Ladies and gentlemen, a very warm welcome to the 2020 Pan African Half-Year Results Presentation. For those attending in person, thank you very much for taking the time to be here today. It is always nice to see some familiar faces and then also some new ones. Welcome to those of you dialing into the conference call facility in South Africa, from the U.K., and from elsewhere.
Rest assured that we will keep the presentation fairly brief, even though we, again, have a number of positive developments to highlight. There will be an opportunity for questions after our presentation. We will first take questions from the floor and then from our conference call participants. I know that some companies treat the Q&A part of their results presentations.
I do, however, I think that we, as a team, are fairly well prepared today, so feel free to fire away with questions when the opportunity presents itself. We run and manage Pan African for our shareholders and for our other stakeholders. Your views and comments are always welcome. Please refer to our SENS and RNS announcements and to the supplementary information available on the Pan African website should you require further detail not dealt with in today's presentation.
We are actually very proud of our new Pan African website launched only this morning. Please go have a look when you have a moment. Thank you very much to Niel Symington from our office and to Jeremy Stephen from Otternative for putting all of it together. As per usual, our disclaimer and detail on forward-looking statements can be found on pages two and three of the presentation.
On slide four, in summary, as part of today's proceedings, we will provide a brief overview of our operations and then spend some time on our half-year highlights and key focus areas in the year ahead. Deon, our Financial Director, will analyze some of the half-year numbers. We will conclude with an update on organic growth projects and our outlook for the business.
On slide number five, our strategy for Pan African is simple, but we believe powerful. Position ourselves as a sustainable, safe, high-margin, and long-life gold producer. We are proud to say that in the first six months of this financial year, we've taken significant steps towards realizing this strategy. If I had to describe the first half of the financial year in a single word, it would be robust.
The dictionary defines robust as of a personal animal, strong and healthy, or of an object or system, strong and unlikely to break or fail. In terms of results, sure. Let us give some credit to the gold price, both in U.S. dollars and in rand terms. The U.S. dollar gold price provided us with some really nice tailwinds. This was further magnified by the weakening in the rand.
When the rand depreciates materially, like we saw in our 2016 financial results and now again, it certainly assists our margins. Also worth noting that the current rand gold price is more than 10% stronger than the average for the six months we are now reporting on. I'm not so bold as to forecast the gold price or the rand. What I can say with certainty today is I'm pretty close to an all-time high in rand gold price terms.
Robust does not mean or imply that we are not presented with threats or challenges. The last six months, we had to deal with community unrest, Eskom load shedding, the most rain in probably 20 years, and some geological issues at Barberton, and yet our portfolio, for the most part, delivered. Even more importantly, our assets are now well-positioned for the second half of the financial year and beyond.
The work our team has done in this regard, we will demonstrate very clearly in the slides ahead. Slides seven and eight provide you a brief overview of our assets. As most of you will know, all of our operations currently are based in the Mpumalanga province in South Africa. The business that we have built now represents a unique combination of underground mining and surface re-mining. In terms of ounces produced, almost half of our gold comes from surface operations.
These operations are low cost, not labor intensive, and not that exposed to the electricity woes. Some more detail on these assets. Barberton Mines, the Barberton underground. This is where it all began for Pan African. We used to call Barberton a universe of opportunity. I believe this still holds true. We will detail some of our plans and opportunities for Barberton later. We do some 80,000 ounces per annum from underground operations, and our MRC ore body at Fairview's life is still some 20 years.
Sometimes at a grade as high as 100 grams per ton. The BTRP or the Barberton Tailings Retreatment Plant and Elikhulu are our surface operations. As I've said, these operations now account for 50% of our gold production. BTRP, again, delivered an exceptional cost performance. In the period past, all-in sustaining costs of less than $650 per ounce.
Elikhulu, which means the big one, really is a big one for Pan African and for our investors. Initially, we forecast a payback of approximately four years on this project. It's $120 million of capital spent. Given the current performance and gold prices, this payback is much closer to three years, we think. You will have to go far to find a better gold operation.
Elikhulu is also testament that once you get large scale projects done in South Africa on budget and actually ahead of schedule. The way we now have to think of Elikhulu is a safe, long life, and low-cost gold annuity.
In his slides, Deon will demonstrate how we expect the very attractive cash flow generation from this asset to translate into a very rapid de-gearing for Pan African, and also imminent increased cash returns to our shareholders. The last asset is the Evander 8 Shaft pillar.
