COVID and the sharp rise in inflationary increases experienced in the first half of the year are expected to continue into the second. And therefore, our full year unit cost guidance is between ZAR12000 and ZAR12500 per PGM ounce. Turning back to cash flow. The company ended the period in a strong cash position of ZAR57.6 billion, An increase of DKK39 billion from the end of 2020. Cash from operations was DKK62 billion, up from the ZAR1.8 billion generated in the first half of twenty twenty. These cash flows were used to fund capital expenditure And capitalized waste stripping collectively amounting to ZAR5.2 billion. Taxes and royalties paid to the fiscus amounted to ZAR16,600,000,000, an increase of ZAR14,400,000,000. The net cash position is after the payment of the 2020 final dividend of ZAR9.4 billion. The company has sufficient liquidity With unutilized committed debt facilities of ZAR20.6 billion. Capital expenditure of $5,200,000,000 was higher than the prior period, reflecting the new asset reliability maintenance programs and the recovery in operating activities following the COVID disruptions in 2020. The main components of SIB expenditure Include the replacement of heavy mining equipment at Mogalakwena, the construction of tailings storage facilities at Mosutoro and Mogalakwena as well as the ACP B rebuild. Project capital of ZAR0.5 billion was incurred on the future of Mogalakwena feasibility studies, the development of the mechanized Tumela 15 East dropdown as well as progressing the feasibility study at the De Brokhen replacement project at Mototolo. Breakthrough project capital was incurred on equipment required for the modernization of Amandelbult, on the copper leach project at the Base Metals refinery and Unki and Motortola debottlenecking projects as well as completing the first phase of the bulk ore sorting plants at Mogalakwena. Year to date capital expenditure is below our plan. However, we retain our full year SIB capital guidance. This is, of course, subject to any further potential COVID-nineteen disruptions. In line with our disciplined and value focused approach to capital allocation, the board has approved an interim dividend of ZAR46.4 billion for ZAR175 a share. This comprises the base dividend of 40% of headline earnings equating to ZAR18.6 billion of ZAR70 a share and a special dividend of ZAR27.8 billion equal to ZAR105 per share. This takes the total payout ratio to 100% of headline earnings, equivalent to an 11% dividend yield. Community Trust share schemes can expect to receive approximately ZAR245 1,000,000 in respect of the first half dividend, Supporting much needed investment and relief in the communities. This is an excellent performance and reflects our ability to deliver industry leading returns. Turning now to a review of the markets. The first half of twenty twenty one Was a record period for PGM prices. Our realized dollar basket price averaged 47% higher than in the first half of twenty twenty, led by 168% increase in the rhodium price, while palladium averaged 22% higher over the period. Platinum was up 38% year on year to $11.70 per ounce. For the minor PGMs, iridium hit an all time high to average $5,300 per ounce, Waruthenium reached a 14 year high, up 80% to average $4.70 per ounce. In the short term, demand from the automotive sector, which makes up approximately twothree of gross PGM demand, has been robust. Since the COVID shock in the first half of twenty twenty, we've seen an impressive recovery in auto sales and production, which has continued into 2021. However, the growth has slowed due to the semiconductor chip shortage, which has reduced auto output by around 4,000,000 vehicles in the first half. Despite this, underlying demand for cars has been very strong, Especially in the U. S. And China, and inventories are now low. This points to a strong production recovery when the chip shortage eases. And while the outlook for the recovery is uncertain, this seems likely in the second half of twenty twenty one or early 2022 at the latest. Rising auto production is positive for all PGMs, but we expect platinum to see faster growth as it substitutes A portion of the palladium in the gasoline catalyst. There might be a role for palladium to replace rhodium in the catalyst, But our research suggests this is limited. Looking in a bit more detail at each of the major PGMs. Platinum hit a 6 year high in U. S. Dollar terms in the first half. This was investor driven, indicating confidence in the future demand prospects from gasoline automotive substitution and from the hydrogen economy. Platinum has fallen back a little since then, and in 2021, it will be in surplus after 2 years of deficit. While industrial platinum demand is strong, growing 14% on the back of solid capital investment, Platinum jewelry demand continues to underperform, with the retail sector still subdued due to COVID. Further out, We forecast platinum to return to deficit in the next