Earnings Call: H2 2019

Sep 18, 2019

Ladies and gentlemen, a warm welcome to the '20 nineteen, I've lost ten years, Pan African Final Results Presentation. To those of you attending in person, thank you very much for taking the time to be here today. Welcome also to those of you dialing into the conference call facility in South Africa from The United Kingdom and from elsewhere. Rest assured that we will keep the presentation fairly brief even though we 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. Please refer to our Sen's RNS announcement and to the supplementary information available on the Pan African website should you require further detail not dealt with in today's presentation. As per usual, our disclaimer and detail on forward looking statements can be found on Page two and three of the presentation. Trust me, What is your immediate reaction to those words? To be honest, normally, my immediate spontaneous reaction on hearing the words trust me is skepticism, doubt, mistrust, maybe even a physical reaction of elevated blood pressure and heart rate and a bit of a sinking feeling in my gut. These days, too often the words trust me are spoken too flippantly or what or by people with ill intent or by someone with limited understanding of what he or she has committed to. Recent corporate failures in South Africa and elsewhere have understandably made the investment community even more cynical and skeptical around delivery by management teams. Also, let's be honest, the global and local economic and social environment makes delivery growth and profits very challenging to achieve. Over the last eighteen months, the people, shareholders, bankers, suppliers, communities and other stakeholders of Pan African Resources have had to trust our operations and management to deliver a turnaround in our business model, a model that for the most part was very similar to that of most other South African underground gold miners. The issue that we faced are by no means unique to our business. However, the relatively small size of our financial and other resources and the concentration risk on only two asset complexes amplified the negative impact when these assets did not perform well or when the gold price did not cooperate. Pan African was never intended to as a marginal producer, and that is what we've had to address. When we say trust us, the statement was supported by a fully committed and experienced team with detailed plans and the necessary resources to execute into these plans. Hopefully, you will agree that the results of the past has, for the most part, vindicated the decision to trust Pan African. Let's be clear. I'm by no means saying that our journey is complete. There is and always will be a hard journey ahead of us. Gold is precious exactly because it is so very difficult and costly to extract from the earth safely. I'm also not saying that everything will always go according to plan. We've built flexibility into our plans to the extent possible. Despite relatively conservative planning, we operate in an environment with many variables outside of our control. We are also not perfect. We make mistakes. Our business is, however, now significantly more robust to withstand short term shocks. Let's now move on to an overview of the presentation on Slide four. We will talk generally about gold as an investment and then also about our current experience of mining gold in South Africa. I will make a summary business case for Pan African and Vion, our Financial Director, who will then take us through the FY 2019 numbers. We will conclude with near term growth opportunities and take stock of where we are as a business. On Slide five, I'm pleased to report that for the time being, it appears that the safe haven status of gold has returned. The world is increasingly an unstable place. Project one world or globalization seem to have failed. Governments are printing too much money. Currency devaluation is increasingly a theme, though seldom mentioned almost like the elephant in the room. We have a saying that in general, gold mining is an industry with long cold winters and short but very beautiful summers. The gold price of $1,500 per ounce is attractive and the gold price of ZAR 700,000 per kilo even more so. A number of historical gold bears are even now saying that gold has a role in a balanced portfolio. So why invest in a quality producer of the metal such as Pan African and not only in the physical. Physical gold does not give you a dividend. There's a holding cost to owning a Krugerrand or an exchange traded product. Physical gold cannot multiply. One Krugerrand will unfortunately remain one Krugerrand. A producer like Pan African can bring resources, which in this market has not attributed any significant value in the ground to account as quality, profitable and incremental production ounces. Also, the leverage is greater in buying a quality producer in a gold bull market. A 20% increase in the gold price can result in much larger profits for the producer. Let's move on and spend a couple of minutes on Slides six and seven on gold mining in South Africa. The statement said many years ago that South Africa as a country would never be as good or as bad as it could be. Until today, that saying holds true even though for most of us, it's a pretty negative place at the moment. Let's look at some of the positives. We have one hundred and thirty years of gold mining history. Valvoline has been going since 1886. We've well established infrastructure and technical support. It takes us an hour and a bit to get to Uvanda, four hours to get to our Balbaten operation. When we have a major breakdown, we can have it fixed within a day or so. That's not the case in the rest of Africa. In terms of the government investment, despite certain restrictions to the country, there are many good, skilled and committed people in government. We have seen a definite decrease in unnecessary Section 54 stoppages by the DMR. And where we have operational challenges, I want to commend those government officials that assist. Recently, after many frustrating years, there seems to be a real realization from government that unnecessary bureaucracy and impediments will cost jobs and growth, which our country can ill afford. Dion will spend a bit of time on the rand leverage effect on our profits. But suffice to say that in the right circumstances, it makes for a very attractive return. We have a sophisticated financial sector in South Africa. All of Pan African's banking facilities are currently with South African banks. These institutions assist us with funding value accretive