Last year we were asked, "Why don't you just shut or close the Evander 8 Shaft, and what will the cash burn be on the Evander underground?" I think we have now done the hard yards, and we forecast a payback on this project of less than a year. We anticipate that the pillar will produce 30,000 ounces of gold or more per annum at an all-in sustaining costs of less than $1,000 per ounce.
A very nice cash cow. Let us spend a bit of time on the highlights for the first half. Slide number 10. I have to say, these are actually fairly easy results to present. From a production perspective, the gold produced by the group increased by some 15%. Elikhulu, the first period of steady state and full scale production, the production at Elikhulu increased by more than 90%.
The 8 Shaft pillar, as we've said, is on track to achieve steady state production pretty much in the next couple of weeks. From a financial perspective, group profit after tax increased by 125%. EBITDA, as demonstrated, a very significant increase, more than 80%. Earnings per share in dollar terms more than doubled. Group net debt decreased. At the same time, we reinstated and reinitiated our dividends.
I guess one sort of red point on the slide is the all-in sustaining costs have increased, and I'm quite happy to detail how we will deal with those cost increases in the period ahead further on in this presentation. Also, I think from an adjusted EBITDA generation perspective, it was a good performance. All of our operations contributed positive cash flows, even scratching around on the 24 level at the Evander underground.
This is why our expectations for 8 Shaft pillar are justified, we believe. Just have a look at the EBITDA from Elikhulu. This performance was at a lower gold price, and we expect an even better operational performance from Elikhulu in the second half. On slide 12, safety and group safety. If we cannot mine safely, we cannot mine.
I, along with the rest of the South African mining industry, am very proud of the achievements over the last years. It was definitely a team effort with contributions from the respective companies and our employees, our regulator, and our unions. In an industry that has made significant improvements as far as our safety record is concerned, Pan African's operations stand out for our performance. We can, however, not rest on our laurels. We need to continue to do better.
Some years ago, I stood before you and committed that our senior management would regularly engage with individual employees on safety in a small group environment. This continues to happen. We are also now involving the families of employees in safety campaigns. I again implore each and every one of our employees and contractors to take charge of your own health and safety as we continue this incredibly positive journey for our group.
Slides 13, 14, and 15 provide you with information on some of our ESG initiatives. We do not operate in a vacuum. We are dependent on and need to safeguard the ecosystem in the broadest definition of the word in which we operate. We build clinics, libraries, and schools. We invest in the training of our people and communities. We rehabilitate old workings and our closure liabilities on slide number 15 are fully funded.
Our tailings treatment operations clean up historic liabilities and free up land for agriculture and urban development. Our employees and contractors number more than 4,000. In the last six months, we paid almost ZAR 400 million in salaries and wages to these employees. In the current South African environment, you can imagine what a difference that makes. I'm proud of the positive impact that Pan African's operations has on all of our stakeholders.
I think we need to, however, become better at telling our story in this regard. If we move on to slide 17. I'm moving through these slides quite quickly to allow more time for questions. What are the key focus areas in the year ahead, in addition to continuing to mine safely? We need to deliver into the group production guidance. We need to reduce our all-in sustaining costs across all operations.
As I've said, we're certainly seeking to reduce all-in sustaining costs for the year to below $1,000 per ounce. We need to continue to operate successfully in South Africa, and we have to reduce debt levels and increase dividends. On slide 18, group production. In terms of production guidance, the first half provides a solid platform which will allow us to meet full year production guidance.
In terms of Elikhulu, we believe that we're well-positioned for the second half. We have a new satellite pump station that's been commissioned. All of the next six months at Elikhulu will be in the higher grade dam one and two re-mining areas at Kinross.
Certainly we'd expect even better performance at Elikhulu. In December of last year, we were actually targeting 180 kilos of production at Elikhulu. That didn't materialize because of principally the rain.
I'm very happy to report that in January, actually, of this year, we had a record month in terms of production. We produced almost 180 kilos. That's a fantastic run rate for Elikhulu. At Barberton, we will also be in our new 257 high-grade platform during the month of March.
We will then again have three platforms in this incredibly high-grade MRC ore body. Bottom line is, I think we're well-positioned to meet the production guidance of 185,000 ounces for the full financial year.