few years as these positive future prospects start to materialize. Palladium It's a record high of over $3,000 per ounce, driven by strong demand and lower supply. This comes following 10 consecutive years of annual deficits, showing tightness in the market. We expect palladium will remain in deficits in the next years due to strong automotive demand, driven by a combination of recovering global light vehicle production and ongoing high palladium loadings. We do acknowledge that the palladium deficit should start to shrink A substitution by platinum in gasoline catalysts and the growth of sales of battery electric vehicles bring this metal into balance. Rhodium's remarkable price performance during the first half, averaging nearly $25,000 per ounce, reflected a continuing fundamental deficit. Firm automotive demand driven by robust automotive production And high rhodium loadings outweighed still constrained supply. The pullback in price by midyear reflects both improving supply and worse than anticipated auto production trends owing to the semiconductor issue. For these reasons, we expect The rhodium market to be in balance in 2021, yet increasing auto production means that the deficit is set to grow again from 2022. Looking now to the medium term. The chart on the left hand side shows tighter emission standards that meets higher PGM loadings for light vehicles as demonstrated by the various stages of European legislation. This has been further enhanced in recent years by more realistic real world testing, effectively making these emissions rules tougher. Although there is always considerable pressure to Thrift Metals. As Euro 7 legislation is introduced later this decade, we expect to see another increase in loadings. As best in class technology reduces emissions in autos rolled out globally, we expect to see a similar story In large and growing markets of China and India, this should support and ensure global automotive PGM demand remains robust Now turning to our market development activities. In line with our strategy, we continue to stimulate new markets. The development of the hydrogen economy remains an important source of incremental future demand for PGMs. Many market commentators suggest that nations will not be able to fully decarbonize without green hydrogen playing a role. We have seen an acceleration of commitments worldwide even in the last 6 months, with a number of large fell projects announced increasing to 359. Government pledges to develop the hydrogen economy increasing to $76,000,000,000 69 gigawatt of electrolyzer capacity announced with more planned. We have long understood the potential of the hydrogen economy for BGM demand and have been involved in market development for many years. We remain actively involved in advocacy of the hydrogen economy with Anglo American being one of the first members of the Hydrogen Council. We have leading roles in industry bodies in South Africa, the U. K. And China. The spin out of IP Ventures has enabled them to increase their committed funding to nearly $400,000,000 which has so far been invested into 17 portfolio companies at various stages of the hydrogen economy cycle. Beyond the hydrogen economy, we are working on progressing PGM demand in a variety of end use sectors, which utilize the full basket of PGMs. You are likely familiar by now with our co funding of the Line Battery Technologies to develop palladium and platinum enabled solutions for lithium batteries. We have recently been awarded 3 patents to take this technology forward to ultimate commercialization. Our collaboration with alloyed in the U. K. Created the world's first physical and digital alloy capability for PGMs. The potential of new alloys is allowing us to develop multiple projects in the jewelry, aerospace and industrial sectors that might open up untapped markets and other segments. The computing world is an opportunity area for PGMs. We are moving towards both a sustainable and more data centric society, and we'll need more devices or hardware with better performance and with lower energy consumption. This is where spintronics such as magnetic memories or MRAM come in. In the last 12 months, we have established collaborations to research PGM materials that may enhance or enable memory capacity. In FoodTech, we are commercializing PGM based technology that prolongs freshness of food, thereby minimizing food waste. In Japan and China, together with Furuya, we have established the Feet Eco Company to develop and commercialize applications for home and retail appliances. We just concluded Sales for e commerce consumer market test in Japan and have identified our production site in China. Each of these value propositions are underpinned by PGM enabled or PGM enhanced products, which should stimulate future demand for our metals. I want to conclude our presentation with our 2021 guidance and a summary of the first half. We have made some revisions to our guidance for