Mining for a future is not just an empty mantra, it's the foundation we build our business on. We keep our eyes firmly fixed on the horizon, and it's filled with opportunity. Let's take a look. Mining is a complex endeavor and never without challenges, and this year was no exception. Nevertheless, it still saw a robust financial performance from the group, with exciting near-term projects and opportunities looming. Construction has begun at Mintails, with commissioning scheduled for the fourth quarter of 2024. This project will significantly increase group production, adding about 25% or 50,000 ounces per year to Pan African's production over the next 20 years or more, while contributing to the environmental rehabilitation of the site.
Evander Eight Shaft remains one of the lowest cost underground operations in Southern Africa, and the development of levels 24, 25, and 26 will ensure sustainable production from this operation well into the future. The implementation of continuous operations at Barberton Mine over the last half year has resulted in an increase in production, with further optimization expected into the future. Finally, Pan African continues to lead the way in terms of rapidly expanding our renewable energy footprint and reducing our dependency on the South African grid, a strategy we believe will greatly benefit all of our stakeholders in the coming years. And of course, these highlights are all part of our vision of a smarter, more agile, and future-focused approach to mining. Pan African Resources, mining for a future.
Good morning to all of you, and a warm welcome to our 2023 financial year-end results presentation. Thank you very much for taking time out of your schedules to join us today. Now, we always knew that the last year would not be easy, having produced some record results in 2022. In addition to the constraints faced at our Barberton underground, grades normalized at our Evander Eight Shaft operation, also impacting production. We further had to contend with electricity supply issues and some quite severe cost inflation, specifically on inputs such as reagents and Eskom tariffs. With war breaking out in the Sudan, we had to evacuate our expat staff and safeguard our assets.
It would be fair to say that all of these challenges, and of course, also the fatal accident we suffered at Evander in March of this year, has kept our management team very busy and engaged. Pan African's strategy is to position ourselves as a safe and sustainable, high margin, long-life gold producer. 2023 presented some difficulties, but it also again demonstrated Pan African's resilience, our ability to adapt, reconfigure our business, to move forward on a strong footing, and grow in a responsible and value-accretive manner. I'm very excited about the year ahead and look forward to sharing some thoughts on our prospects in the following slides. We will keep the presentation fairly brief, with an opportunity for questions afterwards. Joining me in presenting today will be Deon Louw, our Financial Director.
You are welcome to refer to our SENS, RNS announcements, and to the supplementary information available on the Pan African website should you require detail not dealt with in today's presentation. Please note the disclaimers and info on forward-looking statements on slides 2 and 3. On slide 4, an overview of the presentation. We will start with Pan African's health and safety performance, and then provide an overview of the group and of our operating environment, some key features from the year past, and detail on asset performance, as well as our cost and capital outlook. We will then spend a couple of minutes on ESG before allowing Deon the opportunity to highlight elements of the group's financial performance for FY 2023. The presentation will then conclude with an update on our Sudanese exploration venture and by detailing key focus areas for the next 12 months.
If we then proceed to slide 6, our safety performance and our journey to Zero Harm. A key standout is obviously the fatality at Evander during the year, made even more difficult by the fact that the operation achieved 1 million fatality-free shifts just before the accident. We continue to focus on safety initiatives and interventions, and on maintaining an industry-leading record. We can also celebrate a number of safety milestones achieved during the past year. In addition to safety, wellness of our staff is enjoying a lot of attention, specifically a focus on reducing the impact of the so-called lifestyle diseases. Slide 8, a high-level representation of our unique portfolio of surface remining and underground assets. The addition of Mintails means that we now have three large mining complexes in South Africa. Surface operations reduce unit costs and turn legacy liabilities into profits.
While the underground provides long life of mines, solid returns on investment as a result of a large sunk capital base, and also attractive optionality, which we are bringing to account in a circumspect manner, as demonstrated by our progress on the Evander Underground. If there's one takeaway from this slide, it is that we are growing profitable production very materially in the years ahead. We expect to be well north of 200,000 ounces of annual production in 2025, with Mintails coming online, and also then with the Evander underground expansion at the same time. Importantly, all of this growth is funded, either with banking facilities or with cash generated from operations. Slide 9. The coming two years will also see us moving towards an even more balanced portfolio of low cost and stable surface remining, and high-grade, long life underground assets.
This asset mix should also reduce our group all-in sustaining cost profile, with both Elikhulu and Mintails producing at an all-in sustaining cost of approximately $1,000 per ounce. Slide 11, our operating environment. We continuously seek ways of making our business less susceptible to adverse external impacts in South Africa. Some matters to highlight in terms of our operating environment over the last year include the following: We are reducing our reliance on Eskom, the South African electricity utility. Some more information on this in the next slide. Pan African's assets have long lives with extended mining rights. The Evander Complex's rights are valid until 2038, and those at Barberton until 2051. The Mintails new order mining right is currently valid until 2029. We will obviously seek extension in due course. In terms of stakeholder interaction, we invest heavily in our social license to operate.