In terms of reducing the all-in sustaining costs of the group, again, to the magical $1,000 per ounce level, we have tangible and concrete plans to get there. If we analyze our operations, excluding Consort and Evander Underground, we actually delivered at below $1,000. That's for certainly Elikhulu, BTRP, Fairview, and Sheba Mine.
The more problematic operation, so to speak, really is the Evander Underground. We came in at a high number of almost $1,800, then also the Consort Mine. Let's talk about the Evander pillar and how the pillar in the next six months will assist in driving down that all-in sustaining costs of the group. As we said, the pillar access development at 8 Shaft has been completed.
Secondary development and ledging operations are ongoing. Currently, I think we have five stoping crews in the pillar. By March, we will have all of our nine stoping crews in that pillar. The pillar will be mined at a rate of almost 12,000 tons per month. We were very conservative in terms of the head grade. I think we planned for the pillar. It was about seven grams a ton. Currently, we believe we can potentially do better.
Again, estimated all-in sustaining costs for a pillar of below $1,000 and production of more than 30,000 ounces per annum for three years. Just a couple other points on the pillar. What's going to assist us to bring down this cost and actually deliver into the guidance? Environmental conditions, due to the fact that the pillar is much shallower, and it's right next to our intake airway. Environmental conditions will be significantly better. Productivity numbers should increase dramatically.
We'll have increased face time. The pillar being right next to the shaft, expect the traveling time to the workplaces is about 10 minutes from the station, compared to the roughly 1 hour and 45 minutes to the 24 level stopes. This equates to a gain of roughly 3 hours of productive face time per day, which makes it much, much easier to achieve a quality daily blast.
Lastly, reduced ore handling. As I've said in the past, sort of mining on 24 level is a bit of a nightmare. In the pillar, ore will only be transferred 3x to 4x before reporting to the plant, compared to approximately 22x from a 24 level stopes. Ore will also only be transported about four kilometers from the pillar versus 14 from a 24 level stopes.
The combined effect of fewer transfer points and reduced transport distance will equate to a big improvement in our mine call factor we anticipate. If we then move to slide 21, the other sort of very key area of focus at Barberton is the Consort Mine. During our final presentation last year, I stood here and I said to yourselves that we will find a solution for Consort.
An easier solution, probably, or more convenient would have been to close the Consort Mine. That would have impacted 348 of our employees, and we didn't want to do that. We looked at alternatives, and I think we've actually come up with a very good plan. We will mine a PC shaft pillar at Consort that is going to give us another 10-20 kilos per month for a three-year period.
That will give us enough flexibility to do more exploration, open up more areas, and get Consort to be a sustainable operation over the long term. People forget that some years ago, Consort was actually the highest grading ore body in Barberton. Ideally, that's what our exploration geologists need to get us back to. We have a number of exploration targets at Consort. 36, I believe, Indra.
We're looking forward to some exciting results there. In addition, we've upgraded the plant capacity at Consort. We've increased the plant capacity to almost 10,000 tons a month. We have sufficient surface stockpiles to actually keep that plant going for some years. That's also gonna certainly assist in margins and keeping Consort sustainable. Certainly, we're now in the throes of executing on our plan.
I very much look forward to reporting an improved performance from Consort during the next set of results. Lastly, Sheba. It makes profit. It's a long life operation. We still have nine years at Sheba. That excludes Royal Sheba. It's too high cost at the moment. We've spoken about Project Ebenezer before, which really looks to combine some of the infrastructure of Fairview and Sheba. We've made very good progress, working on an implementation plan at the moment.
Again, please watch this space, but we certainly will work to get Sheba down in terms of all-in sustaining costs. Has the other added benefit of freeing up infrastructure for our Royal Sheba project, which we will discuss and speak about a little bit later. Now, in terms of slide 23 and all-in sustaining costs, which is so critical for our business and internationally. It wasn't a bad performance for the last six months, just over $1,100 per ounce.
Really what we need to get to is $1,000 an ounce benchmark, and that's what we're guiding towards. That'll put us very solidly into a sort of low-cost range in terms of our production, not only from a South African perspective but also internationally. Let's talk about another key area of focus for us in the next six months, continuing to operate successfully in South Africa.
On slide number 25, security. We have completely overhauled and professionalized our security function. I have to say that the onslaught is constant, and we have to continue to adapt and devise new strategies in this regard. I really feel that it's time for government to stop talking and start doing as far as policing and enforcement is concerned. Electricity situation in South Africa has been well-publicized.