the full year. Our metalline concentrate PGM production guidance has been tightened to between 4,200,000 4,400,000 PGM ounces due to lower third party concentrate receipts and the ongoing effect of COVID on operations. Our refined PGIM production has been revised upwards and tightened to in 4,850,000 ounces as we have proven operational stability in our processing operations and continue to be confident that we Can Drive Performance in the Second Half. Our PG and E sales volumes guidance, excluding trading activities, We'll revert to becoming line with the refined production as we will have a small rebuild in refined metal inventory. Our unit cost per PGM ounces per PGM ounce will increase to between ZAR12,000 and ZAR12,500 per PGM ounce as we see continued inflationary pressure on utilities and consumables. To end with a summary of the first half, Safety remains a key priority, having achieved no fatalities at any of our operations, and we continue to focus our efforts on eliminating injuries. We will be a trusted corporate leader through our responsible economic contribution to society with a value add of almost ZAR40 1,000,000,000. Our focus on asset integrity and reliability was has been proven through our operational stability with recovery in metal and concrete production performance and a significant increase in refined production. And we have plans in place to further drive value from our assets. We are confident about demand and continue to see a robust market for PGMs. Through our market development efforts, we will continue to leverage and grow this demand. We are proud to deliver industry leading returns with record EBITDA, a strong balance sheet and a total dividend for the first half of ZAR46.4 billion equating to 100% payout of earnings. We continue to deliver on our strategic priorities to ultimately achieve our purpose of reimagining mining to improve people's lives. That concludes our presentation, and thank you once again for joining us. I now hand over to Emma Chapman, our Head of Investor Relations, to facilitate our question and answer session. Thanks, Emma. Thank you, Natasha. Just a reminder today that if you are joining on the webcast that you could submit questions through the question box. And alternatively, we also have a conference call line where people can join and submit live questions. So with that, I will firstly go over to the conference call line and can we start to take some questions there please? Thanks. The first question It's Sascha and Craig. Thanks Just a bit Bothered about Amandelbult's performance. It's running at about 70% of 2019 levels. And I'm wanting to know when it could return to 7,000,000 tonnes per annum again And appreciate that absenteeism and Eskom has been causing issues for this mine, but it stands apart For many of its conventional peers. And secondly, costs, quite an astronomical increase in costs, 9% for your guidance. And I appreciate there's inflationary pressures, but those Would have been foreseen. So are you employing contract more contractors to support your production base going forward? On the sort of outlook for CapEx, obviously, you haven't changed that, but You have paid 100% of your dividend and you certainly must be confident on your capital growth program. Be curious To know what the results of the pilot testing at Masala Buena have yielded thus far and how you're thinking around The expansion or the size of the expansion for Mogalakwendi could be. And then lastly, You're very bullish hydrogen. You certainly painted a very bullish picture for China as a future demand, some 6,000,000 ounces, flattened by 2,035. So what are your plans or do you have any rollout plans Other than your own fleet in South Africa to incorporate a hydrogen economy on your own turf. Thank you. Thank you, Adrian. And some very good questions there. And to start off, I I believe it's your birthday today. It is? Yes. I think you should give me a little song, okay? I'll rather answer your difficult questions. How's that? Happy birthday, Adrian, and very relevant questions. So Adrian, I'll start off with the Amandelbult question and I'll ask Graig to come in on costs and CapEx as well and I'll come back to the Hartejern question. So if you reflect on the closures and areas specifically in Tumelaapa, That areas in Amandelbult that's closed and you normalize Amandelbult's performance H1 2019 to now, We are flat in terms of production here on here. And that's despite the fact that we did see the impacts of COVID and absenteeism. So Craig will touch on the fact that we did indeed increase LIBOR to last year already to address some of the absenteeism due to people, vulnerable employees not being able to come to work. And that certainly was a portion of the cost impact. And Craig will deal with some of the other cost impacts. So back to 7,000,000 tonnes. We are currently, as part of our modernization rollout, the extension into 15 East. We are busy with the work