growth. I have to say our banks can sharpen things a little bit in terms of cost of our funding, specifically in this gold price environment, but otherwise our supportive partners. We have a world class constitution without, in my view, any need to change it and also a well functioning legal system. On Slide seven, some of the most material operational challenges in South Africa at present. Our people are desperate, unemployed with limited prospects and a situation where people have nothing to lose is very dangerous. We were and we will continue to up our game in terms of community engagement. We make a massive positive impact in the areas in which we operate. It is important that we that we have our communities understand how interlinked their fort future fortunes are with our own. Barton is an old mine, one of the oldest in the world, as I've said. We are frugal with capital. Our capital spend has to generate the requisite returns. We have great engineering teams, and we will continue to invest in this asset. In a higher gold price environment, it makes sense to invest a little more for enhanced future returns, and we'll get to that a bit later in this presentation. Regulatory uncertainty. We need to better resolve the issues around mining Charter three. Unlike some other miners, we do, however, not have to rely solely on 1¢ power. We are currently 26% in power at group level. Electricity, we all know the issues related to Eskom. We will be finalizing a study into a 10 MVA solar plant at Ilekudu soon. Fortunately, our tailings, as you will see, is far less exposed to Eskom. Increased illegal mining, this is something that's always front of mind. Security has now become a core and specialized function for Pan African. If we hadn't spent more on security in the last year, our operations would have been overrun, similar to what happened in 2,009. The moment we're arresting two fifty illegal miners a month. We see these individuals not only from South Africa but from neighboring countries as well. It's a worrying trend and it's something that certainly we're paying a lot of attention to. So this list of challenges appear quite daunting. But for the most part, we have equipped and skilled ourselves to manage successfully in this environment. Also, South Africa is not unique in its challenges. In other parts of Africa, you have to worry about terrorism or very limited infrastructure, about the ever changing rules of the game and in a number of other South American countries, militant unions and road blockages. If we then move on to Slide nine, twenty nineteen at a glance, I believe, is very positive. We've improved on pretty much every metric. Safety, we'll discuss in a bit more detail, but certainly encouraging performance. Production increased gold production from all of our operations. Cost and profits, really significant reduction in all in costs. Also, point has to be made, this is in a much lower gold price environment to what we're seeing at the moment. So gold price in rand terms for the year past was ZAR $5.77 per kilo versus the current north of ZAR 700. So clearly, these numbers would have been looked a lot better. ESG, we'll discuss ESG. We're making good progress as far as ESG is concerned. Growth, successfully commissioned Ilekulu. We've had the first gold from Evanda H Shaft Pillar that came in July, a bit ahead of schedule. Royal Shiba, we're progressing, and we'll discuss the Igoli project also. And in dividend, I think quite a special occasion for us to reinstate dividends. It demonstrates that as a group, we really are on a better footing. So why not pay down the bulk of our debt first? The dividend proposal is fairly modest even though 1% yield in hard currency is much better than negative interest rates in Europe at present. The dividend focus management on capital discipline and the dividend is very important to some of our shareholders. I'm quite relieved that come Christmas time this year, we do not have to explain the lack of dividends to some of our elderly shareholders. On Slide number 10, we can always do better as far as safety is concerned. However, an excellent safety performance from our team for the year that's passed. We've more than halved our lost time injury frequency and reportable injury frequency rates, and we compare very favorably with the industry. For the first time, we've achieved 2,000,000 fatality free shifts at our Barberton operation. Our group health and safety manager, mister Mandlo Andloji, is here today. We call him our Attila Vahan on safety. He does not take prisoners. It's also his birthday today. So happy birthday, Mandlo. I implore each and every one of our employees to take charge of your own health and safety and to continue this incredibly positive achievement for our group. Let us move on to ESG. ESG has become big business for fund managers and consultants alike. We have to caution against this. ESG is about the sustainability of the business into the future, about doing the right thing, not about ticking boxes for profit. Mining gold profitably is critically important, but it's not the only issue of importance for Pan African. As illustrated in this quote on the slide, which I won't go into, for more than a century ago during the Yukon Gold Rush, We endeavor and generally we succeed in making a real positive difference in the lives of our stakeholders. We build schools and clinics, we provide bursaries and we build infrastructure. We scale up entrepreneurs and we support local business. Our tailings operations clean up legacy liabilities. Our closure liabilities are fully funded. In the last year, we spent ZAR16 million on demolishing and rehabilitating old shafts and infrastructure at Evanda. These activities in themselves create opportunities in employment as per a direct directive from the Minister of Mineral Resources. We've also strengthened our Board, and I welcome the new Board members to Pan African. Allow me in a couple of minutes on our financial FY 2019 production and cost summary. So overall, I think it was a really good year. We increased gold production. We brought down all in sustaining costs, both in dollars and in rand quite dramatically. And our tailings business reduces the exposure to above inflationary input costs such as labor and electricity. So for the first time, we produced almost 40% of our production from tailings, and so we'll deal with the tailings in detail. But then also importantly, we're increasing our forecast for FY 'twenty quite dramatically. On Slide 13, this is how we now compare to the rest of the South African industry. So when we compare ourselves