I don't think Eskom will fall over, but we need to anticipate and plan for load shedding in the years ahead. Fortunately, as I said before, our operations are not as exposed as the rest of the industry, who relies on massive refrigeration plants, massive power consumption, et cetera. From a tailings perspective, power cost is only about 15% of our total input cost of production, and we are much lower power consumer than the rest of the industry.
Also, quite exciting from our perspective, we've completed a bankable feasibility study into a 10 MW solar plant at Evander. We're now working to get all of the boxes ticked from a regulatory perspective. Also exploring non-dilutive funding options. For a plant like this, which makes economic sense for a long life asset like Elikhulu, we believe that the funding should not be a major issue.
Mining tenure, that continues to be a challenge all over. Our Evander mining rights are actually valid until 2038, it's not something we worry about on a daily basis. That's quite a long and good timeframe. In Barberton, our existing mining rights expire in 2021. We've actually, in a very timely fashion, submitted the renewal applications, we believe those applications are in progress at the DMR.
Again, from a tenure perspective, I really think we have things under control. Stakeholder engagement, which is the fourth point and seriously critical and important for our business. This relates also to our communities. As we said before, our people in South Africa are desperate. They are unemployed with very limited prospects. A situation where people have nothing to lose is very dangerous. We have and we will continue to up our game in terms of community engagement.
We make a massive positive difference in the areas in which we operate. It's important that we have our communities understand how interlinked our future fortunes are with their own. Now, these challenges might appear daunting, but for the most part, we have equipped and skilled ourselves to manage successfully in this environment, and we have a proven track record of doing so.
It's also important to note that South Africa is not unique in its challenges. I'll ask Deon to please spend a bit of time on the numbers and cash flow generation. Thank you.
Thank you, Cobus. Good morning, everyone. As Cobus stole my thunder on the financial results analysis, I am indeed here to contextualize the group's cash generation and deleverage potential in the next couple of slides. Slide 27 provides a breakdown of the group's cash flows for the reporting period. Notable is the decline in net cash generated by operations to $13 million relative to the $21 million for the corresponding period.
Now, this is a bit of an anomaly, as the cash flow consequences of the 20,000 ounce gold loan entered into in July 2019, is recognizing cash inflow from financing activities and not cash generated by operations as the proceeds were used to refinance a portion of the RCF.
For case 2019, cash inflows from operating activities to that of the corresponding period, an amount of $11.2 million, representing 10,000 ounces delivered during the reporting period and settlement of the gold loan, has to be added to net cash generated from operations. Together with the net dividend of $2.9 million, increases cash inflows from operating activities to $27.1 million relative to the $21.3 million for the corresponding period.
The gold loan was entered into to benefit from an interest rate arbitrage between the gold lease rate and that of the RCF interest rate at that point in time. There were no principal installments due on the RCF during the reporting period, as redemptions only commenced in June of this year, as I'll demonstrate in a subsequent slide.
There was a comment from an analyst that we entered into the gold loan because we needed to redeem an installment on the RCF, which is just simply not the case. With the construction of the Elikhulu project completed in the corresponding period, cash outflows from investing activities declined to $12 million as capital expenditure reverted to more normalized levels.
Concomitantly, cash inflow from financing activities also declined as the group's requirements for external funding declined. Net cash increased to $7.4 million relative to $3.5 million in the corresponding period. The RCF facility enables us to deposit and redraw from the facility. In this manner, we make use of surplus cash to reduce the group's interest burden to a minimum.
We do, however, monitor our available liquidity on a daily basis and ensure that we have access to immediate available short-term facilities, such as the undrawn balance on the RCF facility and our general banking facilities of no less than ZAR 250 million, or the equivalent of approximately $18 million.
As of this morning, we held ZAR 333 million, or approximately $22 million, in immediate available liquidity. Slide 28 summarizes the movement in net debt for the recording period. Since then have redeemed $21 million of the senior debt during the recording period. Senior debt comprises the revolving credit facility with a capacity of ZAR 1 billion and the Elikhulu term facility, which originally had a ZAR 1 billion exposure after Elikhulu's construction.
During the reporting period, we repaid ZAR 394 million, approximately $28 million of the RCF facility from the proceeds of the gold loan. We also repaid the first two quarterly installments of the Elikhulu term facility of ZAR 100 million, equivalent of approximately $7.1 million. Since inception of the gold loan, we redeemed ZAR 197 million or $14 million of this gold loan, which is equivalent of 10,000 ounces.