that we've touched on in creating stability and that rollout program with a life of asset plan review to map out the way forward for Armando Bult. It will have it will obviously include the work that we're doing in 15Es and future growth opportunities going forward. But I think you just need to consider the areas that we've closed that came to the end of their life at Armandelbult. Craig, do you want to Yes, certainly. So Adrian, happy birthday again. Just in terms of the Cost, yes, so as clearly articulated, we're clearly disappointed with our cost performance in the first half. We have seen And some really significant inflationary pressure coming through the business, particularly as a consequence of a lot of the higher input prices We've seen on the back of high steel prices, copper prices and oil prices. The consumables constitute around about 30% of our input costs, We've seen that sort of increase on average around about 10% year on year. So that's a significant driver and not necessarily anticipated in terms of The increase that we've seen there and coming through the business. So yes, so that is something that we're focused around. We've got we're redoubling our efforts with regards to P101, driving those efficiencies, driving those improvements and also making having a look at our cost base overall again. We have also incurred about ZAR290 per PGM ounce of additional costs associated with COVID, particularly in the 1st 6 months, that being the loss The impact of the lost production, so around about 40,000 ounces, but also those additional costs that we've incurred, particularly with regards to additional labor, The contractors and some of that and additional overtime in order to continue to maintain production. So it's certainly there, but For us as a business, I'm very focused around how do we bring our costs back in line with what we're anticipating. And as we articulated back in February, our ambition is to get all our assets into the lower half of the cost curve, And that's what we're actively working on. In terms of the CapEx, so yes, I mean, our CapEx spend at ZAR5.2 billion in the half year It's below what we had anticipated spending, and we've maintained our full year guidance. But I think for us We are starting to see the impact of COVID and we've seen that on some of the contractors in the first half Either through our own onboarding and testing of those bringing people onto site, there was a bit of disruption in the earlier part of the year. We've got that process sorted out. So we've maintained our full year guidance, but with that warning that COVID could continue to impact that. But The business is confident that we'd be able to that we will be able to spend the CapEx, but I do think there's a bit of A warning there that it might be impacted by COVID. Natasha, do you want to talk about the hydrogen? Yes. So, Ai jen, from a hydrogen point of view, I think quite a bit of work that's happening in our world. We Obviously, we have driven the technology development around hydrogen for quite a number of years now. We have been part of the first members of the Hydrogen Council. But I think closer to home and actively involved in that hydrogen development, we are working in a couple of collaborative processes to develop the hydrogen corridor here in South Africa, and we hope to make more specific announcements around that coming up. We also through our IP Ventures and opening out to IP Ventures, who now has access to $400,000,000 and is targeting 17 different projects that focuses on the development of technology across the entire extent of for the hydrogen value chain. So quite a bit of activity in that area, both locally in South Africa, broader in globally and then both in the technology development and advocacy areas to support the development. I hope that's covered your questions. Thanks, Natasha. Yes, just on the pilot testing from So, Arun, the approach that we're taking with technology in terms of The fast track deployment is that we have tested technology on a bench scale, understanding that it works. We have now built a full implementation program where basically all our feed goes through that bulk all sorter and not ready yet to talk to the outcome of that. It is in an optimization process and we are optimizing literally in full scale as we integrated into the broader system. Thanks so much, Natascha. Thanks, Craig. Thank you. The next question comes from Chris Nicholson from RMB Morgan Stanley. Please go ahead, Chris. Good morning, Natasha and Craig. Thanks for the call. My initial questions were also going to be on costs. And I do think that's a bit of a stand up, but I'm not Flogadet Horsoft agent has asked most of the questions there. Potentially, could I ask a question on the Kalaquena. For the first time in these results, you've talked about having to resettle some of the communities at Mogalikwena. So two things. I think we've seen in the past, I remember there were