Good morning to all of you, and a very warm welcome to the Pan African Resources 2022 interim results presentation. Thank you very much for taking time out of your schedules to join us today. The six-month reporting period has again seen excellent progress with Pan African's strategy of positioning ourselves as a safe and sustainable high margin and long life gold producer. We are excited to share some highlights and also strategic plans in the next slides. As per usual, we will keep the presentation fairly brief, and we will be available to address questions afterwards. Joining me in presenting today will be Deon Louw, our Financial Director. You are welcome to refer to the SENS and RNS announcement, and also 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 detail on forward-looking statements on slides number two and three. On slide number four, an overview of the presentation. In section number one, we will deal with our continued response to COVID-19, as well as provide information on the group's excellent safety performance. We will then follow with some of the highlights and key features of the last half year, and also further detail on our unique portfolio of surface re-mining and underground assets. We will discuss the group's all-in sustaining cost, performance and outlook, and how we continue to reinvest in our mining assets via capital spend to ensure their sustainability into the future. I look forward to spending a couple of minutes discussing progress on our ESG initiatives, where our aim continues to be to go beyond compliance.
Deon will analyze our financials with record profits despite a lower gold price for the half. We will then conclude with an update on our growth and expansion plans, and by demonstrating that Pan African is firmly on track in meeting our deliverables for the full financial year. On slide six, COVID-19 and health and safety. When we last presented full year results, we targeted a COVID-19 vaccination rate of 75% or more for our employees and contractors. We are now pleased to confirm that from a group perspective, more than 80% of our people are fully vaccinated versus a national average of less than 50%. We are also continuing to implement policies and protocols to minimize the impact of COVID-19 on our staff and on our operations. From a safety perspective, I wish to commend our operational teams on their performance in the last half.
Both Barberton and Evander achieved fatality-free shift milestones, and our Evander underground operation had zero reportable injuries in the six months, despite the challenging pillar mining conditions. Normally, when safety goes well, production does also, and you can really see that at the Evander underground. If we move on to slides number eight and nine, some of the highlights from the half. We again delivered an excellent production performance with gold produced increasing almost 10%. The last half saw Pan African set a record on gold production. The Evander underground produced excellent results, with production up more than 100%. Evander's Eight Shaft life has also now been extended to 13 years with the inclusion of 25 and 26 levels. From a cost performance perspective, the half was very much in line with our targets.
Our all-in sustaining cost actually reduced by 6% despite the stronger rand, and 80% of our gold production was delivered at an all-in sustaining cost of just over $1,000 per ounce, which is world-class. We maintain a targeted all-in sustaining cost of some $1,200 per ounce for the full financial year. On slide nine, Deon will speak more about the financial performance, but we achieved a record profit for the half year, even after accounting for a weaker gold price received. After all the capital programs and the highest rand dividend ever paid to shareholders in December of last year, we also managed to cut our net debt to what is now a very manageable level. The last six months was also, again, an excellent period for Pan African's ESG initiatives.
We are particularly pleased with our achievements on renewable energy, water recycling and Barberton agriculture. We will discuss these programs further in the ESG section ahead. If we then proceed to an overview of our operating environment and operations starting on slide 11. As we have said many times before, in terms of a track record of operating successfully in South Africa, Pan African's operations have a pedigree second to none. The Barberton Mining Complex has been mining continuously for more than 130 years. Now, few mining jurisdictions are without challenges. It is therefore key that you have quality assets and a management team experienced and equipped to deal with problems and challenges as they arise or where possible, preempt and avoid some of these issues altogether. 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 half include. As previously announced, we are reducing our reliance on Eskom, the South African electricity utility. Our first 10 MW solar plant at Evander will be complete in the next month, and we hope to switch on shortly thereafter, and then make a final decision on expanding this Evander solar facility by a further 12 MW to cater for our underground operations. We will be one of the first mining houses in South Africa to have commissioned a plant of this scale. We've also completed the feasibility into an 8 MW plant at Barberton, and we've commenced the permitting process and engineering design on this facility. Our assets have long lives and also extended mining rights. The Evander complex's rights are valid until 2038, and those at Barberton until 2051.