from a cost perspective, we do not look only at South Africa. We also clearly have to look at international benchmarks. So it's quite controversial to say that we are lowest cost producer in South Africa, but it's pretty safe to say we pretty much go right down there. We have long life assets. And globally, we compare quite favorably. We would expect this cost to decrease further in the next year as we have a full year of production from Ilekulu. So on Slide 14, our business can now be positioned in two pretty distinct blocks. The first, where we get pretty much 40% of our gold, only employs some 500 people. It's incredible, really low cost. Also, less exposure, as we've said, to labor and electricity increases. You can see on ETRP or rather BTRP and Alukulu, about only 10% of our 10%, 11% of our costs relate to labor and only sort of 15% relate to electricity. So that's quite a lot lower than what you see in our operations. Then on the right hand side, we have our underground ounces, a very highly leveraged gold price increases certainly group profitability significantly in a highly high gold price environment such as what we're seeing at the moment. If we then move on next slide, a beautiful picture of our Yelukudu plant. And then on Slide 16, we'll spend a couple of minutes on our tailings business. Really, it's something to talk about. So overall, we produced almost 80,000 ounces, all in sustaining costs of below $600 an ounce. And we've increased recoveries, and that we use as a result of the Ilekulu operation now being in full production. And again, we're increasing our guidance, as I've said, so we should get 85,000 ounces plus out of our tailings business in the next year. Briefly then, the two components when we talk about surface remining or tailings remining. BTRP, it's a fantastic asset. Dion has said I should stop saying that it paid itself back in eighteen months, but it did, and it's still a good achievement. The regrind mill, which we commissioned last year, working exactly to expectations and really a great performance from BTLP. Also, can see our all in cost has come down quite dramatically in the year that's passed. In Okulu, I think if there ever is a project that demonstrates that the right management team can bring an incredible project to account in South Africa in record time at Ilekulu, we had a lot of naysayers, a lot of people that didn't believe we could do it. And it's not often that you find a project delivering in excess of the bankable feasibility study. We're doing that pretty much on most metrics at the moment. We were early on commissioning. Our recovery is a little bit better than what we expected. And the average all in sustaining cost also is lower than what the year feasibility indicated. If we move on to Barbaton underground, a fairly solid performance, certainly an increase from last year. There are some challenges also. The Bogota, an incredibly high grade mine on average. You can see that Fairview delivered at just over $1,000 an ounce all in sustaining. Shiba contributed, but there's a bit of work to be done in consort, low ounces and not profitable in the year that's passed. That's something we need to address. Also, in terms of all in sustaining cost, cost per unit or per ounce went up by more than inflation. So why is that? Normally, I mean, electricity is something we can't really do much about. As I've said, we've had to spend more on security, and that's something we have to focus on. We have to have a sustainable solution, but not at the cost that we spent in the last year. And then also, we processed some surface material at increased costs as far as processing is concerned. The ounces contributed to profits, but it did put up our costs slightly. So we have an opportunity to optimize Barbaton by what we believe to simplify the two phase or two stage approach. First stage would be rather Phase 1a, sustain and grow underground high grade production. A couple of points. We spoke about the subvertical shaft previously. So feasibility study indicates that the subvertical will increase production from Fairview by some 7,000 to 10,000 ounces. We now have a bottom and top access, so we can start development in terms of the shaft in the next year. So this project should be complete in the next twenty four months. We're doing a lot more drilling. And I think something that's quite telling is we're doing a lot more development. If I give you the waste development meters for the last year, it becomes quite clear. We did 2,000 odd meters in 2017, 2,200 in 2018, 3,100 in 2019, and we're budgeting for the year ahead more than 4,000 meters of waste development to give us more The beneath further project we're excited about from the refining infrastructure of Sheba and Fairview. It's a busy slide, and it's a slide that's best discussed in person. But suffice to say, we believe that the Bogota underground presents a universe of opportunity. So that's Phase 1a. Phase 1b, suite and optimize surface infrastructure. We've already started. We've upgraded the plant capacity of both the Sheba and Kansur plants in the last year. These plants now contributed an additional 3,000 ounces from surface. And really, it's bringing these resources to your accounts in the years to come. We have almost 100,000 ounces now in reserves that we didn't have there before. So it's a nice and sizable resource and reserve to assist. I mean, Phase two, new mining projects. I mean, incredible, after seven years of mining, we still have new mining projects. We've elected not to proceed with an open pit at Roelshiba for a number of reasons. Environmentally, it would have been challenging in terms of pit slopes that we believe the capital was too much. So we do have two distinct or it's one ore body that we're planning on accessing in the next years in two distinct different ways. Phase two minuteing, which you see at the bottom, that's 500,000 ounces in resource, 400,000 ounces in reserve, developing towards Phase two via the ZK shaft on 22 level, about 500, 600 meters of development to go. So we'll bring that ore body into production in the next years, next next three to four years. And also, I mean, I'm quite excited about Phase one, accessing the old workings and some virgin of the virgin ore bodies via an addict. So what we said is we will update the market in the year in the months to come as far as exact plans are concerned for Real's Royal Sea by Phase one. If we then move on to Slide 23, Uvanda H Shaft. So we might get the question, H Shaft lost money again, why haven't you closed it properly? So operation is pretty much derisked for