Good morning, ladies and gentlemen. I'm Theto Maake, Head of Investor Relations at Valterra Platinum. Thank you for taking the time to join us for our Interim 2025 Results, both in person as well as online. Let me start by welcoming our Chairman, Norman Mbazima, members of our board that are here with us today, as well as our executive leadership team. From a housekeeping perspective, we do not have a planned fire drill today, and therefore, if there is an alarm or in case of an emergency, I'm going to request that you exit using the glass doors to my left and right. At that point, you will have both our fire marshals and security to escort you to our designated assembly point. With that said, I would like to draw you to the cautionary statement and would appreciate if you can read this in your own time.
Now, onto the agenda for today. Craig Miller, our CEO, apologies. Clearly, I'm stuck three years back. Our CEO will take you through a brief overview of the significant milestones achieved in the first half of this year, followed by a review of our operational and market performance. Sayurie Naidoo, our CFO, will then take you through our financial results. Finally, Craig will wrap up today's session by taking you through our outlook for the 2nd half of the year and the medium term. As usual, we have allocated time for Q&As at the end, which I will come back to help and facilitate. Without further ado, I'm going to hand over to Craig, who will take us through today's Interim Results presentation. Thanks.
Thank you, Theto, and good morning, everybody. Once again, thank you very much for joining us at our maiden half-year results as Valterra Platinum. As you know, we've had a very busy start to the year, but it is customary for us to start with safety. Safety remains our foremost priority, so it is with deep regret that we've experienced a fatality at Unki on the 20th of April, where Mr. Felix Korre lost his life in a mobile machinery-related incident. I'm also very sad to say that we recently experienced a fatality at the shaft section of the Amandelbult mine, where Mr. William Nkengke lost his life on the 22nd of July in an incident related to a grunt pack. On behalf of the entire Valterra Platinum family, we convey our sincerest condolences to Mr. Korre and Mr. Nkengke's families, friends, and colleagues.
While we mourn their losses, we also recognize the achievement of significant milestones across our operations, which reflects our continued dedication to achieving zero harm. These include being 13 years fatality-free at Mogalakwena and Mototolo mines, nine years fatality-free at Amandelbult's Tumela mine, and more than two and a half years lost-time injury-free at the Polokwane smelter. We've also seen an improvement in our total recordable injury frequency rate of 12% - 1.46%. We're pleased to highlight that we've made substantial progress against our strategic objectives, which we shared with you during our Capital Markets Day just a few months ago. We have successfully completed the demerger from the Anglo American Group, as well as our secondary listing on the London Stock Exchange. As you would have seen in the media and all around you today, we've established our own new brand identity.
With the recent appointment of independent non-executive directors, we've now concluded the recomposition of our board. We've also successfully transitioned from the Anglo American centralized services, with the majority of these services now being performed internally. The balance are subject to transitional service arrangements, with the longest of which is about an 18-month period, at which point we'll be in a position to be able to do these activities ourselves. These developments, together with our simplified and fit-for-purpose executive committee and organizational structure, which we discussed in great detail earlier this year, demonstrate that we've delivered on our strategic priority to achieve a simplified and strengthened organization. Our 2nd strategic priority relates to achieving operational excellence. We'll go into this in a bit more detail throughout the presentation, but let me talk you through just a few highlights.
We've delivered a resilient operational performance despite the impact of inclement weather across the portfolio, the most severe, which was at the Tumela section of Amandelbult. I'll unpack this in a bit more detail later, but we have delivered a further ZAR 2.1 billion in cost savings during the 1st half of 2025, and we're on track to meet our full-year guidance of ZAR 4 billion. Part of our strategy is to invest in our portfolio for maximum value, and to re-emphasize, our focus is value over volume. The completion of the SunSlurred underground project pre-feasibility study is a key step in bringing this exciting value-enhancing opportunity to fruition. The De Broghene shaft is progressing well, having delivered first answers in the 1st half of the year. What we're most excited about is the rally in the PGM prices.
It's pleasing but not surprising to see that the basket price recovery and our ability to be able to deliver into that in the 2nd half of the year. Last but not least, during the period, Makhale Kwena was ERMA-accredited, meaning that all our owned assets have achieved the all-important ERMA accreditation. According to ChatGPT, we're the only precious metals mining company in the world that has all our mines ERMA-accredited. Quite something. How does all this translate into our first-half performance? The realized basket price during the 1st half increased by about 5% in U.S. dollar terms, but this doesn't fully capture the recent momentum in prices. Since the beginning of July, prices are up about 20% on the quarter so far. Our EBITDA margin was solid before the impact of one-off demerger-related costs and the flooding event at Amundabild.
Despite these one-off impacts, our all-in sustaining cost remains below $1,000 per 3E ounce. We've maintained a strong balance sheet despite having paid ZAR 16.5 billion in the final 2024 dividend and notwithstanding the operational headwinds and demerger costs which I've mentioned. We closed the period with approximately ZAR 5 billion of net debt. Our solid financial performance and strong balance sheet have positioned us to maintain our dividend policy, and the board has approved an interim dividend of ZAR 2 per share or ZAR 500 million. Turning to our operational performance, we produced just under 1.5 million ounces of PGMs of metal-in-concentrate and approximately 1.4 million ounces in refined production during the period. Despite the significant external headwinds, our mines demonstrated a resilient performance, while our processing operations delivered a credible one.