Pan African's mines make a meaningful, positive impact in the areas where we operate. We have one year remaining on our Barberton wage agreement, and we are also very pleased to report today that the underground contract at Evander recently entered into a three-year wage agreement with their union, which will provide stability as we grow production from that asset. Finally, from a security perspective, our efforts to safeguard our people and operations and minimize the impact of illegal mining and criminality are ongoing. In the last year, we have definitely seen an improvement in terms of the illegal mining situation at Barberton, which is encouraging. To conclude on this slide, Pan African's track record demonstrates that we can operate and grow in South Africa and do so very successfully.
To elaborate further on our renewable energy roadmap on slide number 12, with construction having commenced at our Barberton solar facility, we are set to almost double our behind the meter renewable energy footprint in the next year. We further anticipate first power from our 40 MW Sturdee Energy power purchase agreement in early 2025. You can also expect other announcements on renewables from Pan African in the year ahead. Hopefully, we can add even more capacity and also possibly diversify into wind energy. The first 10 MW solar plant at Evander is already reducing group all-in sustaining cost by more than $10 an ounce, with this number obviously increasing in coming years as Eskom tariffs continue to escalate. If we then proceed to key production, cost, and financial features from the last year on slide 14.
From a production perspective, our surface assets performed in line with expectations, and we will demonstrate the progress with Barberton's underground operations in the next slides. In terms of costs, all-in sustaining costs came in in line with revised guidance, with U.S. dollar costs increasing by only some 3.3%, despite higher U.S. and South African inflation. Given the production headwinds, the group delivered a very resilient financial performance, with a strong rand gold price compensating for lower underground gold production. Importantly, we are maintaining what we believe is a very attractive dividend to shareholders, despite the large capital tickets for Mintails and for the Evander underground expansion. As you may know, in terms of upfront capital investment, Mintails is the largest single capital project we have ever undertaken.
We've managed to fund all of this Mintails development capital without any call on shareholders, and we ended the financial year with very manageable net debt. If we then move on to more detail on the performance per operation, starting with Elikhulu on slide 16. This really is a flagship asset for the group. 10 years of production remaining, producing at approximately $1,000 per ounce. Despite lower recoveries, production was stable, and looking forward, we expect another year of more than 50,000 ounces of production and clearly excellent cash flow generation in the current gold price environment. As we have said before, Elikhulu is testament that large mining projects can be successfully constructed in South Africa, on budget and on schedule, and we are carrying all of the learnings on building and operating Elikhulu over to Mintails as we ramp up activities there. Slide 17, the BTRP.
Another sterling performance from our first gold tailings retreatment plant, commissioned in 2013, and the lowest cost producer in the group. The BTRP management team also deserves special mention. By working on dilution efficiencies and optimizing their process, they managed to reduce total costs despite inflation in cyanide and other reagents. In the coming years, we will substitute the BTRP's feed with run-of-mine material from Royal Sheba and Western Cross. Lower grade, but bulk ore bodies, with both having significant potential to further increase resources and reserves. The latest addition to our tailings retreatment portfolio on slide 18, large-scale construction at Mintails is now underway. Despite almost two years having lapsed from when we completed the Bankable study and some serious inflation recently, our team believe they can still deliver this project for upfront capital of some ZAR 2.5 billion, or $135 million.
Payback on this investment should be under 4 years, with a project life of more than 20 years when we include the Soweto resources. Now, South Africa has its issues, but where else can one acquire gold reserves, 2 million ounces on surface for less than $2 per ounce? On slide 19, a picture of construction progress on the site, with commissioning scheduled for December 20, 2024. You can see that we are nicely on track in terms of project execution timelines. Slide 20. There is no doubting the benefit of Pan African developing Mintails for all legitimate stakeholders. We currently have 200 contractors on site, more than 50% of them from local Mogale communities. Now, this number is set to increase to more than 500 staff on site in the months ahead, with even more locals benefiting.
When steady state production is achieved, the operation will directly employ almost 400 permanent staff. On slide 21, over the life of Mintails, it will also dramatically improve the environmental and water situation on site. A win-win for all involved. We calculate that the final closure liability will be less than 40% of what was an unfunded liability of more than $20 million when Pan African became involved. To then conclude on our surface assets on slide 22, we are building a world-class Tailings Retreatment business in the next 2 years, with further scope to grow also. I don't believe the market is currently giving us much credit for Mintails, but this should change as the project becomes closer to commissioning in 2024. Slide 23.