From a security perspective, our efforts to safeguard our people and operations and minimize the impact of illegal mining are ongoing. We continue to roll out a number of new technology-based solutions to increase effectiveness and reduce our security costs. In terms of stakeholder relations and interaction, we continue to invest in our social license to operate. We have stated before that Pan African's operations make a meaningful, positive impact in the areas where we operate. In South Africa, we have ready access to technical support, infrastructure and mining skills, and our legal and taxation systems function well. This is not always the case in other jurisdictions. On slide number 12, Pan African's business represents a unique combination of surface re-mining and underground mining.
Surface operations reduce unit costs, while the underground provides long life of mines, solid returns as a result of a very large sunk capital base, and also attractive optionality, which we are bringing to account. Slide 13 is a summary of our current operating assets. Elikhulu and BTRP, our surface re-mining operations. These plants are highly automated, with a smaller labor component, and have generated fantastic returns for the group. The BTRP paid its initial capital back in 18 months, and Elikhulu its $120 million construction capital in only three years. We have managed to extend the life of Elikhulu to approximately 12 years, and we expect the BTRP to operate for many more years, processing run-of-mine material from our Sheba.
On the underground, Barberton Mines, as we've said, is one of the oldest mining operations in the world, still with a life of mine of 20 years and more. The Evander Eight Shaft is now really delivering with what we believe a great future ahead, particularly with the life now extended to 13 years. If we spend a couple of minutes on the operational performance of each of our core assets. Elikhulu on slide number 15. Now we started the financial year very well at Elikhulu. Unfortunately, November and December were months with some of the most rainfall and inclement weather on record. These conditions, together with some other issues, impacted production. We have commenced the construction of re-mining infrastructure at Leslie Bracken, the next re-mining complex, and we are still targeting 54,000-55,000 ounces of gold production for the full financial year.
Elikhulu's costs should also reduce once our solar plant is fully operational in the next months. On slide 16, the current period again saw a good performance from the BTRP, with the asset generating almost $7 million in EBITDA. We can maintain this level of production from the BTRP for approximately three more years. However, the future of the BTRP is processing Royal Sheba ore. The 10,000 bulk sample from Royal Sheba will be extracted in the next months. Slide 17 and 18 provide more information on the Barberton underground operations. The flexibility afforded by the four operational platforms at Fairview's 11 Block continues to assist us from a production perspective. Admittedly, the costs at Sheba and Consort underground mines are high, and we are implementing plans to reduce these costs.
At New Consort, the following year's production will be enhanced by accessing the down dip extension of the 42 level ore body at 43 level. High-grade mud pumping from the 22 level PC shaft will commence during the last quarter of this financial year. Future production will be sustained by ore from the MMR Reef between 14 and 16 levels. High-grade reserve blocks on 20 level are currently being accessed and will be in production during quarter one of the next financial year. From a Sheba perspective, this operation will change in the next year as Project Dibanisa is completed and we start accessing the Royal Sheba ore body. If we then conclude on our current operations, slide number 19, Evander, the eight Shaft pillar.
The Evander underground team again delivered an outstanding performance, producing some 27,000 ounces during the half at an all-in sustaining cost of below $1,000 and an excellent safety performance also. With the addition of 24 level and now also 25 level, 26 level, this operation has a life of mine of 13 years, excluding any gold production from Egoli. Slide number 21, all-in sustaining costs. 80% of our portfolio are produced at an all-in sustaining cost of just over $1,000 per ounce. We are guiding a group all-in sustaining cost of approximately $1,200 for the full financial year. A final word on costs from my side on slide number 22. I think we can demonstrate that our cost performance on core operation, operations is very much in line, if not below the average for the global sector. Slide number 24, group capital expenditure.
We continue to invest into our assets. In a lower gold price environment, we can cut CapEx to maintain cash flow margins. For the time being, we are able to balance a fairly large reinvestment into our assets with other capital priorities. For the current financial year, in terms of capital, we are moving to the new re-mining site for Elikhulu and extending its tailings storage facility. We are also doing pretty much all of the 24 level development, which will also now serve 25 level and 26 levels at Evander Eight Shaft. Also included in Evander capital is the cost of the water treatment plant that we are currently constructing. Going forward, Elikhulu's capital spend will drop significantly after 2023 once the Elikhulu move to Leslie Bracken is complete. At Barberton, the 2023 CapEx also now includes work on Royal Sheba.