At Mototolo and Amundabild, our concentrator recoveries improved by 3 and 4 percentage points respectively, whilst we achieved a 2-3 percentage points uplift in our chrome yields. We also achieved a 9% improvement in mass pull across the portfolio. At Makhale Kwena, we're seeing early, encouraging progress through the initial commissioning and optimization of the Jameson cells. Specifically at Makhale Kwena, total material moved reduced by 15% year-on-year, demonstrating traction from our pit optimization strategy. While all tons mined remained flat versus the 1st half of 2024, reflected increased mining efficiencies. The head grade for the period was around 2.5 g per ton, slightly below our guided range of 2.7-2.9 g per ton. This was due to the planned processing of lower-grade stockpile materials to supplement ex-pit ore volumes.
In the 2nd half, we expect to process a greater proportion of higher-grade ore from the targeted sections in supporting a recovery in grade in line with our full-year guidance. Our metal-in-concentrate production increased by about 2% year-on-year, and our optimized mining sequence positioned Makhale Kwena for a significantly stronger operational performance in the 2nd half of the year. Turning to Sandsloot Underground. Just to recap what we said in March, we're taking a phased approach to the development of the Sandsloot Underground in order to preserve capital and progressively de-risk the project as we move through feasibility. The 1st phase, if it meets our capital allocation criteria, is a tracking solution which will support an initial production rate of roughly 2-2.5 million tons per annum.
If phase B meets our capital allocation hurdles, we'll then expand the ore logistics infrastructure to include a conveyor system, allowing the mine to gradually ramp up to around 5 million tons per annum post-2030, unlocking the full potential from Sandsloot. Moving to the next slide, the pre-feasibility study for the Sandsloot Underground project was completed during the 1st half of the year. The results confirm that the key parameters outlined in our Capital Markets Day remain intact. These include reef grades of 4-6 g per ton, significantly higher than other mechanized underground mines in Southern Africa, as well as a competent hanging wall and favorable mining width with an approximate reef height of 45 m. The image on the screen shows a cross-section of the reef intersection, with the white line indicating the high-grade contact with the reef to the left.
All these characteristics make the ore body amenable to efficient bulk mechanized underground mining, making SunSlurred a highly value-accretive growth prospect for Valterra Platinum. The feasibility study is underway and targeted for completion in the 1st half of 2027, at which point we'll be in a position to make an informed investment decision. We'll also continue to make solid progress on the development activities at Sandsloot. In the 1st half, we completed about 12.8 km of underground exploration drilling and 1.6 km of decline development. This brings the cumulative total to 43 km drilled and 8 km developed. Trial mining will also be undertaken over the next 18 months as part of the feasibility study, followed by a ramp-up to the phase one steady state towards the end of the decade.
A 31,000 ton ore stockpile has been accumulated at the end of June and will be processed through the concentrator facilities as part of the feasibility work. We've also reduced our current-year CapEx guidance from ZAR 2 billion to ZAR 1.5 billion, while guidance for 2026 and 2027 will be between ZAR 1.5-2.5 billion per annum. Turning to Amandelbult, whilst the extreme flooding at Amandelbult was not in our control, the manner in which the team on the ground responded is commendable. To contextualize the extent of the flash floods, the historical average rainfall for Amandelbult in the month of February is around 300 mm. On the 19th of February, we had 300 mm of rainfall in just over a 24-hour period. A neighboring river burst its banks, and the upstream dam wall also failed. Part of Amandelbult was inundated with water, particularly Tumela, which was severely flooded.
We were able to leverage, from the extensive experience, the management team, some of whom were at the flooding event which took place in 2008. Within a month, Dishaba and Tumela Upper recommenced operations, and a month thereafter, the open pit sections resumed operations, while Tumela Lower was focused on dewatering. Tumela Lower, which accounts for approximately 50% of Amandelbult's production, recommenced ahead of schedule their production in June and are currently ramping up to full production by the end of the 3rd quarter this year. In addition, we've extensively improved our flood defense systems and have developed appropriate response measures to mitigate a similar occurrence. Given the events, it is expected that Amandelbult's production in the 1st half of the year would be significantly lower than the prior period.
Encouragingly, Dishaba production volumes were up 1% despite the impact of flooding, which illustrates the benefits of the restructuring and the drive for operational excellence. Our priority is to ensure the safe ramp-up of Tumela Lower whilst maintaining stability at Dishaba and Tumela Upper in order to meet our guidance of between 450,000 and 480,000 PGM ounces for the year, which implies a material increase in production in the second half. Commensurate with the increased PGM production is the increase in chrome volumes as well, which at current chrome prices makes a meaningful contribution to Amandelbult's economic cash flow. Turning now to Mototolo, the improvements in productivity, increased tons milled, and enhanced flexibility at Mototolo reflect the impact of our operational excellence initiatives, with key performance metrics trending in the right direction. In the 1st half, metal-in-concentrate production increased by 4% due to improved output from the two existing shafts.
Productivity also improved, with the PGM ounces per employee up 19% year-on-year, and mining flexibility has improved as well. Immediately available ore reserves increased by 32% compared to the prior period, supported by a 22% upliftment in the total development meters. These improvements support Mototolo's continued trajectory to the lower half of the cost curve, whilst the chrome production volumes provide a further reduction in its all-in sustaining cost. Turning to our processing operations, we're on track to meet our full-year guidance. Following the Q1 stock count and normalizing processing availability, we've seen a strong rebound in volumes. Refined production rose by 118% quarter- on- quarter, and our base metal output increased 37%.