The Evander underground team has delivered in line with expectations, despite electricity constraints and difficult mining conditions, producing more than 33,000 ounces for the year at an all-in sustaining cost of just over $1,050 per ounce. We are on track with our capital programs at Evander, and some highlights from the 12 months include: progress with our new underground refrigeration infrastructure, with phase two due for commissioning in December of this year. A ramp up in tons from underground by more than 20% in the last year, despite challenging pillar mining conditions. Completion of the dewatering of the Egoli decline to 19 level, with vamping activities set to commence in the coming months on the upper levels of this project. And finally, good progress with the development of our subvertical hoisting shaft, with this project scheduled for completion in quarter one of 2024.
I really believe that this shaft, with a hoisting capacity of 40,000 tons per month, will be a game changer for Evander. No more cumbersome conveyors, lower costs with a higher mine call factor. If we then proceed to slide 24, dealing with Fairview at Barberton. Clearly, given a decline in production from Barberton Underground in the last year, a key element of this results presentation is demonstrating progress with our initiatives to increase future production. Even though continuous operations took a bit longer to implement, I believe we still restructured in record time, to be fair. Tons at Fairview are up by almost 8% in the last month, and gold production also. Other important initiatives at Fairview is opening up near surface resources for mining and infrastructure improvements we are implementing, most importantly, the chairlift next to 3 Decline.
The other critical component at Fairview is increasing drilling on slide 25, reducing productive- production volatility in the years to come. If we move on to the smaller underground operations at Barberton on slide 26. At Sheba, continuous operations definitely having an impact, with production tons up almost 40% in the last month. Consort, it took us a bit longer to get the contractor going, but they are now firmly established and our mine plan reconfigured. The headcount has been reduced by more than 30% at this operation, and in the last months, tons and gold produced are up. We expect gold production of some 25 kg in September, returning Consort to a cash flow positive position. Mining of the MMR and the PC ore bodies will give this operation a life of many more years. Slide 29, the section dealing with all-in sustaining costs.
More than 80% of our portfolio are produced at an all-in sustaining cost of just over $1,150 per ounce. We expect unit costs at Fairview, Sheba, and Consort to reduce in the new financial year, benefiting from the turnaround plans currently being implemented. Slide 30 demonstrates that our cost performance on core operation continues to be very much in line with averages for the global sector, with most producers having experienced significant cost pressure in the last couple of years. Despite inflation, we should be able to maintain all-in sustaining costs at current levels in the coming financial year in U.S. dollar terms. On Slide 32, group capital projects. We continue to invest into our assets and into growth, with most of Mintails' upfront CapEx spent in the next year.
For Evander, we expect capital to reduce from 2025, as most of the large capital or 24 to 26 levels within have been spent. ESG, slide 35. Very proud of our achievements on this front, particularly on progress with renewable energy and water retreatment. I'm happy to report that our Evander treatment plant for water is fully commissioned. At our Barberton Blueberries project, we are currently employing 300 community members, mostly women, in the second harvest, and also forecasting positive EBITDA for the venture this year. We would love to expand this operation further and create even more employment and opportunity. In terms of other ESG progress, we are issuing our very first TCFD report today.
I'm also very pleased to report that this is the first year that we have limited assurance on 10 ESG KPIs, of which five relate to energy management and climate change, and five to important social aspects of our operations. I will now hand over to Deon, who will provide an overview of the financial results for FY 2023.
Thank you, Cobus. Slide 37 summarizes the group's results for the 2023 financial year. Contrary to the prior financial year, during which the average rand gold price declined, this trend reversed in the 2023 financial year, with the average rand gold price increasing by 18%, while the increase in the average U.S. dollar gold price during this period was negligible, at below 1% to $1,836 per ounce. The impact of the lower gold sales on rand turnover was offset by the increase in the rand gold price of 18%, resulting in a virtually flat year-on-year turnover of ZAR 5.7 billion. This leverage to the depreciating rand is important, as the group's functional currency is the rand and our debt is rand denominated.
Rand cash generation drives our ability to fund our capital programs and redeem our rand debt. Unfortunately, the flat year-on-year dollar gold price did not provide a similar offset for dollar revenue, which declined by approximately 15%, commensurate with the decline in gold sales. The lower gold production of 175,000 ounces also adversely impacted all-in sustaining costs per ounce, given the large fixed cost component of our cost base. Fortunately, as virtually all our costs are rand denominated, the 17% depreciation in average rand-dollar exchange rate to almost 18 rand to the U.S. dollar, contributed to subsidizing all-in sustaining costs per ounce in dollar terms, which commendably increased by only 3.1% to $1,327 per ounce, and the all-in sustaining cost margin declining by only 1.9% to 28%.