On slide number 26, environmental, social, and governance. The increased focus on ESG in recent years has required our group to explore opportunities of improving our operations and ensuring that we future-proof our business. Last year, we released our first dedicated ESG report, reporting in terms of the group, Global Reporting Initiative or GRI. We will also commence assurance work on our ESG reporting in the next year. At Pan African, actions speak louder than words. For me, in addition to our achievements on renewable energy and water recycling, it really is worthwhile again mentioning our Barberton Blue Project. This major agricultural initiative, which cost us $2.7 million, was constructed on time and on budget. The first phase alone is expected to create temporary employment for some 400 community members, mostly women, for almost five months of every year.
We are also hoping to expand this farming project in the next years and create even more employment and economic opportunity. Pan African is making that meaningful and positive difference in the areas where we operate. I will now hand over to Deon, who will provide an overview of the financial results for the half year.
Thank you, Cobus. Slide 28 summarizes the group's interim results for the 2022 financial year. As is evident, revenue increased by 5.3%, resulting from a combination of a 9% increase in gold sold to 107,000 ounces and a decline in the dollar gold price of approximately 3% relative to the comparative period. The appreciation in the average rand dollar exchange rate by 7.5% relative to the comparative reporting period further impacted the average rand gold price, which declined by almost 11% to ZAR 872,000 per kilogram relative to the ZAR 975,000 per kilogram received in the comparative reporting period.
Notwithstanding the impact of the lower dollar gold price and appreciation in the average rand dollar exchange rate during this reporting period, earnings increased by 13% to $46 million, benefiting from a decline in the income tax expense of $3.6 million. Earnings per share and headline earnings per share increased commensurately with earnings, as no new shares were issued or acquired in this reporting period. We mentioned in the 2021 financial year results presentation that given the undervalued share price at that time, we would embark on a share buyback program. By the time the mechanisms to execute a buyback had been implemented, we found ourselves in a closed period due to the corporate activity relating to the announced Blyvoor tailings transaction. Fortunately, in the interim, the share price has recovered to some extent.
Notwithstanding, we are now well-positioned to make use of such a program and will again consider its merits in the future. Adjusted EBITDA was constant relative to the comparative reporting period, enabling a further reduction in net senior debt in this reporting period by $10 million and a payment of a net $21.6 million dividend in December 2021. In this reporting period, we also continued to invest in our operations, spending $34 million in cash on operational capital, which is an increase of 75% relative to the $19 million spent in the comparative period. Slide 29 shows that despite the decline in the dollar gold price, the all-in sustaining cost margin still increased in both dollar and rand terms to 35% during this reporting period relative to the comparative period.
Although our reporting currency is the US dollar, our functional currency is the South African rand, as our cost base and debt is rand denominated and the rand gold price directly influences our profitability and cash flows. Notwithstanding the decline in the rand gold price during this reporting period, net cash generated by operations increased during this period by 54% to $43 million relative to the $28 million generated in the comparative period, as a group benefited firstly from the full momentum of the Eight Shaft pillar project's production and high grade, secondly the group's all-in sustaining costs declining by 6.3% in dollar terms and 13.4% in rand terms, and finally the absence of a number of large and non-recurring expenses that were accounted for in the comparative period.
Slide 30 demonstrates a decline in the group's senior debt and contractual repayment profile of the new RCF, which now expires in 2024, whereas the previous RCF would have expired in June of this year. The domestic medium-term note program, which we established last year with a nominal value of ZAR 5 billion, or approximately $330 million, provides the group with access to longer-term institutional debt capital, whereas RCF is intended to be a shorter medium-term working capital facility. All of our operations' sustaining and expansionary capital is funded from the RCF and operational cash flows. The medium-term note program would be ideal for funding our expanding solar power generating capacity and the construction of further tailings processing plants should the Mintails and/or the Blaaifontein acquisitions become unconditional.