The remainder of this loan of $14 million will be redeemed by the end of this financial year. Also included in net debt of ZAR 1.74 billion at 31st December 2019, are two non-cash debt components comprising ZAR 77 million of operating leases now capitalized in terms of IFRS 16, and an unrealized hedge profit of ZAR 44 million. Slide 29 shows the accelerated rate of de-gearing due to the prevailing robust ZAR gold price and the increased production profile.
As all our debt is random denominated, if the ZAR price of gold of approximately ZAR 750,000 a kilogram or $1,540 an ounce holds for the next 18 months, and subject to the other assumptions mentioned in the slide, we anticipate to be fully de-geared by June 2021, as is depicted by the green line graph. This forecast also provides for an increased dividend for the 2020 financial year.
The blue line graph is the contractual debt repayment profile of both senior debt facilities. The bar chart in the lower section of the slide shows the senior debt contractual principal repayment obligations, with the red bars representing Elikhulu's principal debt redemptions and the green bars representing the extent to which the RCF's capacity reduces over the next couple of years.
The RCF balance was, as of yesterday, ZAR 697 million or $47 million at exchange rate of 14.9 for the dollar, which is already well below the balance of ZAR 750 million to which the facility must be reduced by 15 June of this year. The Elikhulu facility balance is now ZAR 800 million or $54 million after the first, two quarterly installments of ZAR 50 million were made in September and December of last year.
To clarify, the only further contractual principal debt redemptions required for the remainder of this financial year are the two quarterly Elikhulu installments of ZAR 50 million, $3.4 million each, and the remainder of the gold loan of ZAR 197 million. Together, these obligations amount to ZAR 297 million or approximately $3 million for the second half of this financial year.
Post-June of this year, the contractual debt requirements are relatively muted until June 2022 when the RCF facility terminates at the assumed balance of ZAR 500 million, which is $34 million approximately, is redeemed as a bullet payment. The graph shows the full repayment of this bullet in 2022, which is unlikely as it'll probably be extended as a core indebtedness if there is still a requirement for a revolver at that stage.
Slide 30 shows existing zero cost collar hedges in place for the next 12 months. For the remainder of this financial year, we have 50,460 ounces hedged at a floor price of approximately ZAR 656,000 a kilogram, approximately $1,370 an ounce, and capped at ZAR 856,000 a kilogram, approximately $1,745 an ounce.
For the first half of the 2021 financial year, we have 40,000 ounces hedged at a floor of ZAR 690,000 a kilogram, approximately $1,440 an ounce, and capped at ZAR 925,000 a kilogram, approximately $1,951 an ounce. These hedges underpin our cash generation for the next 12 months, and by implication, our ability to redeem our debt.
Finally, slide 31 shows the group's historical dividend yield. In the 2018 financial year, we suspended dividends following the cessation of large-scale mining at the Evander shaft, and in light of the resources required to complete the Elikhulu project. For the 2019 financial year, we reinitiated dividends at a relatively pedestrian level when compared to prior years. It signaled our confidence in the operational and financial stability of the repositioned group that Elvis referred to.
Our dividend policy is to distribute a minimum of 40% of discretionary cash flow after capital expenditure and debt redemptions. Historically, our dividend yield was sector-leading, but since we restructured the RCF debt in the 2001 financial year, the gold price as in ZAR terms increased by approximately ZAR 200,000 a kilogram.
If this prevailing ZAR gold price holds, and based on a constant 185,000 ounce production profile going forward, which we just used for assumption purposes, the forecast annual incremental post-tax cash flow amounts to approximately ZAR 800 million, which is compelling in our belief that the deleverage of the balance sheet and reverting to the historical sector-leading dividend yields can occur in unison in the short term. Thank you.
Thanks, Deon.
I think I conclude by a couple of points on South African and us investing in our future, and then also the outlook for the year ahead. Most of you would have seen these graphs before on slide 33. We have a great internal and organic project pipeline with more than 30 million ounces in resource, which is not insignificant.
That's really to the likes of a gold major. In this market, we recognize that ounces in the ground mean nothing. Shareholders need to see profits, they need to see dividends, and that's really what we will be targeting. I do think we have a good track record of bringing internal projects to account. Recently we completed the BTRP. That was a payback of 18 months. We can talk about ETLP, less than three years. Elikhulu, we're now saying also in the tune of three years.