The decline in revenue also adversely impacted adjusted EBITDA, which declined by 17% in dollar terms, and attributable earnings and earnings per share, which declined by 19% in dollar terms relative to the prior financial year. The disproportional lower decline in cash flow from operating activities of only 9% to $100 million relative to that of the prior financial year of $110 million, is due to the upfront receipt of ZAR 400 million, or $22 million from the synthetic forward sale of gold, which I'll touch on in the next slide.
The financial year's robust cash generation contributed to net debt increasing by $9 million to $22 million only, which is lower than originally anticipated, notwithstanding the capital expenditure on Evander's 24 to 26 level project and Mintails' capital expenditure gaining momentum towards the end of the financial year. Slide 38 demonstrates the extent of the group's available debt facilities and funding approach to the Mintails project.
As we mentioned in the past, our approach to projects of Elikhulu and Mintails scale is to fully fund the project's upfront capital with its debt redemption profile sculpted to its cash flow profile, leaving the rest of the group's cash flows unencumbered for other capital expenditure programs and returning cash to shareholders. The bar chart on the right of the slide shows the composition of the two dedicated debt facilities from Mintails construction, comprising senior debt of ZAR 1.3 billion, approximately $70 million, and the domestic medium-term bond issue of ZAR 800 million, approximately $43 million. Together with the ZAR 400 million, approximately $22 million upfront receipt from the synthetic forward sale of gold, Mintails upfront capital of ZAR 2.5 billion, approximately $135 million, is fully funded.
To reduce the financial risk associated with the forecast increase in debt levels, the group entered into a gold price hedge in March 2023, which locks in the rand proceeds on 116,000 ounces at an effective rand gold price of ZAR 1,135,000 per kilogram, approximately $1,909 per ounce over the following 24 months. This rolling 2-year hedge underpins the rand proceeds on approximately 32% of the 2024 financial year's production, using the midpoint of 184,000 ounces in the production guidance range as a base.
In addition, for the period June to December 2023, a further 25,800 ounces were hedged by means of a zero-cost collar, with an average floor price of ZAR 1,100,000 per kilogram, or $1,849 per ounce, and an average cap of ZAR 1,326,000 per kilogram, $2,203 per ounce, bringing the total hedge ounces for the 2024 financial year to 46% of the 184,000 ounce guidance referred to earlier. It is likely we'll continue to make use of short-term hedges of this nature to lock in cash margins when we see a similar spike in the rand gold price.
The bar chart on the left of the slide shows the extent of the group's available bridging and standby facilities should additional liquidity be required, either for operational or capital expenditure purposes. Slide 39 illustrates the individual redemption profiles of the group's facilities referred to in the previous slide, and the group's total debt profile as it amortizes over the next five years. Total debt is expected to peak at approximately ZAR 3.1 billion, or approximately $165 million, in the third quarter of the 2024 financial year as Mintails' expenditure peaks. However, principal debt repayments only commence in the fourth quarter of the 2025 financial year, by which point in time Mintails should be commissioned and in full production. This 18-month window in principal debt repayments enables the group to focus on completing Evander's 24 to 26 level capital expenditure program and Mintails' construction.
At forecast peak debt, the total debt-to-equity ratio is expected to be approximately 56% of the existing equity base of $295 million. In reality, it will probably be less, as the ZAR 1 billion RCF facility is seldom fully drawn, and the group endeavors to hold a minimum cash balance of ZAR 200 million, approximately $11 million, at any point in time. Slide 40 tracks the group's historical dividend yield and the yield on the proposed dividend of ZAR 400 million, or approximately $21 million, for the 2023 financial year.
In rand terms, the dividend is identical to that of the prior year, of ZAR 0.18 per share, but lower in U.S. dollar and pound terms due to the depreciation of the rand relative to these currencies, and equates to approximately 0.96 U.S. cents per share or 0.75 pence per share. Based on the 30 June 2023 closing share price of ZAR 3.03, this represents a dividend yield of 5.9% in rand terms relative to the dividend yield of 4.6% of the prior financial year, which was based on the year-end share price of ZAR 3.94 at that time. The proposed dividend falls within the range provided for in the group's dividend policy of 40%-50% of discretionary cash flow, as defined by the dividend policy.
Return on equity is a key parameter for measuring the success of our capital allocation decisions, and slide 41 shows the $ return on the group's shareholder funds for the 2023 financial year relative to that of its peer group. The decline in the return on equity to 20.8% relative to the 26% of the 2022 financial year is to be expected, given the decline in profitability. However, as Evander's 24 to 26 level project and the Mintails mine commences generating returns in the 2025 financial year, we can expect the return on equity to revert to its historical levels of closer to 30%, given the profitability of these projects. Thank you.