some issues with Kumba that this does hold the potential to actually delay some projects. How material is that resettlement? Would It has to be under both the open pit and underground option, so maybe a bit more detail around that. And then Strategy Day in February this year, you talked about a little bit about redefining the relationship with the communities there. Could you provide any further info on that? Are you talking, I don't know, an ownership on the mine? What exactly are you looking at In terms of that community relationship. Thank you. Chris, thank you for those questions. And just to confirm, Craig did talk about cost, but cost is a huge priority for us. So just to underscore the point that we cost and safety is remind you of our biggest priorities going into the second half. So to then touch on Mogalakwena and the resettlements of communities. We do indeed need to look at the resettlement of Skimming and Lerra Leng. And we are still busy concluding some of the final resettlements at McLaughlin. Now we have over Many years learned and progress our maturity in these resettlements, I would argue significantly. And we are following our own Anglo social way, which is aligned with global best practice. And we would actually like to talk about resetting or resetting and reestablishing livelihoods instead of just resetting. And there's a very important difference in that, in that we take cognizance of assuring that when we do have to move or want to move communities that we reset full livelihood and not just move. It is a big part of the project, both for the open pit because of Despite the fact that we're fast tracking the underground potential, we still need to move skimming and lerolling, because we are in the next couple of years, we will move within the kilometer radius of some of these communities. And we are currently already putting mitigation in place, mitigation around areas like blasting practices, dust and vibration control. All of those processes are well underway. We have started very early. We have we're reviewing that relationship under 4 pillars. There is an open up of communication lines and Transparency of how we're engaging, transparency on aspects of procurement, job opportunities and really just to making sure that there is trust and transparency in that communication. That's the first one. The second one is protecting value and that is to make sure that We close out and ensure that all of our commitments that we have made to these communities are indeed closed out on. The third one is value creation. And I think this is certainly the one that's most exciting because that targets on how we establish self sustaining communities who aren't only looking at us for livelihoods but will can indeed have economies outside mining to sustain their livelihoods. And then the last aspect is resetting recycling and land access. That's the area where we are actively now already starting to engage with communities for the future resettlements. We've all started very early. The first engagement period that we've started is 30 months And only then, we will start to really getting into the execution of any resettling. I think the underground needs some specific attention because of it will certainly reduce any future surface impact. And that is the reason why we're also then fast tracking the exploration through the exploration decline to be able to define what that underground options would look like sooner. Chris, I hope I've answered your question. It's great. Thank you. I'll follow-up later with more. Thank you. Thank you. Sorry, back to the conference call. Thank you. The next question comes from Patrick Mann from Bank of America. Please go ahead, Patrick. Two main questions, please. Just one the First one is on the inventory unwind. So given that your 3rd party receipts are a bit lower and the ACPs seems to be performing ahead of your Is it not likely that, that inventory releases before the end of 2022? I'm just Wondering why the guidance hasn't come forward on that. And then the second question is I saw your potential output from base metals going up to, I think, 50,000 to 55 1,000 tonnes. As far as I was aware, that's ahead of your capacity at the moment on the base metals side. Would you need any expansion downstream in order to go ahead with that? Thank you. Do you want me to do the inventory? Okay. Hi, Patrick. Good morning. Yes, so in the first half of the year, we released about 200,000 PGM ounces from the work in progress build up that we had at the end of last year. We continue to we'll continue to reduce that inventory over the next 18 months. And clearly, we'll need to just see what the performance is from an M and C perspective in the second half of the year. As you know, we've reduced our guidance A bit there, but there's sort of a number of factors that are at play. So we're maintaining that position that will reduce it over the next 18 months, but we've taken about 200,000 ounces off in the 1st 6 months. Thank you, Craig. Now the second question, I skipped my mic. Hello, Craig. Hello, Craig. Hello, Craig. Hello. My apologies, Chris, I was Patrick, I was so listening to Craig. So one of the work streams for us at Mogalakwena is the downstream capacity. So what you're seeing there is just to indicate what the potential of Baesmetals would be for us. And that's part of the work of 1 of the 6 work streams that we're doing as part of the future of Mogalakwena. Thanks. So can you just confirm what your current base metal capacity is? It's 30,000 tonnes per month. 