All historical gold and foreign exchange hedges have expired, and the group is currently unhedged with the exception of an interest rate swap of ZAR 300 million or $20 million of nominal debt to mitigate anticipated interest rate increases in the short-medium term. The group expects to remain unhedged from a gold price and foreign exchange rate perspective for the foreseeable future, unless there's a material change in market conditions. Slide 31 shows the extent to which we de-geared the balance sheet of senior debt since 2018, with the debt-to-equity ratio now at 10%. Although we expected to be fully de-geared by October of this year at the prevailing rand gold price, there's no rush to do so given the reduced debt levels and cash generation from the existing operations.
A core indebtedness of approximately ZAR 500 million or $33 million would not be unpalatable given the group's growth aspirations. Finally, slide 32 illustrates the group's historical dividend yields over the past eight years and the yield on the record 2021 financial year dividend. This dividend yielded 5.3% at that time, relative to the average yield of 5.5% for the full financial years preceding 2018, demonstrating that we have now again reverted to the historical pre-2018 yields in excess of 5%. We are acutely aware of our ability to continue paying attractive dividends being a differentiating factor in our segment of the gold sector, and the cash flow consequences of any capital allocation decision is paramount in our stringent investment criteria.
We believe that the increased operational cash generation and annualized return on equity in excess of 30% for this reporting period bears testimony to the efficacy of this approach. Thank you.
Thank you, Deon. In addition to our current operating assets, Pan African also has exciting near-term growth projects, both organic and inorganic, also on new tailings retreatment opportunities. Slide 34 and 35 sets out more detail on Evander's 25- and 26-level. With this development, we have now secured the future of this operation for at least the next 13 years, excluding any gold produced from Egoli. At Egoli in the next year, we will only dewater at a cost of some ZAR 40 million and then assess infrastructure and development at the bottom of the decline. A much more phased and lower capital approach here. 25, 26-level is such an important project for Pan African and for Evander that it's worthwhile spending a bit more time on it.
First, an update on our work and progress on 24 level for the year to date, where development is on track. The waste handling system is in place, as is the development LHD. The refrigeration plant construction has commenced, and areas for installation have been prepared. The development on 17 and 24 levels are in progress, and the 24 level F line is in a position to start stoping once the refrigeration infrastructure is in place. Now, 25 and 26 levels are logical extensions of the mining on 24 level. A more detailed development plan for the project can be found in the SENS and RNS. What are some of the major differences between the 25/26 level project and what was done at Evander in the past? Our mining layout will be different.
As a result of the on-reef development layout, where we have shallower reef dip, limited waste from 25 and 26 levels will be blended with ore, resulting in a minimum dilution of grade. Less dilution means fewer tons required to maintain margins and also more flexibility in terms of development. The infrastructure, including the conveyor system, will be properly serviced and maintained. Our development budget allows for adequate refrigeration, which will assist productivity and flexibility, and we will retain our contractor mining model. The project will be funded by internal cash flows, assuming a reasonable gold price environment. The modeled returns for the project are pretty compelling. An NPV of some $80 million and an IRR of 45%. On slide number 36, during the reporting period, we made good progress with the development of Royal Sheba.
Just to recap, Royal Sheba is a world-class Greenstone Belt deposit with a strike length of some 850 meters and mineralization occurring over widths of an average 10 meters. It will be mined using mechanized, massive mining methods, including long-hole open stoping. In the past, we have assessed listed mining companies with smaller and less attractive ore bodies than Royal Sheba. It has always appeared a bit lost in the Barberton portfolio because of the higher grade of our other ore bodies. The measured and indicated mineral resources alone account for some 800,000 ounces of gold, with significant upside in the inferred mineral resources and the open down-dip extent. We understand the metallurgy of this ore body as we have treated it before on a smaller scale. It is free milling and does not require BIOX.
Modeling only the BTRP capacity, Royal Sheba demonstrates a 20-year life with steady-state production of approximately 25,000 ounces a year. We also have additional processing capacity at our Sheba and Consort metallurgical facilities. Our bulk sampling project is progressing well. We expect the ore to be extracted sometime during the middle of this year. As we have said before, Royal Sheba will be highly mechanized, massive mining with skilled operators and a very small labor force. Currently, we have less than 30 contracted employees on-site doing all of the work. Our development of the Royal Sheba levels is also progressing well with the development in some 180 meters from the ore body. If we move on to slide number 39, Mintails and Blaaifontein. We previously reported the results of the Mintails Mogale Cluster pre-feasibility study.