Pan African now. We only have about 60 employees still on the books of Evanda. The rest of the employees might look to be the underground or contractors. We needed the water from H Shaft in the year past until such time that we moved ETRP into Ilekulu. Clearly, it's no longer the case. H Shaft and what you see the negative EBITDA contributed in terms of overheads. So there would have been care and maintenance costs to incur if we hadn't continued to mine eight shaft. So that contributed from that perspective. And then also now, it's opened up a pillar for us. So before costing 20,000 ounces out of the pillar in the first year, we have two crews already mining on the pillar. All of our crews should be in the pillar come February. Initial capital is we have to spend. We spend about GBP 30,000,000 in the year past, and we'll spend GBP 55,000,000 in the 2020 financial year. So in terms of 700,000 in gold price, certainly, we'll make a bit of money on the pillar in the year ahead. But then for FY 'twenty one and FY 'twenty two, producing 30,000 ounces, they're pretty limited. There's no pretty much no capital to generate significant returns for our shareholders. I will then ask Bjorn to come up and give some color to the numbers. Thank you. Thank you, Chris, and good morning to everyone. By the way, this is the new smart house at Enukulu. Got impressive photograph. Before we start with a detailed financial review, a couple of noteworthy points. Firstly, you will have seen that the reporting currency has changed from the British pound to the US dollar. This is not one of our fund managers asked, not fund managers, one of our shareholders asked, is this now because we didn't get paid in U. Dollars. I said no. It's simply to make the results more comparable to that of the rest of the gold sector. Secondly, in certain instances, we refer to the financial results of the continuing businesses that comprises Barbaton's underground and BPRP operations in the Kulu, now incorporating the ETRP throughput, the remnant mining and planting at Evantas H Shaft, and in the new pillar project that could be referred to. And in other instances, we refer to the combined businesses, both continuing and discontinuing, with the discontinued operations comprises Evander's deep level underground H Shelf infrastructure that we impaired last year. And finally, the full annual integrated report was also loaded onto the company's website this morning for review by our stakeholders. Slide 25 summarizes the group's results for the financial year '2 thirty June twenty nineteen. Notable is the increased turnover from continued operations to $217,000,000 from $146,000,000 in the prior year as gold production increased by 54% to 172,000 ounces and the rand price of gold increased by 7% to ZAR 578,000 per kilogram. That's the average for the last year. Although the gold price of gold declined by 3% during the twenty nineteen year, The rand on exchange rate also depreciated by 10, resulting in a net 7% increase in the average rand price of gold for the 2019 financial year, which assisted in offsetting inflation linked costs. In the quarter's lower cost of production for the ten months post commissioning on thirty August last year and the general improved performance from Barbaton contributed to the group's all in sustaining cost declining by 28% to ZAR $9.87 an ounce or 4 and 51,000 a kilogram, representing a 20% decline in all in sustaining costs relative to the 2018 financial year. Commensurately, EBITDA increased by 75% to $57,000,000 and attributable earnings increased to $38,000,000 relative to the loss of $123,000,000 in the prior financial year after recognizing a loss from discontinued operations of $138,000,000 due to the cessation of deep level underground mining at Evanta's H Shaft. The material improved turnover and reduced costs contributed to basic earnings per share increasing by a 129% and headline earnings per share increasing by by 20%. Headline earnings per share excludes the impact of the impairment of the 2018 financial year and its partial reversal in the 2019 financial year following the decision to mark the H off pillar and in the so being used some of the infrastructure impaired in the prior financial year. Although there were no new shares issued in the 2019 financial year, the number of shares taken into account for earnings per share purposes increased relative to the prior year as a full effect of the 130,000,000 shares issued on thirty nine two thousand and eighteen were taken into account for calculating earnings per share and headline earnings per share in the current year. Pan African still holds 306,000,000 treasury shares that reduces the total issued shares, number of shares of 2,200,000,000.0 to 1,900,000,000.0, which were taken into account for purposes of calculating the 2019 earnings per share and headline earnings per share. At year end, our senior debt peaked at $219,000,000 and should now aggressively amortize as I'll illustrate in a subsequent slide. The decline of 58% in capital expenditure is largely attributable to expansionary capital declining following Elokudis commissioning. The other growth initiatives that Kudis referred to in the presentation have their own capital requirements, but these are largely with the exception of Egoli funded from internally generated cash flows. Slide 26 demonstrates for illustrative purposes the operational leverage inherent in Par's operations. Evident is the escalating rate at which operational profits increase at gold prices in excess of our breakeven costs of approximately 451,000 a kilogram. By way of example, a 21% increase in the gold price from ZAR 578,000 a kilogram, which is the average price for the 2019 financial year to a level of ZAR 700,000 a kilogram, the prevailing more or less the prevailing rand gold price increases operating profits by 96%. The following slide shows for illustrative purposes again, the cash flow impact of this gearing on the group's debt repayment profile. Contractually, our debt is repaid at a rate at the rate depicted in the golden colored line graph over the next five years. This repayment profile was modeled at a spot gold price of approximately R550,000 a kilogram, approximately towards the end of the last calendar year. The blue colored line graph shows the rate at which the same debt is repaid at a gold price of 700,000 per kilogram, a sub two year repayment profile if the prevailing gold price and all other assumptions hold. The benefit of having random denominated debt is evident under the prevailing economic circumstances, where the dollar price of gold increases