30,000. Okay. Thank you. Thank you. The next question comes from Leroy Munguni from HSBC. Please go ahead, Leroy. Yes. Good morning, guys. Thanks for the opportunity. My questions are around The rhodium market balance. So in February, you were forecasting a deficit for the year and that seems to have switched to The surplus, is that mostly attributable to the shortage of microchips in the auto industry? Or Are there any other factors there that we should be taking into account? So we'll tag team on it. Leroy, thank you for that. Yes, certainly, the chip Shortage has impacted vehicles by 4,000,000 vehicles in the first half. So certainly had a big impact, and that was the majority of the swing from our earlier deficit to a slight increase. We do see, however, that, that will recover going into the end of this year or early in 2022. Anything else there, Graeme? I think you covered it. And then maybe just a second question, please. I mean, if you your dividend yield, if you annualize It's quite compelling for the year. Has there been any consideration of maybe Buying back your minority stake in the market and just being Sort of fully owned by Anglo American. Leroy, I think, if I may, it's probably I'll answer the Sort of the first question, but certainly the second question you probably need to address to Anglo. But certainly, I mean, I think from our perspective, We've always been quite clear around the disciplined capital allocation approach, sort of paying generating the cash, investing in the business, The base dividend of 40% and returning that extra cash to shareholders. Certainly, at the half year, we considered that The appropriate return to make, but I think in terms of future projections for Anglo Platinum, you need to Thank you, Mary Knebate. All right. Thank you. Thank you. I'll take a couple of questions now from the web So the first question comes from Nkateko at Investec who says, big congrats on a very strong performance and the 100% payout, Good refined volumes. Please could you comment on the asset reliability work, especially on processing infrastructure? Thank you for that question, Katega. I think 2 things to that question. The one is we believe that we have reestablished our pipeline And we feel very confident in the pipeline performance through the year. I think the big Concern to everybody last year was the fact that we've seen the impact on the ICP and the entire pipeline impacted by that. So we're very confident that the ICP's good performance will continue. I think the other point in terms of just your question on the broader asset strategy and reliability, we have been talking about the fact that we We'll be allocating more money to SIB, specifically around asset strategy and reliability because there is work for us to do across our value chain and we will continue to do it. Will any of this work have the same impact on as we had on ICP. I think we just need to consider that ICP is the true bottleneck and that's why we had that significant impact. None of the other work will have the same impact as stopping the ICP. So confident in performance, confident that Our program on the asset strategy and reliability is now very well defined. And we Really, we have good traction in that execution, but probably a good 18 to 24 months' worth of work across the value chain to and that's reflected in our SIB spend as well. I'll quickly, she's got a second question as well that asks, is there any progress on the sale of the Bokoni asset? Okay, sure. So we continue to progress the disposal of Perconi. We have completed a number of phases in the disposal process. We have Identified some bidders to be able to participate in that process. We have those conversations I'm ongoing, and we hope to sort of finalize the transaction in the near future. Great. I've got a question from Wade. It's one for you, Craig. With Atron costs at 12,550 per PGM ounce. What underpins decreasing costs in H2 in order to achieve your guidance between R12000 to R12500 per PG amounts. Thanks, Wade. Yes, certainly, as I said, We have a number of initiatives underway to be able to reduce our costs, not only just for the second half, but to make sure that they're sustainable into the future. Referencing back to the P101 activities, having a look at that cost base and some tighter discipline. And then We also have a number of