Despite the Jamison cells only being commissioned in April at Makhale Kwena and therefore not fully optimized, we've already seen an improved mass pull of about 9%, with further improvements expected as the optimization continues in the 2nd half. Lower mass pull translates into reduced transport costs, reduced energy use, and emissions, with a 9% reduction in the total number of haulage trucks on the roads. These early wins are aligned with our broader cost and sustainability objectives. Turning briefly to our markets. The largest source of PGM demand is the automotive sector. We've suggested consensus expectations for PGM demand in this sector is too low, given both catalyzed vehicle sales and PGM loadings per vehicle, which could surprise to the upside. Taking these in turn, despite tariff and economic concerns, global light vehicle sales rose 5% year-on-year, according to global data, while catalyzed vehicle sales increased by about 1%.
While BEVs continue to take market share, a few years ago, catalyzed vehicles were forecast to be shrinking rapidly by now, and industry forecasts have once again been reduced for the medium term as governments, OEMs, and consumers reassess the speed of the transition. On PGM loadings, we highlighted in March a raft of proposals by Chinese authorities to strengthen vehicle emissions regulations, to close loopholes, and ensure vehicles meet standards on the road as well as in the lab. In May, one of those proposals was finalized, setting out a broad framework for the supervision, focusing on trucks and hybrids. We expect more decisions in the 2nd half, and this broad approach, culminating in China 7 in a few years, could result in higher loadings. Finally, Chinese buying has been strong across the PGMs, but most notably for platinum.
Both imports, including metal going into Hong Kong and the turnover on the Shanghai Gold Exchange shown here, have been elevated and accelerated throughout the 1st half. This appears tied to a recovery in the Chinese jewelry market, which has struggled for many years. It is clear that there has been an uptick in interest from jewelers, looking for a better value proposition than gold. Chinese consumers will likely match this enthusiasm, given new collections and the promotional campaigns which are currently underway. These developments have had a positive impact on pricing. As I said, our realized basket price in the 1st half was about 5% higher year-on-year, led by gains in rhodium, platinum, and ruthenium.
However, in July, so far, market prices for the basket have risen by another 20% on those levels, with rapid gains for platinum, which has hit an 11-year high, and ruthenium, which is now approaching a 2021 high. Despite the rally in the PGM basket price, we continue to believe that the current price levels remain below the thresholds required for operations to generate positive cash flows and to incentivize new production. To briefly turn into supply and demand. The balances, by our estimates for 2025 and forecast for 2026, are little changed from what we shared with you at the annual results for 2024, though there have been some interesting developments. In platinum, we expect continuing deficits at a slightly higher level on the assumption that jewelry demand in China improves as expected.
For palladium, we see the markets moving into surplus, but once again at a slower pace than previously anticipated. The 2025 deficit is a little higher than anticipated, as risk to auto sales and production from tariffs are offset by lower supply. Rhodium remains in deficit for the next two years. Overall, vehicle sales are growing, but there are risks from tariffs and a potential economic slowdown. BEV sales are higher, but the uptake is slower than expected from a few years ago. Importantly, investor interest is rising, and jewelry demand is a potential positive upside surprise. Mine supply is weaker, and recycling is only slowly picking up. I'll now hand you across to Sayurie, who'll take you through the financials.
Thank you, Craig, and good morning, everyone. I am pleased to report a solid set of financial results for our first reporting period as a standalone company.
While our financial performance was adversely impacted by the Amandelbult flooding event and expected one-off demerger and separation costs, from a controllable perspective, we continue to demonstrate disciplined cost and capital management. To summarize our performance for the 1st half of 2025. The company achieved revenue of ZAR 42 billion for the half year, down 19% due to a 25% decline in PGM sales volumes. This was due to lower MNC production, the prior period's release of built-up work-in-progress inventories, and the three-yearly stock count at the Precious Metals Refinery. This decrease was partially offset by the U.S. Dollar PGM basket price strengthening by 5%. EBITDA was ZAR 7 billion after taking into account the one-off demerger-related costs. This translated into an EBITDA mining margin of 22%. We continued to implement our cost-out program, which delivered ZAR 2.1 billion of operational and corporate cost savings.
The unit cost for the 1st half of the year was ZAR 17,952 per PGM ounce, excluding the impact of the Amandelbult flood, and represents a 2% decrease against 2024. We ended the period with a strong balance sheet. Net debt was ZAR 5 billion, including the customer prepayment, and net debt to EBITDA was 0.3 times, well below our target of less than one times through the cycle. In line with our capital allocation framework, the board declared an interim dividend of ZAR 2 per share, or ZAR 500 million, which reflects a payout of 40% of headline earnings. Unpacking our EBITDA, EBITDA was 46% lower at ZAR 6.6 billion. The flooding event resulted in ZAR 4.6 billion lower earnings, whilst the demerger-related costs had a ZAR 1.4 billion negative impact on earnings. Excluding these one-off impacts, EBITDA was ZAR 12.6 billion, 2% higher than the 1st half of 2024.
This was driven by a 3% higher PGM rand basket price at ZAR 27,631 per PGM ounce, as well as the cost savings of ZAR 2.1 billion. These benefits were partially offset by lower volumes as a result of the stock take at the PMR in the 1st quarter, as well as the prior year work-in-progress drawdown. Looking ahead to the 2nd half of the year, earnings are expected to be supported by stronger PGM prices, a planned step up in production, supporting higher sales volumes, and the achievement of the full ZAR 4 billion cost savings. Furthermore, the insurance claim related to the Amandelbult flood event is in progress, with an interim payment of around ZAR 1.4 billion expected in August. The total claim is anticipated to be between ZAR 4 billion and ZAR 5 billion before deductibles, the majority of which is expected to be received this year.