and the rand depreciates relative to the U. S. Dollar. The bar graph on the lower section of the slide shows the frequency and magnitude of the senior debt principal installments over the five years, with the first installment of 50,000,000 on the Ilekula term facility payable at the end of this month and the first installment of 250,000,000 on the RCF facility payable on fifteen June two thousand and twenty. With the proceeds of the gold loan that we entered into in July, we reduced the RCS balance by R394,000,000. And obviously, subject to it not being drawn again, effectively have already prepaid the June 2020 RCF installment. Slide 28 shows the gold price hedges entered into for the twenty nineteen-twenty twenty financial year. With the higher debt levels and the prevailing elevated gold price, it makes sense to enter into series of zero cost collars to lock in minimum floor prices in rand gold terms. For the first of the financial year, a floor price of R604,000 per kilogram of 29,550 ounces was entered into earlier in this year when the gold price was approximately 610 R620,000 a kilogram. And for second half of the financial year, a floor price of ZAR 655,000 a kilogram on 50,400 and ounces 50,460 ounces was entered into. To fund these floors, we sold corns and forfeited the global price upside of these ounces at R666,000 a kilogram for the first half of this of this financial year to December and R836,000 a kilogram in the second half of the financial year. In all instances, the same number of ounces of the caps as as in as on the floors. These are typical plain vanilla zero cost collars. Once these hedges run out in 02/2020, we have one remaining collar in place at a floor of R690,000 a kilogram and a cap of ZAR 926,000 a kilogram on 40,000 ounces for the six months to December 2020. We have no hedges in place beyond that date. Hopefully, the balance sheet would have been materially deviated by then, and the need to manage risk in this manner has commensurately reduced. Slide 29 shows the group's historical dividend yields. As already mentioned, the Board recommended that dividends be reinstituted this year after suspending dividends in the 2018 financial year given Elacudis construction and the cessation of deep level mining at Evandas 8 Shaft. Although the dividend is materially lower than in the past, as Gurus mentioned, it signals our confidence in the repositioning of the operations and the ability to generate discretionary cash flows in the future. In recommending the reinstituting of the dividends, the Board weighed up the group's existing debt levels against the prevailing gold price, the price protection already entered into in the form of the hedges that are referred to in the previous slide and the forecast cash flows for the foreseeable future. Should the Board approve the development of the Goli project in the near future, our intent is to fund, to the extent possible, this project in a manner that refences its funding impact on the rest of the group so as not to curtail future dividends and the redemption of the existing senior debt. Thank you. Thank you very much, Dion. Let's conclude then a couple of slides, investing the future of our assets. So I think Pan African has a good track record of delivering organic projects over time. I used to speak a lot about our massive resource base, more than 30,000,000 ounces. But in the last year, the market simply gives no value for ounces in the ground. It's about profitably bringing these ounces to account and creating returns as a result. So I think this is the point on Slide 31, as we have a number of attractive projects, some a bit further away than others. But as I've said, we have a good track record of delivering organically. And to the extent one can grow your portfolio organically, clearly, makes sense. You don't have to pay for assets. In terms of Slide 32, reinvesting in our assets. So we don't skimp as far as capital is concerned on our operations. So we believe that if you spend the right level of capital, these operations will return the capital over time. So in the last year, we spent about EUR 140,000,000 of sustaining capital at Barberton. Given the high gold price, we've decided to spend a little bit more capital in the year ahead. So it's for any specific initiatives. We're replacing some of the very old LHDs. We are upgrading switchgear and fire suppression systems. And as I said before, we significantly increasing the level of development we're doing underground. So all of those initiatives will bear fruit in the near term. We move on to near term organic growth. And I can just see some people sort of shaking their heads when we speak about Goli as a growth project. So clearly, there's a lot of skepticism around underground gold mining in South Africa. And we're to do a lot have to do a lot of work in convincing all of our shareholders and other stakeholders that EGOLI is the right thing for us to do. We're not saying it. We're going through a process. And as this slide on Slide 34 is stating that we hope to have an optimized study by the September, and we'll share that study with the market. Very briefly, Goli project is within three kilometers of traveling distance from our seventh Shaft. We spent a lot of money in refurbishing seventh Shaft over the last year. Historical development on 7 Shaft at seven Shaft has made already access to the ore body possible. So following dewatering, standard football development and further deepening of the decline and on reef development, associated engineering is required before mining can commence. We'll speak about the results on the next slide. As I said, the study is expected by the September. And then we are considering funding options. As Dion has said, we believe if we do proceed with the Goli, it will have to be on a ring fenced basis. And we've actually received the funding proposal from a financing institution, a nonbinding one at this point, but very encouraging. So very briefly, Goli versus Evander's eight shaft before closure. What are the differences? Depth, Goli is a lot shallower. Access, certainly, the access at the on on to 24 level at at the eight shaft is very difficult, very convoluted. Access to the Golgi directly from seven shaft to one shaft system with only one decline. Tramming and traveling distance, talking cheese, three kilometers versus 13. Transfer points, only six versus 20. That's certainly going to sit with mine pull factor. Head grade, pretty similar. Waste and reef, you have no ability to split waste and reef at a shaft that certainly limits your ability to develop, also dilutes your head