activities that took place in the first half of the year, particularly around some of the maintenance, which we don't anticipate That level of expenditure coming through in the second half. So yes, we're confident around the second half Cost guidance, it's once again predicated in any significant disruptions coming through from as a result of COVID. But yes, there are plans underway, as you would imagine, for us to bring costs down and, as I said, on a sustainable basis. I've got another question here from Justin Ritchie of Islet who asks, can you comment on the economics of the PV plant planned at Mogalakwena. What return would you expect on the capital spend? So we are still busy with the final adjudication of the PV plant. Early indications are that there will be good returns, specifically if it's for direct and own use. So I think we'll be able to more broadly speak about this in the next quarter. I don't know if there's anything else you want to add from just the evaluation, Graig? Yes. So certainly early indications are that the economics and the capital, I think, that we've previously said would be between ZAR1 1,000,000,000 and ZAR1.5 billion, it's probably coming in towards the midpoint of that. And then in addition to that, the cost of Of electricity generated are very competitive versus what we're paying at the moment. So I expect the economics to stack up Pretty well once we've completed the BID evaluation process. I've got a question here from Catherine Cunningham of JPMorgan, who asks, what is the contribution from rhodium to work in progress inventory as of June 2021. I don't have that number off the Can we come back to you? Do you want me to help? Yes. I can, to some extent. Catherine. So we obviously don't split out our working the value of our inventory by particular metals. However, looking at what we produced In the first half in terms of M and C and what we refined, those are broadly in line. So having restored the pipeline and getting the P back up and running at the end of last year. The metal that we're producing is flowing through. And therefore, the unwind of rhodium that we had built up at the end of 2020 will continue to evolve over the next 18 months. As I said, we'll reduce the stockpile that we've had. And so that's really so what we had at the end of last year is still broadly similar sort of quantities that we have, And it will unwind. I think it's just important to realize why more hasn't unwound is just the pipeline or the duration in the pipeline And that rhodium has sort of averages sort of 46 months. So you will start To see some of that unwind over the next 18 months, as I've said. Thanks, Craig. Can we just take a couple more questions from the conference call? Claudia? Okay. It seems like we might be having some issues with the conference So I've got a couple more questions here that I can go into. So I've got a question from John Williams of Resco Asset Management who asks about substitution of palladium by platinum in light duty gasoline vehicles. What substitution profile do you I can help. So hi, John. Good to speak to you. So as we said presentation. And we do anticipate the substitution of platinum for palladium in the gasoline auto cat. We expect that Between about 100,000 and 150,000 ounces this year, increasing to about 1,000,000 ounces by 2025. And so And then similarly, we do think that there would be a small amount of substitution of rhodium for palladium, although we think that that's relatively limited. Thanks. I've got a couple of questions now on the ESG front. So the first question comes from Arnold Van Gran of Nedbank who asks, have you quantified the financial impact of your 0 Scope 1 and 2 emissions targets? What impact do you expect this to have on CapEx and costs over the next 5 to 10 years? Arnold, I think there's a couple of aspects to that question. The first one is, we have divided our greenhouse gases into understanding, Firstly, how we're more efficient, how we move our Scope 1 and 2, and then obviously, there's a Scope 3 aspect to it. Now when we talk closer to the near term, we Craig has spoken to the ZAR1 1,000,000,000 to ZAR1.5 billion for the PV plant that we are building at Mogalakwena. That is about 25% of our energy requirement at Mogalakwena. And we are working towards increasing that to about 3 20 megawatts to ultimately cover the Mogalakwena requirement. We have a much bigger requirement. And you would have seen that Our CO2 equivalent is about 3,940,000 tonnes of CO2 equivalent. And for that and because we are very reliant on Eskom, a big portion of that is will help require us to move into renewables broader than just diesel and coal that we were using in operations directly. For that, we are engaging with government, and we're also working with our with Anglo American to define a broader program across the country of harvesting renewables, whether it's wind, water storage or PV. And we do have the benefit both from an Anglo