Thank you, Deon. I think we can now wrap up with a couple of words on Sudan, and then also by emphasizing some key focus areas for us in the year ahead. On slide 43, we have in the past detailed our rationale for venturing into the Republic of Sudan. I'm happy to report that we have now successfully resumed our exploration activities in the Red Sea state. Following a detailed assessment of the security and operational environment, which we obviously continue to monitor closely. With drilling now factored into our budgets for the coming financial year, our team is working on hopefully declaring a maiden resource in the next 12 months. If we conclude on slide 45, Pan African continues to be focused on delivery and execution. Key areas for us in the next year include the following: We will continue our proactive journey to Zero Harm.
We will work to increase gold production as per our guidance and limit cost increases. We will successfully execute into our capital projects, including the very exciting Mintails development. We will maintain our balance sheet flexibility and strong liquidity position. We look forward to exploring in the Sudan and to progressing our ESG initiatives, including more renewable projects. And finally, we will maintain our sustainable shareholder return-centered approach to capital allocation decisions, creating value for all stakeholders. Thank you very much for your time this morning. We look forward to continue mining for a future in the year ahead.
Hi. Thank you, Cobus and, Deon. We will take questions from, Chorus Call, if there are any at the moment.
Thank you, sir. We have a question from Raj Ray of BMO. Please go ahead.
Thank you. Good morning, Cobus and team. Thanks for the presentation. My first question is on your fiscal 2024 growth project. It's a big year for the company in terms of executing multiple projects. Is there any particular risk that, Cobus, keeps you awake at night in terms of delivering those on time and on budget for the next year? And a follow-up to that was, one of your South African peers have recently highlighted severe skill shortage in respect to skilled underground drillers. And is that a risk that you foresee for your underground development at Evander? So that's my first question, and then the second one is on Sudan.
How much are you looking to spend this year in Sudan, when I said this is still 2024, and given the geographical risk or jurisdictional risk we have seen, do you still believe in taking that project forward?
Thanks, Raj. We'll start with your, the first question. Yeah, obviously, it's quite a lot that keeps us awake, and as you point out, it's a very big year for Pan African in terms of delivery into projects. Fortunately, we have dedicated teams on all of these. So, on Mintails, it's a team solely focused on the execution of Mintails. As you know, this is the fourth tailings gold tailings retreatment operation that we're constructing. All of them have been on budget, on schedule. There's no indication that we will fail here. If anything, the team has more experience now, certainly than what they ever have, clearly. So that's good. In terms of Evander Underground, again, I mean, it's a project that's been in the making for a number of years.
This is the last year sort of where, you know, there's sort of really significant capital, and then we should start seeing the benefits of having all of this development done. Again, I mean, if you look at our track record in terms of Evander, we've managed to sort of pretty much deliver on the CapEx as and when it was required. So that team are also very focused. In terms of rock drill operators, underground skills, yes, it is a concern. It's not only underground, it's sort of, I guess, generally a theme in South Africa that there's a shortage of skills, and you find a lot of our skilled and experienced people working elsewhere in Africa and in the world.
Again, fortunately, the scale that we have at the Evander Underground is such that we believe we can manage that situation. So it's not like we need to employ 50 crews. I think at most, at this point, we're gonna ramp up to about 20 crews, and that's quite manageable. So even though it's a challenge, it's something that we believe that we will be able to overcome. In terms of the Sudan, the capital that we intend to spend on exploration is limited. It's an order of about $4 million or so. So yes, I mean, there is definitely jurisdictional risk, there's no doubt. And what's happened in the last six months is definitely highlighted that.
But then, you know, we still very excited about the ore bodies that we believe we can find. And the bottom line is that, you know, Africa is not without risk. I mean, we've seen West Africa recently, what's happening in Mali, the terrorism situation elsewhere. So yes, I mean, we will continue to, in a prudent and circumspect manner, take that project forward, and, the capital at risk there is quite manageable from our perspective.
Thanks, Cobus, for that. A follow-up question with respect to your cost profile. As you pointed out, fiscal 2024 is pretty much in line with where fiscal 2023. But as you start executing on the development projects, you expect it to come down. Do you have a target in mind as to where you can get to, given the current, let's say, the current inflationary environment stays for the next few years with the projects coming online? What's the target that you have in terms of reducing your all-in sustaining cost? And another part to that question is with respect to the Evander underground. You did point out with all the development capital spend, but I'm assuming there's gonna be sustainable underground development that you committed to do over the next few years to improve flexibility.
Can you give us some idea about how much of that capital could be?
Yeah. So, look, the target on all-in sustaining cost is as low as it possibly can be, without compromising the long-term sustainability. But, certainly with Elikhulu and now Mintails, producing at circa $1,000, that will definitely benefit the portfolio. Together, obviously, with hopefully producing more ounces at Barberton, and we've demonstrated some good progress, I believe, in terms of producing more gold from Barberton. So yes, I mean, there's so many variables. Also, obviously, we have the South African rand exchange rate playing a role, so I wouldn't really want to commit beyond 2024, other than to say that, you know, I think if we compare ourselves to the rest of the global sector, we're very much in line.