We are on track to deliver the targeted savings of ZAR 4 billion in 2025, with ZAR 2.1 billion delivered in the 1st half of the year. The cost reductions delivered included ZAR 1.1 billion from labor and contractor costs resulting from the flow-through benefits of the operational restructuring completed in 2024, and approximately 450 vendors off-boarded to date. ZAR 0.6 billion delivered from the optimization of consumables and efficiencies, benefiting from a total cost of ownership approached procurement, and about ZAR 500 million in corporate cost and other related sundry related savings. Since the launch of our 2024 action plan, we have delivered operating cost savings of ZAR 9.5 billion and a further ZAR 5 billion in stay-in-business capital reductions, enabling us to more than offset inflation for two consecutive years. Our cash operating unit cost declined 2% from 2024 to ZAR 17,952 per PGM ounce.
This reflects our commitment to cost discipline. Including the Amandelbult flood impacts, the cash operating unit cost was ZAR 20,580 per PGM ounce. Full-year cash operating unit cost guidance has been revised to between ZAR 19,000 and ZAR 19,500 per PGM ounce. We are confident in meeting the revised unit cost guidance as Amandelbult's Tumela lower section ramps up and our operational excellence initiatives gain traction. The all-in sustaining cost for the 1st half of the year, excluding the impact of the Amandelbult flooding, was $962 per 3E ounce. The all-in sustaining cost at each of our operations, with the exception of Amandelbult, was largely in line with the prior period, despite the lower sales volumes, and each asset continues to deliver solid margins. All-in sustaining cost for the year is expected to be between $970-$1,000 per 3E ounce, supported by the targeted cost savings, sustaining capital optimization, and higher sales volumes.
Looking at the one-off demerger and separation-related costs in more detail, total one-off demerger-related costs remain consistent with the guidance we previously provided of around ZAR 1.5 billion-ZAR 2 billion for advisory costs, system separation costs, and corporate identity changes. ZAR 4.2 billion for the settlement of historical services provided by Anglo American. A large portion of these costs were already accrued in 2024. In the 1st half, we accrued a further ZAR 1.4 billion. In terms of cash flows, we paid ZAR 2.8 billion in the 1st half, comprising ZAR 2.2 billion to Anglo American and about ZAR 0.6 billion in advisory and corporate rebranding costs. In the 2nd half, we anticipate a further cash outflow of approximately ZAR 2.7 billion. We remain on track to deliver ZAR 1 billion-ZAR 1.5 billion in annual post-demerger run rate savings, with around ZAR 1 billion expected to be realized in 2026.
These savings will be driven by the phasing out of transitional service arrangements, optimized labor structures, reduced overheads, as well as a more simplified operating model. Minimal dyssynergies of approximately ZAR 0.2 billion are anticipated, lowered from our previous estimate of around ZAR 500 million . Year-to-date capital spend amounted to ZAR 7.9 billion. Stay-in-business capital expenditure was ZAR 2.7 billion, mainly focused on maintaining asset integrity across all our operations, extension of tailings facilities at Makhala Kwerna, and the flood recovery at Amandelbult. At Makhala Kwerna, capitalized waste stripping decreased to ZAR 2.4 billion, driven by the pit optimization, reducing capitalized waste tons. Life extension capital was ZAR 1.6 billion and was mainly incurred on the development at Der Brochen. Makhala Kwerna underground project capital remained broadly flat at ZAR 0.6 billion and was incurred on drilling at the Sandsloot Underground.
The expected capital expenditure for 2025 for the feasibility study, bulk sampling, trial mining, and further drilling is around ZAR 1.5 billion. Total capital expenditure guidance for 2025 has been lowered by approximately ZAR 1 billion to between ZAR 17 billion and ZAR 17.5 billion. This is due to prudent cash management, project prioritization, and more agile project execution. We started the year with a net cash position of ZAR 17.6 billion and paid a final 2024 dividend of ZAR 16.5 billion as we reset our capital structure as a standalone entity. During the period, cash generated from operations was ZAR 11.6 billion, excluding the one-off impacts already mentioned. This was utilized to fund ZAR 7.9 billion of capital expenditure, as well as taxes and interest payments of ZAR 1 billion. We ended in a net cash position of ZAR 2.2 billion if we exclude the one-offs.
However, including these, we ended the period in a net debt position of ZAR 4.9 billion. The net debt to EBITDA ratio was 0.3 times, including the customer prepayment, and net debt was ZAR 16.5 billion, excluding the customer prepayment. Following the demerger, the refinancing process was successfully concluded. Our committed facilities amount to ZAR 31 billion, with ZAR 14.4 billion drawn as of 30th June. Our liquidity headroom was ZAR 27 billion. In line with our disciplined and balanced capital allocation framework, the board declared an interim dividend of ZAR 2 per share, or ZAR 500 million, equivalent to a 40% payout of headline earnings. This marks the 16th consecutive dividend payment since reinstatement in 2017, a best-in-class track record across the PGM sector that underscores our commitment to shareholder returns. I will now hand you back to Craig to take you through the rest of the presentation.
Thank you, Sayurie. To conclude, we expect the 2nd half of the year to benefit from several operational tailwinds. Amandelbult is expected to be restored to normalized production during the quarter and produce between 450,000-480,000 PGM ounces. We are continuing to implement our operational excellence initiatives across both mining and processing assets, with improvements in productivity and concentrator recoveries, as well as chrome yields. We will deliver on our cost savings target of ZAR 4 billion in 2025. As a reminder, since we started the cost savings program, our total savings are ZAR 14.5 billion, of which ZAR 9.5 billion is from OpEx and the balance being from CapEx. PGM prices have rallied, and we are set to deliver into this higher price environment.