Platinum point of view and an Anglo American in South Africa of the geographic distribution across the country to enable us to harvest this renewables in the best possible geographies. And The recent announcements that we will be able to under certain conditions, we will open up the opportunities for us to do so. Hopefully, from that, you will see that many of these plants are in development. And the early indications Greg has spoken to the economics of the PV plant going up at Mogalakwena. The economics seem to be look good. But certainly, though, the full capital requirement for us to achieve that is work that's still underway. Thanks, Natasha. Just a warning to everyone. It seems like the conference call is not working. So if you have I've got a couple of questions here from Ian Rousseau of Barclays who asks, do you expect any major maintenance in H2 that could impact refined production such as in Q1 with the BMR maintenance. And his second question why don't we answer that first and then I'll ask the second. Iain, there's nothing significant that we know of. So no planned maintenance significant planned maintenance in H2? No. I think probably just worthwhile commenting that We are continuously doing significant maintenance. We are on a rebuild cycle of our furnaces, for example. So that work is continuing, and that is then built into our guidance. So nothing additional to what we are aware today. And the second question is one for you, Craig. You have built up about $1,800,000,000 on the of prepayment. Could you provide an update on the expected unwinding of that liability, the start of delivery of metal and over which period? Okay. So hi, good morning, Ian. So yes, we have seen a ZAR7 point ZAR6 1,000,000,000 increase in the value of the customer prepayments, taking that value to around about ZAR26 1,000,000,000 at the end of June. In line with that contract, It starts to unwind from the Q2 of 2022, and that unwind will take approximately 12 months. So that's the current status of that particular contract. So it will start to happen into 2022 based on the current contractual terms. His final question, which is linked to the customer prepayment question. So he asks, with PGM prices lower now. Do you expect some working capital build in the second half if spot prices persist into the year end? So could you just repeat that, sorry? So with PGM prices lower now, do you expect on working capital build in the second half if spot prices persist into year end. So Ian, I assume you're suggesting that the value of the prepayment would come down and So yes, we've come down and therefore, working capital by inference potentially going up. Look, From our perspective, where's our biggest portion of working capital? It's sitting in work in progress. We continue We're very focused around unwinding that work in progress and bringing it down, and that's what we'll do for the over the next 18 months. So that's sort of our biggest opportunity. I think what is important is that value of the customer prepayment is translated At spot prices at the end of June, so it's already sort of been mark to mark down to where the prices are. So hopefully, that answers your question. The focus for us is really around the words in progress. I think I'll have to ask this as the last question. But any other questions that have come up, we will respond to. And the last question comes from Martin Creamer of Mining Weekly who asks, could renewable and green hydrogen be used in your PGM smelting process instead of coal fired Eskom Power and coking coal. If coal fired power continues to be used, Could your company be hurt by carbon import tariffs and carbon taxes? Martin, so we've definitely seen the iron ore industry or iron and steel industry deploying and making quite significant a number of announcements over the last while. We are looking into to the potential for us to use similar forms of energy, but certainly not as far progressed as we are as the iron and steel industry is going at the moment. Do you want to just take the comment on the carbon tax, Clive? Yes. So certainly, the carbon tax It's one of the considerations that we have in terms of future cost base and being able to evaluate the benefits Moving to the carbon neutral position or reducing it by 40% by 2,030 and then taking us to neutral by the end of 2,040, that is a big component. So I think we paid around about ZAR13 1,000,000 in carbon tax In the first half, it's relatively insignificant. However, what we do see is obviously the legislation that's In Train, that's increasing quite materially and therefore, that's a greater incentive for us, not only with regards to the environmental benefit But also from a cost benefit and being able to look at alternative forms of energy to be able to reduce our overall cost base. And I think we'll have to call that a day. So thank you, everyone, for joining on the webcast. And if you have any further questions, please feel free