We're not going to undertake any other project if we can't see the same sort of return metrics. Briefly on slide 34, I just want to emphasize that if you look at the way we think about the cash flow generation and the calls on our cash, clearly the first priority is to continue to reinvest in our asset portfolio, and that's what we've been doing.
The high gold price allows us to put more money into the ground at our operations. At Barberton's we've increased the capital, we've doubled our rates of production on some of these ore bodies. We've invested in new LHDs. I think that we've bought five new very expensive LHDs in the last six months. Reinvesting in our assets is critical. That ensures long-term sustainability of this business.
It's very important on growth in our own portfolio. Let's talk a little bit about the Egoli project at Evander. Most of you, again, have seen this slide before. Quite a bit of excitement around Egoli, and then also some concerns which I think you share. Egoli is a deep-level mine in South Africa. Understandably, we still have some work to do here. We have completed a mining feasibility study with DRA Project.
It demonstrated very robust returns. This study is currently in process of a third-party review by The Mineral Corporation. We'll only release the results once we are comfortable that we have an executable project plan. Now, on Egoli and in terms of funding the project, let me say this categorically.
We will not cannibalize the current very attractive group cash flows to fund Egoli, despite our view that this is a very attractive asset and much better than anything for sale in this market, for that matter. If Egoli cannot stand on its own feet as far as funding is concerned, it will not be developed. Our funding options for Egoli include bringing in equity partners, we've discussed this before, and alternative financing arrangements such as gold streaming.
On slide number 37, Royal Sheba. Again, this has been on our radar as a project for some time. We have scaled back plans for large big bang approach here. We just don't think the ore body can accommodate sort of massive capital on day one. We do, however, see Royal Sheba contributing ounces in the next years to Barberton's production on a smaller scale.
And again, we have the Royal Sheba Upper and we'll start trial mining Royal Sheba Upper in the next three months or so. Then we have the very attractive phase II of Royal Sheba, which we've actually been developing towards from the ZK Shaft for some years. We're now only about 390 meters from phase II, and when we get there, we'll start opening up and certainly preparing that ore body for mining.
Where to next, FY 2020 and beyond? I think what we've said, hopefully in this presentation, gives you some sense of our priorities and where we plan to focus our time in the year ahead. We started this presentation with some comments on group strategy and on our robust performance in the period past.
Please bear with me for some final closing remarks in this regard. We are often asked about M&A and our appetite for acquisitions. At the recent Mining Indaba, we were again questioned by senior journalists on African gold opportunities.
It's understandable that deals in the mining space are a lot more interesting than companies that keep their heads down, stick to their knitting, and get on with the job. You have to know that we have looked at gold mining opportunities in South Africa and in many African jurisdictions, both producing assets and also development opportunities.
At the moment, I have to say, it is very difficult to see value. Pan African Resources does not need to do a deal, and unless we can see compelling value and payback similar to Elikhulu, BTRP. And the BTRP, we will not do a deal.
We will be sticking to our knitting, as I've said, and focusing on realizing value from our own portfolio. Most of our shareholders want to see the balance sheet de-geared, and they want to see a significant increase in dividends. This is what we plan to achieve in the next year. I would like to conclude by thanking each and every Pan African employee for your hard work and dedication during the past year.
The fruits of your labor reflect in our safety performance, our production numbers, and our profits included in these results. There's a lot to be said for continued positive momentum. We all know what is required of us in the year ahead, we will give our very best. Thank you very much. I guess, shall we open the floor for questions?
Hi, Cobus. Well done on your results, okay. Nice cost reduction in both your mines anyway. A little bit concerning the cost increase at Elikhulu. I hope after the rains you had, it'll come down a bit. Concerning about Pan African is the very high security cost. I spoke to you guys earlier, about 7% of total cost.
Yeah.
You said Eskom was about 15% of total cost. Now, that 7%, how does that compare to the rest of the industry? Do you think you can ever get that 7% down or you can't deliver that?
Thanks, Rene. Yeah. Just quickly on Elikhulu, we budgeted about $700 an ounce for this half year. If we increase production, which we anticipate to do, we're in high grades at the moment, and we've commissioned a satellite dump station, we're comfortably doing 40,000 odd tons a day. I would expect with Elikhulu increasing production, you will see that all-in sustaining costs come down.