Our definitive study for this cluster will be complete in the next two months. We have also now legally extended our evaluation period for these assets until August of this year, which will give us sufficient time to finalize things. In terms of Blaaifontein, we have until December of this year to make a call on the transaction, with the first hurdle being a fatal flaws analysis due in April. Blaaifontein Gold previously reported mineral reserves of 800,000 ounces of gold. With Blaaifontein, we have the option to acquire almost 1 million ounces of gold on surface for an upfront consideration of only $7 million. On this slide 39, we demonstrate the production potential of Mintails and Blaaifontein, a further possible long life and low-cost tailings business for Pan African and our stakeholders.
From these low-risk surface operations, we could be producing between 60-100 thousand ounces of gold annually for 15 years or more. If we wrap up on slide 41, Pan African is firmly on track to meet our full year deliverables. Key focus areas for us include the following. We will continue to manage the impact of COVID-19 and our safety journey to zero harm. We will seek to deliver into our increased production guidance of 200,000 ounces for the full year. We will successfully execute into on-mine capital projects that will sustain and increase future gold production. We are targeting an all-in sustaining cost of $1,200 per ounce for the full year. We will progress our organic and tailings retreatment growth opportunities. We will continue to investigate potential exploration and gold mining opportunities outside of South Africa.
We will continue our ESG focus through partnerships to ensure sustainable host communities, the increased use of renewable energy and recycling initiatives, and we will endeavor to increase dividends and further strengthen our balance sheet. Thank you very much for your time this morning. We look forward to continue mining for a future in the year ahead. We will now be available to answer questions.
Thank you very much. I think let's go to the conference call facility first. Do we have any questions?
Thank you. At this point, we don't have any questions from the lines. Apologies. One has just come through now. The person is Raj Ray of BMO Capital Markets.
Thank you, Alberta. This is Raj from BMO. Cobus and Deon, good morning and congrats on the first half results. Good to see the momentum continuing. The first question is on your capital returns. You did talk about having a share buyback platform implemented. Can you talk to the size of the share buyback platform and what criteria you're using in terms of your decision to when to buy back shares?
'Cause we haven't yet finally decided the magnitude of a share buyback. You know, circumstances at that stage will dictate.
It's probably a question of trading off also the obviously, the prevailing share price and the value to be unlocked with such a share buyback relative to the other capital, application or allocation opportunities that we do have within the group. At this point in time, it's probably a bit of a wait and see attitude. Once we're out of the closed period, depending on the share price and as I said, the other priorities, we will reassess the situation.
Okay, thank you for that. Deon, just on the question on the cost inflation. I mean, it's good to see that you have been able to pull costs below $200 an ounce. Just if you can talk to the cost inflation you're seeing generally, across the business.
Look, you know, inflation came out yesterday in South Africa at 5.7%. That's a general CPI inflation. We're more vulnerable to producer price inflation. Typically, the mining industry's inflation rate is in excess of the CPI rate, probably 1% or 2%. So that'll probably take it somewhere closer to 8%-9%. But, you know, inflation is a function of productivity. Inflation management is a function of productivity, and it's a function of the extent to which you can increase your ounces. So the unit cost per ounce comes down, all other things being equal. Also initiatives such as the solar plant provide more long-term structural benefit, you know, something that we'll continue building on, as Cobus said.
Okay, thank you very much. The next question I have is on the 25-26 level and what it does to the Egoli timeline. Is it safe to say that the Egoli has been postponed indefinitely and you expect the 25-26 level to be the next production front? Also, I apologize in advance if I am wrong on this, but I thought the 25-26 level, the production profile was more around the 100,000 ounces. The 65 that you're saying, is that a decrease from that?