grade. So we can start from scratch, clean slate at Egoly. Employees' ability to pick and choose a workforce, make the workforce tailor made for the project. So as I said, it's a significant resource, and it's certainly on our radar in terms of progressing it going forward. If we then finalize and conclude this presentation, our health check and deliverables. So what we what have we focused on and what will we focus on in the year ahead? Continued emphasis on improving our safety performance in ESG compliance on sustainability. Production, we've delivered into our guidance for a year past. We're on track to deliver into FY 'twenty guidance. We need to ensure that Ilukudu delivers, and we've obviously completed the ETLP incorporation into Ilukudu that's running very smoothly. And as I've said, we need to implement initiatives to further reduce all in sustaining costs, specifically at the Bulbaf and underground. From a financial or finance perspective, balance sheet degearing for gold price tag where it is, You certainly should see that degearing coming through, and we've reinitiated the dividends. Growth, so in terms of our the way we look at capital allocation, firstly, we reinvest in our assets. Secondly, we have to give shareholders a return and give you the balance sheet. Thirdly, we also have to continue to look at growth opportunities. And I mean, we've grown by El Akulu. We're busy with the Evander H off project. We'll update the market as far as well see what Phase one is concerned in the months ahead. And then I hope to also update the market as far as Evoli is concerned before the end of this financial year. So finally, I would like to conclude by thanking each and every Pan African employee for their hard work and dedication in the year past. The fruits of your labor reflect on our safety performance, our production numbers and our profits included in these results. There is a lot to be said for positive momentum. We all know what is required of us in the year ahead. Thank you very much. We'll now take some questions from the floor and then move on to the conference call participants. Hi. It's Arnold Van Kraum from Nedbank. I've got three questions. I'll follow the easy one and then progress from there. So the first one is, what is your all in sustaining cost guidance at eight shaft in 2021, 2022? Because it's quite high still next year. I understand it with the CapEx, but I wanna get a sense once all that capital is spent. So that's the first question. The second question is what are your views on hedging going forward? So I understand now you've put hedging in place to mitigate the risk associated with your debt. So what's your view on that given where the gold price is now and the longer term? I mean, yes, I'll have a third one once you've answered those. Okay. So let's also answer the second question first. Shareholders generally are allergic to us hedging too much. So the reasons why we would look into hedges would be to protect the capital spend, ensure that we can repay our debt, potentially possibly for a dividend. So we're quite conservative as far as level of gearing is concerned. Also, we don't go and hedge long dated ounces. Who knows what the market will do. So we're quite satisfied that at the current level of hedging, we've protected out the downside, and we should be able to very much give here and a year and a bit ahead. So shareholders want exposure to upside, and hence, we're quite cautious of sterilizing that upside. Also, because of the fact that we've repositioned ourselves as far as being a low cost producer is concerned, I mean, we can withstand pretty much most cycles. So again, no matter of need to gear there. In terms of the first question on the forecasts on H Shaft, well in sustaining cost, as you point out, we will expect that cost to come down quite dramatically in terms of FY 'twenty one and 'twenty two. So we haven't issued guidance, but you can quite simply assume that our costs are pretty much fixed. We don't spend any capital and go and calculate a production 2021 of circa 2020 we're guiding 30,000 ounces. So you can I mean, it sounds quite attractive and hence, we're quite cautious on overpromising? But I was down in terms of on 15 level a couple of weeks ago. So it's incredible. You walk out of the station, literally 50 meters later, you hit the pillar. It's a nice conglomerate that I've certainly seen in Evander. We've taken a lot of care in terms of rock mechanics. The key is not to overmine, to make sure you do it in a phased and planned approach and very cautious. So I think the upside as far as the pillar is concerned is quite attractive. Okay. And then my final question comes to growth and growth in M and A. And I understand you need to grow. I mean, your company is a certain size, you've got a certain overhead, so growth definitely has a benefit. But how do you add value to M and A, especially now at the high gold price? And how do you add value by doing M and A into Africa? In other words, what do you what do you bring? What do you bring to an asset? So you're clearly good executives when it comes to to projects, building projects. We've seen that with with Helicudin. You've got, you know, green stone belt expertise. But but how are you, in Africa, come into an asset, buy it, and do better? Or is it really just buying an asset at the right time in the pricing cycle? So how do you approach that? How do you go through that process and make sure that if you do M and A, there is value? Yeah. It's not it's actually not that difficult a question to answer. I don't think we've done any silly M and A. So we are very cautious in terms of capital allocation, in terms of returns, which is one of the reasons we haven't actually got gone and done M and A. There are some opportunities. And opportunities really is, I believe, the world has changed in the last year. So five years or ten years ago, people were quite excited about single asset companies in Africa. It's no longer the case. The world investors want liquidity. They want to be able to move in and out of stocks. So that might be an opportunity. But again, it comes down to the assets and the ability to have a look and a hard look at a conservative gold price and say, well, we're to generate the requisite returns for shareholders. So I mean, we're constantly looking at M and A. We don't mind looking. But as I said before, every time we look at an asset, actually learn a little bit about our own portfolio and what we're doing right and what we can do better. We under no imminent pressure to do M and A. We've sort of been sort of in and out and looked