So it's not a situation that South Africa is known for being really high cost. It's not the case with Pan African, and we do have certainly the tangible ability to reduce that cost in the next couple of years with these projects that I've mentioned. Just on-
That's great, Cobus.
Yeah, on just to find-
Go.
Yeah, on just to... Sorry, to just conclude on your Evander question. Yes, I mean, the capital will go down, but next year we're probably looking in the order of about $20-$25 million, I would think, so 20-25. This is now with the refrigeration done, with the vent shaft equipped for hoisting, and all of the initial developments done. So the project would be self-funding, very much from that perspective.
That's great, Cobus. And one last question, if I may. With respect to Mintails, now you have significant experience having executed multiple, tailings retreatment projects. Is there anything that's different about Mintails versus Elikhulu or anything else you have done in the past? Or is it pretty much the same?
Well, I think the plant is very similar. Obviously, we taking the learnings from Elikhulu, improving and optimizing to the extent we can. The operating environment's a little bit different. Elikhulu was built on our own mining area, where this is we're venturing into a very new part of Johannesburg we're not familiar with. But technically, there's not a lot of differences. If anything, the benefit that we have with Mintails is that the first number of years of production, there's no need to deposit onto a tailings facility. We'll be depositing into an old, worked out open pit area. So that, in a way, is a benefit.
Okay. That's great, Cobus. Thanks a lot. That's it from me.
Thanks, Raj. Any more questions from chorus?
Yes, there is, sir. We have a question from Richard Hatch of Berenberg. Please go ahead.
Yeah, thanks very much. Most of mine got taken by Raj, so I guess I'll just ask one on the hedge. Obviously you've got, sorry if I've missed this, but obviously you've got some hedge volumes at the moment. You know, rand gold price is pretty attractive here. Any sort of thoughts around putting in some additional hedging, just to, you know, stabilize or just shore up those cash flows as you go through a period of capital investment?
Yeah. Richard, I think that's exactly what our thoughts are. Given the rand gold price at the moment, it spiked to well in excess of what we were anticipating from a budgetary point of view. And once the existing zero-cost collars extinguish in December of this year, we'll probably be looking to hedging again for the next six months. Whether we do so then, or whether we do so in the near short term, it's all a function of where we see the rand gold price going, and hopefully it will give us a good spike again and enable us to lock in those cash margins on the short term.
Thanks, John. Just remind me, when you're thinking about it, you know, what's a comfortable level for you to hedge?
Look, you know, it's, we recognize it's a, it's, it's not a perfect science. It really comes down to protecting cash flows, and there we believe somewhere between probably 40%-60% would be optimal, depending on, as I said, you know, the robustness of the margin that can be locked in. Clearly, we don't want to eliminate all of the upside, even on the short term, but I think it's important to recognize these are short-term hedges, for a relatively limited volume of gold, given the total production. So we don't want to go and entirely hedge out all the upside, but at the same point in time, we want to have a meaningful cash flow underpinning in place.
Just to add, I mean, the way we hedge also is-
Yes.
Yeah, just the way we hedge is not a straight hedge. It'll be as, do you want to say, the collar structure, where we sort of under lock in a-
Mm-hmm
... a minimum, but then retain the upside exposure also.
Right.
Good stuff. All right, very sensible. Thanks a lot. Cheers.
Any other call?
Thank you.
Any other questions?
No, sir.
Uh-
We have no further questions on the line. Thank you.
Thank you so much. So we'll go to the web. Hethen, please go ahead.
Okay. Thank you, Cobus. We have a few questions. Before we do that, I'd like to apologize for the break in the streaming. There was a power dip, but we're back online. Thank you. So I'll start with questions from Edward Smyth. He's got a few questions. We'll start with 2024 all-in sustaining costs. It says it'll benefit from a 4% expected lower rand and guided 5% increase in volumes. So isn't it possible to meet or beat the 2023 all-in sustaining cost of $1,327 an ounce?
Yeah, so, Ed, yeah, we definitely will endeavor to try, but it is quite a high, inflationary environment, as you know, in South Africa at this point. You have electricity increasing by some 18%. You have, as we've mentioned, the reagents. So definitely, I mean, in terms of the underground, it's very much a volume game. So obviously, if we can increase our production, then certainly we would expect to have that benefit. And as you know, I mean, we're very much focused on costs, and if you look at the absolute or total cost increases of our operations, I think the teams have done well and will continue to do so.
Thanks, Cobus. Also from Ed, reagent costs fell at BTRP, but rose sharply at Elikhulu. Can the Aachen shear reactor be applied at both sites?