In terms of our guidance, we remain on track to deliver our MNC production within our previously stated guidance after factoring in the Amandelbult flooding impact, albeit at the lower end. MNC production from our own operations is expected to be approximately 2 million PGM ounces, and our purchase of concentrates between 1-1.2 million PGM ounces. Refined production guidance of 3-3.4 million PGM ounces remains unchanged. Cash operating unit costs, that guidance has been increased to be between ZAR 19,000-19,500 per PGM ounce after factoring in the impact of the Amandelbult flooding. Capital expenditure guidance has been reduced to between ZAR 17-17.5 billion, approximately ZAR 1 billion lower than what we previously guided.
Our all-in sustaining unit cost remains unchanged and is expected to be within guidance of between $970-$1,000 per 3E ounce, reflecting our confidence in delivering the additional cost savings and a step up in production in the 2nd half of the year. Valterra Platinum is in good shape and is well positioned to realize the value for all of our stakeholders. Our strong production profile in the second half should allow us to deliver increased volumes into that firmer pricing environment. Our focus on sustaining capital investment, prudent cost control, and operational consistency from our leading integrated value chain allows us to capture the upside from this continued recovery in the PGM prices. Our extensive resource endowment is in excess of 600 million ounces, and our integrated asset base with industry-leading processing capability are key characteristics of our investment proposition.
Our commitment to all stakeholders is to maximize the value that we create from these exceptional assets. We've also set our medium-term target for our all-in sustaining cost of being less than $950 per 3E ounce and a through-the-cycle EBITDA margin of at least 25%, which should support our sustained free cash flow generation. Our self-imposed gearing target is less than one times net debt to EBITDA through the cycle, thereby maintaining a strong balance sheet. Lastly, investing in our portfolio to maximize value is one of the strategic priorities, and to this end, we're well positioned to maintain our capital allocation discipline and prioritize sustaining capital and consistently delivering our shareholder returns. That concludes our presentation. Thank you once again for joining us. I'll hand you back to Theto to facilitate the questions and answer session.
Yeah. Thanks once again, Craig and Sayurie.
We will use the next session just to take any questions that you may have. Both Sayurie and Craig here in front of us. Our executive leadership team sitting in the front row, I see we also have London representation through Hilton and Matt on the other side, our marketing team. I mentioned our Chairman of the Board is also here, as well as Chairman of the Audit Committee, should Craig need to escalate, delegate upward. With that said, as is customary, I will first take a couple of questions in the room, then move to our conference call where our moderator, Dine, will assist with facilitating that. At the end, I will then facilitate the questions that have come through from the webcast. May I request that when you do raise your hand, mention your name and the company you're representing?
In the interest of time, may I also request that you just raise two questions per person so that we are able to cover? I see Nkateko was already tweeting there on two questions per person, but let's see how we manage it. With that said, I'm opening the session to Q&As. See first Chris and then Nkateko already. Thanks.
Morning, Craig, Theto, Sayurie. Thanks very much for the presentation. It's Chris Nicholson from Morgan Stanley. Okay, so I've got two questions. Can we chat a little bit about the Sandsloot U nderground CapEx? Obviously, that seems to be where you've trimmed the CapEx down. What are we to actually read into that? Is this a change in scope up to the feasibility? Do you have a little bit more time to get that up from the underground because of the pit optimization strategy? Maybe just a little bit more.
Why are you doing that? Especially given prices are higher, so there's not as much pressure, I guess, to optimize CapEx right now. I think that's the 1st one. The second one, could you chat a bit about the insurance payment, please? Just more the back end of it. I know historically you would have been part of an Anglo American insurance captive. Is that now part of a new Valterra insurance captive? Is this external insurers? Kind of where a little bit of the risk sits. The deductibles, I might understand that's an excess. Is that material in relation to that? Because obviously ZAR 4 billion-ZAR 5 billion is going to be quite material for our valuation and net debt. Thanks.
Okay, I'll do the easy one on Sandsloot and I'll let Sayurie do the insurance.
Yeah, Chris, as we said, we have now migrated to the feasibility study from the pre-feas. As a result of that, our options have really been narrowed down. As we've articulated and what we said was the likely trajectory at the capital markets day was that we were then going to go for the 2-2.5 million tons lift as our first stage of the development and then take us to the 2nd stage, which would be then taking us up to 3.5 million tons and then ultimately to 5 million tons. As a result of that, we've had the opportunity of narrowing down the scope. It's very much focused on that first stage, which is the trucking option. Therefore, that's allowed us to sort of trim down the CapEx just because of that, because of the narrowing of the ranges. The timeline is exactly what we've communicated previously.
A decision, subject to it meeting our investment criteria, being made in the 1st half of 2027. We're on track for that. Then a ramp up of that 2-2.5 million tons by the end of the decade. As we've said, we've reaffirmed some of the characteristics that we've seen from the drilling in terms of grade being between 4-6 g per ton. That will therefore support the increase in volume from Makhala Kwerna of around about 10% initially, and we could go up to 50%. Once again, I reemphasize, it is a value over volume strategy. If the market requires that additional volume, we'll supply that into the market. Otherwise, because that would be the most value accretive, otherwise what we could do is rebalance the open pit and extract from the underground.
As a consequence of that, ensure that we maintain a safe level of production, but potentially then reduce our all-in sustaining costs. That's what we're sort of balancing out. Yep, looking at spending about ZAR 1.5 billion this year and then ZAR 1.5 billion-ZAR 2.5 billion both in 2026 and in 2027, while we finalize the feasibility study and we progress some of the development, the underground development, and finalize the drilling to support the investment decision.