Yeah, I think we're being fairly conservative in terms of our planning and scheduling. You know, the ore bodies are fairly well understood. Clearly, you know, the Evander 8 Shaft has had difficulties in the past. We sort of need to be very certain that we're gonna make it work. That's why we're being conservative and, you know, we believe there's a bit of upside to that number. In terms of Egoli, the plans for the next year are to actually go a little bit slower than what we initially or previously communicated. We'll do the dewatering. That'll be done in the next 12 months. We will have access then to the bottom of 19 level. We'll do a little bit more drilling. Just to reassess the infrastructure, see what things look like.
There's definitely further potential in Egoli. Our first objective was to safeguard the longer-term future for the Evander underground. Clearly, we need to make sure that it sort of generates the appropriate returns, and that's what we've achieved now in terms of including 25, 26 levels. That's very positive. Then there should be further upside with Egoli if we sort of get to the bottom of 19 level and we believe we can start mining and make it work.
Okay, thanks, Cobus. Just one last question. I just needed a clarification on the peak funding number that you have for 25/ 26 level, which is, I think, $52 million. Just wanted to see if that is the total CapEx or is that the CapEx net of revenue that you are generating?
It's net of revenue. The CapEx will be spent over four years. It's not a massive difference to that number, but, you know, that's sort of net to the revenue that's being generated, yes.
Okay. The total from the future too.
Sorry, you just broke up there. That last question.
Yeah. Is it?
Sorry, Raj, we are not getting that question.
You know,
I mean, maybe we should move on to another question.
Raj, unfortunately, we're not getting it. We're going on to the next question, which is coming from Arnold van Graan of Nedbank.
Yes. Good morning, Cobus and team. Well done on the solid set of results. Cobus, my question relates to your all-in sustaining cost profile.
Mm-hmm.
You put up that slide where you show that the core or low-cost operations are significantly lower than, you know, the overall cost number. You talked about the culprits there being Sheba and Consort. But my question is that really the right way to approach it and to show it? Can you bring down the cost of those operations? Can you, I guess, remove them, turn them around or, you know, basically get them out of the portfolio, get them to a similar level where your actual cost is closer to that core number? That's really my question. Thanks.
Yeah. It's yeah. Look, it's not an easy one. There's still a massive potential at both Sheba and, well, certainly at Consort, in terms of that 42-level ore body, and that we've demonstrated in the past. You know, when we can sort of extract the rich ore at Consort, the cost drops right down. As we said in the presentation, that's gonna be a major focus area for us.
As far as Sheba is concerned, again, you know, there's a long life ahead in terms of the ZK ore bodies that we're mining at on 37 level. You know, we are very excited about Royal Sheba. You know, it's something that, you know, not a lot of people speak about, and I don't think the market really understands. As we said in the presentation also, I mean, we, you know, we've seen listed companies with ore bodies of a lower quality. You know, Royal Sheba will be mechanized. It'll be massive mining, low cost. You know, that's gonna turn Sheba around over the sort of next couple of years. Yes, I mean, there's definitely plans and things we can do.
You know, even from an overall perspective, including Consort and Sheba, you know, I think sort of producing at sort of the number we did in what's still a fairly strong rand price environment is a decent achievement.
Okay. Thanks. Basically what you're saying is, "Look, it's gonna be high for another year or two, and then, you know, when those improvements come through and Sheba comes through, the numbers should look significantly better.
Yeah. Well, look, I mean, on Consort, we're sort of hoping to access 43 level in the next couple of months. If we find these ore bodies, then it's gonna be, you know, short order. Otherwise it'll be a bit longer. Yeah, I mean, as far as Sheba is concerned, I mean, those plans are in place, you know. We're doing the development. We'll be into that bulk sample by the middle of the year, 10,000 tons, 2.5 grams a ton. Hopefully sort of we get a surprise to the upside in terms of what we find at Sheba. I mean, it's on the same strike as Golden Quarry, which was one of the richest ore bodies ever mined.
You know, we think there's potentially some upside or we certainly hope that there could be.
Okay, thanks. That's it from me. Cheers.
Thanks.
Thank you. At this stage, we have no further questions on the lines.
Okay. Thank you. Are there any questions from the webcast?
No questions so far.
Okay, great. Thank you very much to all of you that sort of joined us today. Appreciate it, and have a good day. Thanks.