They are actually applied at both sites, Ed, but these are very different operations. So, the BTRP process is 1-1.5 grams per tonne, 80,000-100,000 tonnes a month. You know, that's very different with higher recoveries. That's very different to 1.2 million tonnes, 0.3 grams per tonne with 30%-35% recovery. So that's the reason why the reagents have escalated, whereas the team at Barberton have slowed down and increased recoveries and focused on costs. So it's a constant... And again, you know, the sort of variability of what you are putting through also determines the extent of the reagents you need in your metallurgical process.
It's something that teams continue to monitor, but I can assure you, I mean, we've had a number of reviews done on sites, and we're quite comfortable that the process is as efficient as it can be on both Elikhulu and Barberton and the BTRP.
Thanks, Cobus. Also from Ed: How does the company's low valuation impact on the company's capital allocation? How does it affect CapEx and exploration plans? Why does the company not pursue buybacks? Usually accretive value enhancement at a valuation of sub-4x PE.
Thanks. So, and we have pursued buybacks in the past, and it's a balancing act. Some people love them, some people hate them. There's no clear-cut answer. I think we take your point on the valuation. This is a year where we have very substantial and significant capital investments, both in Mintails, as you know, and also on the underground at Evander. And I think once that is done, we'll have a lot more flexibility from a balance sheet perspective. So we're quite prudent. We obviously have to balance the capital investment also with what we think is a sector-leading dividend. And if we continue to do the right things, then I think the valuation will change. But we take your point on the buybacks. It's not something that's off the table.
In terms of capital allocation, all the projects we are undertaking, I believe, have very good return on investments. Clearly, it doesn't make sense for us to go and do a merger now, given our valuation. So we have to be circumspect in terms of what we look at from a growth perspective. The projects that we are undertaking, I think, tick, tick, tick the box despite the low valuation.
Thanks, Cobus. Last question from Ed. Post the 17 ventilation shaft repurposed to a hoisting shaft capacity of 40,000 tonnes, what all-in sustaining costs can be expected from a ramped Evander output?
If I recall, the studies indicated a all-in sustaining cost of circa $1,200-$1,250 from the Evander underground. Which again, you know, comparing it to the international peers is, and certainly to the South African market, is quite attractive.
Great. Thanks, Kobus. So we've got two questions from Rene Hochreiter of Noah Capital. Noah says, "Nice results. Well done on your low all-in sustaining cost increases. Can you quantify the improvement of the security situation at Barberton Mines?
It's difficult to quantify, Rene, but, I mean, if you look at the number of people we are arresting, it went from 150 to about, let's say, 50 or so a month. So that's one indication, and it's a collaborative effort with ourselves, law enforcement, and the community surrounding the mine. And it's obviously, as you know, we've discussed this many times, it's something we have to continue to work at. But yes, I think it's encouraging that illegal mining, which we've struggled with for many years, is certainly enjoying more focus from government, and there are a number of calls to address the situation, so I think that's a positive.
Thanks, Cobus. Deon, I think this is for you. Rene asks, "What is your IRR expectation for Mintails?
Rene, if my memory serves me correctly, it was north of 25% in dollar terms when originally we did the feasibility study. It's a function of the gold price, the dollar gold price, obviously, but we will not pursue a project which doesn't give us a four-year payback on original capital.
Thanks, Deon. We've got a question from Bruce Williamson of Integral Asset Management. He says, "Hi, Kobus. Are you able to employ sufficient senior mining, engineering, and processing skills at all your operations?" And, he says, "We look forward to live presentations once again.
We'll take notes of your comment on, on presentations, Bruce. Yeah, and as we've said, there's definitely a shortage of skills, engineering, mining, processing all of it, it means that you have to look after your people. I think the culture also needs, is important. But yes, I mean, fortunately, I think our business is of a scale where we can still manage that issue. I mean, it's not like we employ 20 or 30,000 people. So it's something we'll have got to continue to monitor, but, and it is a concern.
All right. Thanks, Cobus. We've got a question from David Melville of Financial Hub. He says: While I understand the thinking of the hedging, given that you have very good debt facilities, are you not perhaps giving away some of your upside with, with the rising gold price? Under what circumstances would you stop hedging? Thank you.
I think it's, I think it's important to recognize that the synthetic forward sale we did was twofold. Was a hedging requirement in terms of the senior debt facilities, the ZAR 1.3 billion facility for Mintails. But secondly, also, it was to raise a ZAR 400 million capital contribution to the Mintails total funding. That was necessary to close out that funding. The zero cost collars, as Cobus mentioned, there's a floor. Typically, we'd want to underpin, say, ZAR 1,100,000 a kilogram, which pretty much covers our cost structures, our budget. And then, it's a question of the gold price that determines the cap that we can, we could get.