Okay. On insurance. Until the end of May, we were still covered by the Anglo American. Insurance structure, which was a cell captive as well. We negotiated our new insurance post that from 1 June ongoing. Because the flood, it was in February, we would still be covered by the Anglo American insurance. In terms of the quantum, we said it's ZAR 4 billion-ZAR 5 billion before deductibles.
The deductible will vary, but we're expecting net of the deductible around ZAR 3.5 billion-ZAR 4.2 billion.
Good morning, Nkateko Mathonsi , Investec Bank. I will ask two questions and I wasn't toy-toying. Maybe let me start with the marketing side of things. You're expecting a very strong 2nd half of the year. Supply out of South Africa is likely to increase. Are you not concerned that the increase in supply could actually have a significant impact on this very strong basket price? If you can also talk a little bit on the change in inventory accounting, which resulted in post-tax gain of ZAR 1 billion. Why the change? Why now? What is the most used method? I thought the stock count was the most used method by other peers. I'll leave it there.
Okay, perfect. I'll do marketing again and Sayurie will do the stock count outcome.
Look, I think we've certainly seen in the 1st half of the year, as you've observed, the impact of those weather-related supply disruptions to ourselves and to others in the market. I think in Kathakuma, what we did start to see is supply being really restored back to May and June. Sort of supply levels are back to sort of normal levels. You saw the price reaction too in June and then in July. I think the price reaction is more broader around actually the demand for PGMs. Certainly, supply has been impacted, but supply from both primary supply and also secondary supply is a lot lower. That talks to the tightness of the market that we've been speaking about for quite some time. Demand is healthy.
I think the outcome of achieving some of the settlements with regards to trade agreements reduces some of that uncertainty that we were expecting at the beginning of the year. I think it only improves the economic outlook, which then should be supportive of continued PGM demand for the 2nd half of the year. Yeah, we're focused around what we can control. Provided that we can get the answers into the market, we'll certainly benefit from that higher price environment than what we've seen previously.
Okay, on inventory. We haven't changed any accounting with regards to our inventory. That related to the stock count. Every year we process either a loss or a gain depending on the results of the stock take. This year it was a gain. Last year it was relatively similar in terms of a gain as well.
In terms of the stock take itself, everything was within our tolerance level. I think it was nothing abnormal from an inventory stock take.
Just checking whether there's any other questions in the room before I move to the conference call. I think not at the moment. I may have to come back. Moving to the conference call, moderator, do we have any questions coming through from the conference call?
We have a few questions on the conference. The 1st question we have comes from Reinhardt van der Walt of Bank of America. Please go ahead.
Good morning, Craig and Sayurie and team. Thanks for taking my question. 1st one, maybe if I could just circle back again on the platinum supply demand balance. How should we think about the market balance as Amandelbult ramps back up again into the 2nd half?
Coming offline, I mean, it undeniably had a benefit on market balance. How should we think about the change in balance going into the 2nd half again?
Yes, sir. Thanks very much for the question. In terms of the supply demand balances that we articulated today, very much in line with what we said at the beginning of the year. With us reiterating our production, albeit at the lower end, that was really informed in those supply demand deficits already. I don't believe that the Amandelbult recovery in the second half changes the deficit that we're anticipating in platinum and rhodium particularly for the full year. It doesn't change our outlook in terms of the post 2025. I think we've maintained our guidance and we've been very clear around that in terms of both refined production as well. All of that is factored into those deficits that we've articulated.
I think ultimately, when you look at not only supply, but the demand is still really, really healthy. We've articulated what's going on in China. I've spoken about the sort of some of the certainty that's been created as a result of entering into the trade agreements. I think that all points to a more positive outlook for the 2nd half of the year. Therefore being able to supply the volumes that we're anticipating ourselves and others into the market will meet that sort of demand. Those deficits don't necessarily change and that therefore should support prices for the rest of 2025 and into 2026 and beyond.
Got it. That's very clear. Thanks, Craig. Maybe just my 2nd question just on mass pull reduction. Seems like that's going very well. Congratulations to Agit and the team.
You've previously spoken about, I think it's 120 GW hours of energy savings in total. Can you give us a sense, and I know it's not fully optimized yet, but can you give us a sense of just your 1st half 2025 exit rate? How much of that energy saving are you realizing at this point?
Yes, sir. I'd say, Agit, do you want to answer this question?
Yeah. Thanks for the question. Can you hear me?
Yeah.
Thanks for the question.
Gotcha.
The work that we've done has already materialized with some energy savings that we're seeing. It's obviously not the full benefit. Just bear in mind that we've only had the Jameson cells running in full scale production for at least the last month. We're probably seeing about a 10%-15% improvement on that.
We expect to see the full realization of most of that in the 2nd half of the year and definitely in 2027, that should be realizable. What we're seeing at the moment is very positive. We have no reason to believe that we won't realize that. We want to wait until we get into the full scale production of Jameson cells in the 2nd half of the year and move that full into 2027 as well. Thanks.
Understood. Thank you very much.
Don't worry, we'll remind you about 2026.
Thank you. The next question we have comes from Dominic OKane of J.P. Morgan. Please go ahead.
Hello all. Just a few questions on Amandelbult specifically. You've given us the CapEx guidance for the group for 2025, but could you maybe just give us a bit more granularity on the Amandelbult CapEx spend in the 2nd half of the year?
In addition, given the events of the 1st half, will there be a kind of rollover on CapEx into 2026 at Amandelbult? Secondly, at Amandelbult in the second half of the year, at current prices, should we expect it to be EBITDA and free cash flow positive? Thank you.
Yeah. Dominic, thanks for the questions. Sayurie, just yeah.