at opportunities. But again, we haven't done any silly M and A, and certainly, we don't plan to do so in future. K. Thank you very much. Hi, Curtis. It's Myron from Metal Industries. Hi. Well done on Eric Kooley, and then it looks like it's hitting its stride, getting to steady state. In the last quarter, I mean, I can back it up, but just to hear it from you, what sort of yield did you recover? And what's the all in sustaining cost just on Elukulu project in the last quarter? I mean, is that something that's sustainable? It's gonna come down some more, it looks like, but just hear your thoughts. Yes. So we've done a lot of work in terms of drilling the dumps. So we understand where we're mining, and there is some grade variability. So we've got at 65,000 ounces for the year. And you can sort of like you can take sort of the cost for the last year and put 8% let's call it 8% on top of it in terms of all in sustaining costs. So when you're treating 1.2 odd million tonnes a month, you do get some lower averages fortunately that come through. But it's the guidance should not be a significant increase other than inflation mean in terms cost in the year ahead. So yes, it's I think it's as attractive as what it's been in the last year. Also, on top of it, we're not spending a lot of capital. We budget only 20,000,000 of sustaining capital for Ilukaulu in the next year. And you've covered it for the year? Well, I mean, we sort of you saw we achieved the 9%. We have a bit of play in the plant. So when you we can play with throughput in order to get our ounces. So if recoveries fall a little bit, we can put through we have can Jonathan, we have we can on occasion, we can squeeze the plant or push the plant a little bit. Yeah. So we've brought in a little bit bit of flexibility there to get to our answers. Morning, Corvus. It's Lira from HSBC. My first question is, do you have a sense of what your carbon tax liabilities will be over the next couple of years? How much that is going to cost you? And then my second question is, when you think about your portfolio over the long term, It looks like you're considering Egoly, which is more conventional. Do you have a preference or do you have a certain direction that you wanna take your portfolio? Or are you open to both? Great. So I think the carbon tax liability here is very limited. We budgeted about ZAR 200,000,000, 2,500,000.0 in the first year. Period escalates in some years from now and something we're coming to grips with and seeing how we can mitigate the impact. In terms of our portfolio, to be honest, it's a lot easier mining surface ounces than what it is mining underground ounces, that's a fact. But I think we are successful Greenstone miners. We like to think of some of the best Greenstone miners in the world. Some of the analysts might have said, well, you guys made a mess of eight shafts. That's a difficult one, and we spent quite a lot of time on analyzing exactly what happened. Some operations quite simply just come to the end of their lives and when you have a downturn in the gold price, it sort of makes it more difficult. So I think it's not clear that you only limit ourselves like some other companies to say, well, we're only going to get surplus because we might stumble not stumble, but come upon an attractive opportunity that's not surface. But the bottom line is, can we mine it safely, sustainably at a cost that is attractive and generate returns for our shareholders? That's really how we look at projects. We have the ability to mine surface, open pit fine. We're doing it on a limited basis. It's a lot easier, as I've said, than going underground. We wouldn't shy away from underground purely because it's underground. I don't think it's the right approach. Hi, Curtis. It's Rene Hofrider from Noah Capital. I'm learning your results. Very nice to see that tremendous increase in earnings and other stuff. When you're going to close Kontoor down? I see it's running at $1,900 an ounce AIC. And just my second question, you know, 52% internal rate of return on on the on the Peak Valley project at R700,000 a kilo is a great great return. But you mentioned pensioners before. If you didn't go ahead with that project, what could you push your dividend yield up to? So it's a sensitive issue. I mean, we're not talking about closing consult at this point. We certainly highlighted the issue to our staff and employees at Barbaton. Even though we're running at a loss, okay, and any loss is not acceptable, there are other benefits. And if you recall some years ago, Consult was actually the highest grading mine at Barbaton. So what we've said, you'll see in the slide dealing with the strategy as far as underground is concerned, the current situation is not sustainable, and we have to fix it. If we can't fix it, we are not going to continue to run loss making operations. In terms of dividend yield, we have to find a balance between growth and paying our dividends. So it's great to have a unfortunately, when you find a dividend if you have a 5% dividend yield, stock will rewrite and you might find yourself having a lower yield. So again, it's about finding that balance. I think if you look at the track record of Pan African, we've always returned a lot of money to our shareholders, and the plan certainly is to continue to do that going forward. We're cognizant of the risks of underground operations. The guys, get to the call that's here for in the morning from the underground. So it's not something we will embark upon in anything other than a very circumspect and considered approach. Sorry, I might have missed it. What is the total CapEx for Egoli? So I mean, this is the thing. Egoli, including the plant, is estimated at an order of peak funding is always to be in the order of ZAR $750,000,000. So if this Egoli was anywhere else in the world, with its grades, with a million ounces, it would be a set of company listed with a market capitalization of, I don't know, I don't want to guess. But the key is, if the company had the ability credible ability to deliver, the company could be listed and would have, I think, an attractive market cap. So we mustn't look sort of only the fact that it's in South Africa and that normally deep level mines are difficult and high cost. It doesn't necessarily have to be the case. So where else in the world can you find 100,000 ounces at a reasonable all in cost for $40,000,000 It's not many places. Good answers. Thank you. Thank you. Just a follow on on your goalie. Have you looked at bringing in a partner to share some of the risk? We have. We are talking to partners. Again, it's about