At the moment, the cap we can get is approximately ZAR 1,350,000-ZAR 1,400,000 a kilogram, depending on the period over which we hedge. So yes, there will be a sacrifice of revenue and opportunity cost associated with the gold price if it increases in excess of the cap level. But at that kind of level, on the short term, we'll be making a lot of money, and for that reason, we don't want to hedge out all of the ounces. We still want to keep some upside, underpinning the cash margin from a debt and covenant perspective, while at the same point in time, still giving some participation on the upside.
We keep the hedges short, and as I said earlier to another question, probably no more than 40%-60% of annual production. Will we ever not hedge? Absolutely. Hedging is a risk mitigation endeavor, and if, post the commissioning of Mintails, we're comfortable with the operational risk and financial risk, clearly, the hedging levels will decline, possibly even to zero, as has been the case in the past.
Thanks, Deon. We've got a question from Ntuthuko Sithole of SBG Securities. Congratulations on the result. My question is around your unit costs. Are you seeing any reprieve in commodity input costs?
Thanks. Yeah, well, look, we would hope to have now the reagent escalations easing. Obviously, it's also a product of oil price, so we'll have to see what that does. I think we're in a decent position, because of the fact that, you know, we have sort of 50-60% of our cost base is wages, in South African rand, and, you know, we've pretty much nailed down those increases to circa 6%-7%, so that's manageable. And then, obviously, we have Eskom to continue with, and we know what those escalations or have been and are likely to be, so that's something to manage.
I mean, for us, you know, one of the key ways of reducing unit cost is by commissioning projects like Mintails, which is low cost, $1,000 an ounce and long life, more than 20 years.
Thanks, Cobus. I've got a few questions from Lutz Ebel from Chart Capital, mainly around the Mintails project. And Lutz says: Your Mintails project is situated next to the West Village town, which is known as a very dangerous place and is with still plenty of illegal miners, respectively, so-called Zama Zamas, that live next to it. There are many reports and even videos which show that the Zamas managed to completely strip down the former Mintails plant, which was a pretty large plant, within a few weeks. How do you practically want to control and secure your large Mintails licensed area in this regard? Do you plan for a sort of maximum security prison for your 160 million tons, $160 million U.S. investment?
Yeah, so I mean, we're very familiar with what happened on that site. I can assure you, we, we've had 3 years or 4, even more, to do our homework. And security, as we've said in the past, is one of our core functions. Unfortunately, that it becomes such, and we've been planning, as I said, for a long time. There are other operations close by, DRD, Sibanye, Harmony. We collaborate. We sort of make sure that we sort of have some level of scale there. And yes, I mean, security is something we deal with, and it's not easy, but it's something we're comfortable in, in managing.
Okay. Lutz also says, in your recent July 20, 2023 presentation, you show a nice map of the Mintails property. According to our state of knowledge, there is another gold mine situated next to your Lancaster pit, even named after it, called the Lancaster Gold Mine. It should be the area on the top right corner of your picture in the presentation. It seems that this property does not belong to your Mintails license area, but could feature a continuation of the reefs which have been mined in the Lancaster pit. Beside the fact that you probably would need the surface area in order to reprocess the large tailings dump next to it, it might make sense to extend the existing Lancaster pit in an easterly direction in order to process this virgin reef with your projected, and probably, highly efficient plant.
Do you have any thoughts or plans regarding this neighbor, respectively neighboring property, which most probably not only could add to the life of mine of your Mintails project, but also facilitate the reprocessing of the main project's tailings dump?
Yeah, it's quite a mouthful, but the bottom line is, I mean, we focused on reprocessing tailings. We're very familiar, again, with that operation. It's actually on our surface, so we own all of that surface. We will, in due course, look to do a feasibility on potentially run, a run-of-mine circuit, so mills, et cetera. But that's not the focus for us. The focus is reprocessing 800 to 1 million tons of tailings at 0.3 grams per ton, and that's the business case, which is very attractive. So whatever we can do to optimize, we will. We also obviously have done all the work on deposition space, when, where, and all of that is well established.
So yes, I mean, we're very familiar with that area, and so clearly, I mean, to the extent we can establish synergies with anybody else operating there, we will.
Okay, thanks, Louis. We've got a last question here from Dalo Ncube, from Letaba Elihle Investments. Dalo says, "Congrats on your resilient performance. Some of your gold peers are diversifying into copper. Are we likely to see a similar move from Pan African?
Thanks for that, Deon. Yeah, I think, you know, we have more than enough to do on the gold side. You know, we never take anything off the table, but, I mean, let's focus on the projects we have at hand. As I said, I mean, that's a lot to do, a lot of value to be unlocked in the next year, and that really is what we will be working on as Pan African.
Thanks very much. That's all from the webcast questions. I would hand over to the teleconference, if there's any questions.
Thank you, sir. There are no further questions on the lines. Thank you.
Thank you very much to everybody for taking time this morning. Have a great day. Thank you.