On capital. Amandelbult's capital would obviously have been revised because we expected to spend some capital at the Tumelo One sub shaft. That has been deferred slightly. For the 2nd half, you can expect maybe about ZAR 400 million-ZAR 500 million of capital for Amandelbult. In terms of economic cash flow for the second half of the year, yes, we do expect it to be cash flow positive in the 2nd half. Remember that a lot of it will also be attributable to the chrome impact.
At current chrome prices, and if we deliver on the full production, it's about another ZAR 1 billion of cash flow to Amandelbult for the 2nd half.
Thank you.
Thank you. The next question we have comes from Adrian Hammond of SBG. Please go ahead.
Good morning, everyone. Two questions, firstly for Sayurie. Sayurie, could you just unpack a bit more about the inventory and sales? Obviously, it has a huge impact on how we model your business. Could you just perhaps firstly clarify the ZAR 3.2 billion credit in inventory? What drove that in terms of price versus ounces? Could you remind us where your. Work inventory level was in December versus now and what the sort of normalized level should be going forward? Thanks.
Okay.
So Adrian, just in terms of our work in progress inventory, so there was a build-up, obviously, in the 1st half of the year because of the PMR stock take that was in addition to what we normally would do, plus the maintenance that we usually do in the 1st quarter. However, by the end of the year, we will get to normalized inventory levels. What you would also recognize is that, as Agit had previously said at Capital Markets Day, there is further optimization that we are looking at through the processing pipeline. You will see our work in progress inventories probably around what we had last year or slightly lower. In terms of refined inventory levels, I think that is at normalized levels as where we ended 30th June.
In terms of the ZAR 3.2 billion credit, that is a mixture of your volume because we had the build-up in inventory in the 1st half, and there would have been some slight price impacts in terms of your purchase of concentrate inventory. In terms of net realizable value write-downs, we actually had a reversal of about ZAR 200 million in the period.
Thanks. That is clear. And then perhaps, I do not know if Hilton is on the line, but there is obviously lots of talk about primary and secondary supply being weak. Is he picking up any forward buying from OEMs?
Is that three questions?
Yeah.
All right, Adrian, we will allow you this one time. Hilton is online so he can explain.
Yeah. Look, Adrian.
If you were looking at automotive forecasts for this year in terms of automotive growth, you were lucky to see positive numbers by forecasters. As Craig has pointed out, we have had 5% growth in the 1st half. We have seen auto-OEMs in the discretionary market. They have been buying in anticipation of potential tariff implications and because forecasts have come in to the upside. We have seen benefits in that space.
Thanks.
Thank you. The next question we have comes from Richard Hatch of Berenberg. Please go ahead.
Yeah. Good morning. Thanks very much for the call. My two questions are as follows. Just firstly, Sayurie, just on working capital for the 2nd half, are you able to give us any kind of a steer as to how we should think about working cap in H2?
And then secondly, I appreciate there have been some headlines around a chrome export ban in South Africa. I appreciate chrome is quite an important part for some of your mines. Just wondering if you would be able just to give us an update on your current sort of thinking around that and how we should be thinking about it as we move into the 2nd half. Thank you.
Yeah. In terms of your working capital, the large part of that is your inventory balance. As I've indicated, we will see a release of the work in progress build-up that we had in the 1st half and the 2nd half of the year. Our refined inventory will remain fairly flat. In terms of the other working capital, a large part of that is your customer prepayment, which is obviously impacted by prices as well. That will impact that.
Your purchase of concentrate creditor again will be impacted by prices. I mean, assuming all things equal, those items should be relatively flat as to where we ended this year, this half.
I think just, and Richard, just in response to, if that's okay, in response to your chrome question, yeah, there's been a sort of proposal around introducing a chrome tax here in South Africa. I think that's very much in early stages. Ourselves, together with the Minerals Council and other chrome producers, are having engaged conversations with government around that. I'm not necessarily sure it's going to impact into the 2nd half, but our view is very much we support economic development in South Africa, but at the same time, it needs to be balanced.
Therefore introducing a tax doesn't necessarily, we believe, may not necessarily create the desired outcome which the government is trying to create in terms of the beneficiation of chrome and chrome products in South Africa. Therefore, we'll have that conversation with them, but unlikely to have an impact in the 2nd half of the year.
Cool. Thank you so much.
Thank you. The final question we have comes from Ben Davis of RBC Capital Markets. Please go ahead.
Great. Thanks. Thanks for the presentation. Just a quick question for me on the cost of synergies, moving down from $0.5 million to $0.2 million. Can you just unpack what were those? Are those finance items or sort of operating costs? Thanks.
Yeah, sure, Ben. On the demerger to synergies, what we had originally anticipated would be we'd have some synergies from a supply chain perspective.
We had global framework agreements with Anglo American. We thought there would be some synergies there, as well as from an insurance perspective. However, now that we've renegotiated our insurance, we're actually seeing some benefits as opposed to a synergy. The $200 million that I indicated, that's really around more of your IT systems and those contracts that we're still working on. Hopefully those synergies will be removed by the time we need to renegotiate those contracts.
Perfect. Thank you.
Thank you. I believe there are no more questions.
There are no further questions.
Perfect. Thanks. A couple of questions, Sayurie, have come through the webcast. 1st, coming from Arnold Fan, Kran Netbank. On unit cost guidance, can we use the initial FY 2025 guidance as a proxy for the FY 2026 unit cost pre-inflation? Or will there be spillover impact from Amandelbult flooding going into FY 2026?