There are also some mines with costs included in their all-in sustaining costs. On Barberton is a long life asset, we have to safeguard the asset. That's what we're doing in all respects. We're investing more money in the ground. From an illegal mining perspective, and our people love to talk about this, Barberton is not unique, it is in a position where we're quite exposed to not only sort of what happens in South Africa.
We're seeing an influx in illegal miners from Mozambique, Zimbabwe, and from other countries as well. About 18 months ago, we were in a position where if we hadn't done what we had done on professionalizing security, I believe we would have been overrun today. What I can say to you, certainly not comfortably, because it's not a comfortable situation, but I do think we've made great inroads. We have a dedicated security initiative.
As I said, we professionalized the function. I believe we've sort of made that business sustainable from a security perspective. Obviously, it's great to reduce costs, and we'd love to do so. Our first and foremost priority is to safeguard the asset. Will the cost increase significantly going forward? I don't think so. I think we sort of have the situation under control. Is it a key area of focus? Yes. We will do what we need to do to keep that mine going.
Cobus, it's Arnold Van Graan from Nedbank. Question on 8 Shaft pillar. What is the fixed cost to run that operation on a monthly basis?
I mean, a key principle of reducing your all-in sustaining costs is clearly that you have all of these fixed costs, and it's pretty much the same versus mining 50 kilos a month or 110 kilos a month. That's the principle of coming down the AISC to ZAR 1,000. I think the all-in cost per month, gentlemen, of 8 Shaft, we'll certainly need to get.
It's about ZAR 20 million, I think ZAR 25 million odd. Our power cost is very significant. Then we have the labor cost and the contractor cost. The key focus is obviously producing more ounces. What you'll also see that will reduce it is our cost because we don't have to do the cooling on 24 level.
Okay. Thank you.
Sure.
Hi, Cobus. Bruce Williamson, Integral Asset Management. Coming back to the Barberton area, I mean, indirectly, our president has an interest in your company and I guess in the area. David Mabuza is a kingpin in that area. Have you guys had an opportunity to sit face to face with his people or people close to the president and the vice president and find a way to just ease the whole situation?
Yeah, Bruce. Just firstly, on your first comment, the president does not, other than sort of the sustainability of the asset mining industry, he no longer holds a stake in Pan African for clarity.
Is that absolutely nothing to change?
Nothing, zero. No.
Is it not managed in the trust?
No. There's no further stake. That doesn't certainly mean that he's not interested in ensuring the sustainability of the business.
Yeah.
I've personally sat with our Deputy President on a couple of occasions. He's the kingpin in that area. As is the case elsewhere in South Africa, there are a number of dynamics at play, and you find an awful many interest groups. This is not one united front, unfortunately. That's our job, is to continue to manage all of these conflicting interests.
As a matter of fact, the town of Barberton at this point is under siege, from a point that wants to break away from the Mbombela municipality. I don't think any one individual can provide a solution to our issues. That's why we have to be quite vigilant, and we have to think on our feet.
Yeah.
Thank you. Very good. Just another question. What are the IRRs? Maybe you can't join me yet, but on Royal Sheba and on the Egoli project, what are you looking at at the moment?
Well, where would we go into this? What IRR would we target on something like Egoli? I would say a minimum USD return of 25%-30%. We're busy optimizing that study, and it's, I think, premature to comment. On something like Royal Sheba, depends on how we undertake it.
Again, it's dependent on your gold price assumptions. We wouldn't do any project if we couldn't see, as I've said, a payback of three or four years. That's sort of what we're targeting on any project that we do.
So a 15%-20%?
Yeah. Well, certainly more than 20% on a dollar terms.
Yeah, and the last. The production one to full-year production.
Well, so on Egoli, we could get into production about first ore in about two years, steady state in sometime in year three. On the likes of Royal Sheba, as I've said, on Royal Sheba Upper, we'll start producing first gold in the next year and slowly ramp that up as we get more comfortable with what we find in the ore body.
On Royal Sheba Lower, we should be in the ore body in, I'd say, the next 18 months, sort of a plan, then another sort of 12 months to open up and develop. You're looking at about a time horizon of a few years to get Royal Sheba Lower into a steady state production.
Great. Thanks very much.
100%.
If there are no further questions from the floor, shall we go and check whether we have any conference call participants that want to ask a question?
I'm sorry, Mr. Loots. There's no questions on the line.
Fantastic. So, looks like we covered most of this in the presentation. Thank you very much for attending, and have a good week further. Thanks.