finding the right partner, somebody you can work with. And if we find the right proposal, there's no reason for us not to execute and implement. I think our shareholders would prefer that also. Anything else? Any calls from the conference call? Yes. We have a question from Justin Chan of Numbers. Thanks. Hi, Justin. Congratulations on a much better year. My first question is just with regards to balance sheet management. I mean, you have a view of how much, I guess, cash you'd like to save for rainy day? And on the dividend policy, have you I guess, could you give any more guidance on how you came to the number and what the dividend policy might be going forward? I think our dividend policy remains unchanged. And operationally, the money we're paying out, we did generate via a number of initiatives in the next in the in the last year. If you look at the policy, we do retain flexibility in times where we believe we can move the dividend up or down. In terms of balance sheet flexibility, prefer to have no debt, to be honest. The less debt, the better for a mining company in our view. It will be a great position when we have cash, and I think then we'll sort of fight to shareholders terms of how much we bury out and how much we keep on the balance sheet. So hopefully, that's a discussion we can have in a year and a bit, Justin. Okay. And on Royal Sheba, I realize that the parameters have changed perhaps, but could you give us a sense of how much CapEx you're looking at just even from a balance sheet allocation perspective? And then how does that rate versus the goal in terms of priorities? So one of the key issues we had, Justin, before with Royal Sheba as an open pit with a separate plant was the capital. The capital was north of 500,000,000. It wasn't attractive on that basis. If we develop what we call the upper, which is circa at this point resource of 160,000 ounces. The capital, Justin, will not be, in my view, more than 60 odd million. So the return on that, I think, is quite attractive, and certainly, we can fund it internally. So as I've said, we will update the market in the months ahead as far as Roachiva is concerned. Okay, perfect. And then just my last one is on where your all in sustaining cost or cash cost guidance is for next year. So other than improvement at Evander and inflation, are there any other moving parts that we should be aware of? No. I think we've sort of highlighted issues in terms of capital. There's no massive cost increases other than what you normally find in South Africa that we can agree with the anticipating. So with a full year of production at Ilekulu, an exchange rate that's a bit weaker than what we had in the year past, I think you can expect a reasonable performance. Okay, perfect. And then just my last one is on the grade profile, especially at Barberton. I guess, what are your expectations for, is there any any variation through the year? And, yeah, I mean, do you expect to be roughly at a similar point? Yeah. We we sold it 10 grams we sold it 10 grams a ton. There was you'll see in the results, the underground delivered eight point nine point eight grams a ton, close to 10. That is diluted by some of the surface material. So you'll see that we report a little bit lower, eight grams a tonne. But as I said, that's a result of surface. So we're targeting 10 grams a tonne, and there's no reason for us, we believe, not to achieve that target. We have flexibility or certainly more flexibility. We have two platforms that we on a high grade MRC that we're mining. So for the full year, you should see that come through. Okay. And and do you in your forecast, do you have much in the way of surface for this coming year? Yeah. We you'll see that we reported a resource for the first time on surface. And as part of the underground, you should see some sea to 5,000 ounces from surface. The next question comes from Tim Huff of Peel Hunt. Hi. Thanks for taking calls and great set of numbers. Just three questions for me. You've run through a lot of the different growth options and given some time frames on the Sun Vertical Shaft as well as Zcash after your time lines there. But could you give us a little bit of an idea of where you're thinking Devenisa fits into that as well? So Tim, I think over the next year, we have to refine Devenisa and then communicate to the market what the plans are. So I think I we highlighted in the presentation that a key area of focus of us in the next year will be the Barbizon Underground. As it has been in years past, these ships don't turn as quickly as what you want them to. So hopefully, we can update you as far as the Benita is concerned in the next six months. Okay. That's great. And then on the dev, you've been pretty clear about your dividend policy, OCF minus sustainable CapEx and debt commitments. But I was just wondering, that mean you're prioritizing the dividend or dividend growth over some of your growth projects? Because you do have quite a few growth projects that look like they could require capital in the coming year or two. Sure. So I think it's a balance, and that's what we try and strike between returning money to shareholders and growth. And shareholders are difficult creatures and rightly so. They want growth. They want dividends. They don't want to pay for any of it. And that's the balance that we are paid to try and strike. We don't get it right always, but that's what we look at. So growth, it's not growth at any or all costs. It has to be value accretive growth. And normally, you find that the value accretive growth in a portfolio such as ours, to some extent, funds itself. If we have to look too much into our own cash flows and potentially want to say, well, one has to relook at the returns of the specific project. Yes. No, that's fair enough. I had a feeling you guys are going to balance it all out. And then the last question was just a follow-up on the other accounts request identified that you know exactly what the issues are there. Have you given yourselves a time line in which you want to fix that before having to maybe make a strategic decision? Yes. We have to be careful because we haven't officially communicated anything. And yes, we have a time frame, and I would not want to stand in front of shareholders again with Concert performing like it did in the year past, if that makes sense. Fair enough. That's exactly what we're looking for. Excellent. Thank you. Thank you. And James, there are no further questions on the lines. Thank you. Great. So thank you very much to everybody for attending, and we'll be outside if there's anything else. Thank you. Cheers.