So in terms of our unit cost guidance, I mean, we haven't provided our 2026 guidance, and we're still working towards that. What we have indicated is from a medium-term point of view, we're looking at an all-in sustaining cost of less than $950 per 3E ounce, and that is what we're targeting. What I did indicate is that we will see some cost benefits from the demerger. Once we exit some of the transitional service arrangements, we'll see about ZAR 1 billion-ZAR 1.5 billion of run rate savings from 2027, of which about ZAR 1 billion will come through in 2026. Further to that, all the operational excellence initiatives, so your mass pull reduction, the pit optimization, those will continue, and we'll see the full benefits coming through in 2026.
Yes, I mean, roughly we will firm up our guidance by the end of the year, but we are looking very hard into all our assets to see how we can reduce costs further.
Perfect. Thanks. Thanks, Sayurie. The next one is from Chris Reddy, All Weather. Anglo American has previously stated that they did not intend selling any further Valterra shares for 90 days post the demerger. Should these shares be placed, what is the potential for Valterra to do a buyback given the current low net debt-to-EBITDA, incoming insurance proceeds, and a better 2nd half expected?
Do you want me to go?
You can go.
Okay, I'll go. Thanks very much for the question. Look, we certainly see there's value in our share price. We think that there's still further upside to go.
More importantly for us is maintaining that capital discipline and actually delivering on what we said we were going to do. Generating the cash from achieving our step-up in the 2nd half of our production. As a result, we'll generate the cash and we'll assess each opportunity at each reporting cycle. We've been very clear that our focus is around generate the cash, invest sustaining capital back into our business. We've outlined what we want to do on Sandsloot , and then we'll make a decision based at the time in terms of what we will do with any extra cash, whether that's in the form of an additional dividend or a potential buyback. Let's rather get to that position than doing anything now.
Thanks. Thanks, Craig. The next one, Shilan Modi from HSBC. Are you trying to conserve cash given cuts to CapEx guidance?
I think the question was asked earlier. His 2nd question is, do you need to maintain a cash balance? Can we anticipate a 2nd half dividend equal to the cash generated in the 2nd half?
You would ask that?
Yeah.
Okay.
In terms of the capital, we've lowered our capital guidance, but that hasn't changed in terms of our focus on asset integrity. I think we still. Committed to all the projects that we had in our pipeline, but what has changed is the way we actually executing on some of our projects. The operating model in terms of which we're operating as a standalone has seen some benefits in how we can actually do projects differently using an in-source model, for example, as opposed to 3rd parties, has generated a lot of those savings. In terms of, we're not really cutting back in terms of asset integrity.
In terms of the dividend, I think Craig has already indicated, I think for us it is if we deliver on what we need to do for the 2nd half of the year, if we do have excess cash, we'll look at it at that point, whether it's an additional dividend or a share buyback.
I think if I can just to re-emphasize and to support what Sayurie said, as we said, this is the 16th consecutive period since the reinstatement of the dividend that we've paid a dividend. We've articulated our strategy and our commitment to generating value. We will, at every single opportunity, look at what our uses are of that capital, invest it back into the business where it's appropriate, and return that extra cash to shareholders. That philosophy doesn't change.
We'll look at it again at the end of the year once we've then delivered on our 2nd half commitment.
Thanks. Thanks, Craig. The next one is coming from Yamin Luriem Capital. On tariffs, PGM imports into the U.S. were not subject to tariffs in the 1st draft. What are your thoughts going forward? Will PGM still be exempt from August 1st?
It almost feels like it's easier to answer the question, what's the platinum price going to be at the end of the year than what are tariffs going to be? Look, I think what we have seen is, yeah, PGMs initially from the proposals from the U.S. administration was that PGMs were not tariffed. They are under review. I think there is concern out there in terms of tariffs potentially being, PGMs potentially being tariffed, and that's been articulated through the decisions around copper.
At the moment, we just need to continue to see what that impact will be and wait for the outcome of the review. For the moment, they're not tariffed. We have seen metal going into the U.S. in anticipation of tariffs, in anticipation of that potentially PGMs being tariffed, but we'll deal with it as and when it arrives.
Thanks, Sayurie. I think the last question coming through the conference call may be related. This one comes from Samuel Semenyah from CGIC. As things stand, we are to expect 30% tariff on automotive and potential 10% additional tariff to apply to all countries aligned to AGOA. How will this impact Valterra and their strategy? But I think you may have answered it already, so no need.
Yeah. I mean, certainly, I think what we are seeing is certainly agreements are being reached with various governments.
Some of our largest markets, both in Europe, having sort of reached an agreement. And Japan in terms of where some of our volumes go and where they go into the U.S. So we'll just continue to evaluate it on a case-by-case basis. But certainly, I'm encouraged by the fact that we're now entering into these agreements that reduces the economic uncertainty, which is there, and ultimately should translate into improved sentiment towards economic growth and ultimately demand for PGMs.
Thanks. I guess assuming there are no questions coming through from the room, I'm going to hand over Craig just to close today's session. Just checking residual, residual gone. Craig, over to you. Thanks, Theto. Thank you very much for joining us.
It's not usually that I get the last word as a Theto, but I think today is just to recognize this will be Theto's last hosting of our result sessions. Theto will be leaving Valterra Platinum and just wanted to extend a sincere appreciation on behalf of the executive team and all of the board. And I know everybody at Valterra Platinum for the huge amount of work that you've done, Theto, since you've been part of us, and wish you all the very best and success as you embark upon the next phase of your journey. So thank you, Theto. Thanks very much, ladies and gentlemen. Thanks very much, ladies and gentlemen. Thanks very much for joining you, and look forward to speaking to you in February when we'll show you the delivery.