I think it is 11:00 A.M. Ladies and gentlemen, a warm welcome to the 2009 Pan African-- 2019. I've lost 10 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 U.K., 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 SENS, 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 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. Let's be honest, the global and local economic and social environment makes delivery, growth, and profits very challenging to achieve.
Over the last 18 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 issues 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 as a marginal producer. That is what we've had to address. When we said, "Trust us," the statement was supported by a fully committed and experienced team with detailed plans and the necessary resources to execute these plans.
Hopefully, you will agree that the results of the year past have, 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 build 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 Deon, our Financial Director, 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 at ZAR 700,000 per kilo even more so. Why invest in a quality producer of the metal such as Pan African and not only in a 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 are not attributed any significant value in the ground, to account as quality, profitable, and incremental production ounces. Also, the leverage is greater when 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. A statesman 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 130 years of gold mining history. Barberton's been going since 1886. We've well established infrastructure and technical support. It takes us an hour and a bit to get to Evander and four hours to get to our Barberton 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 and investment, despite certain perceptions 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. 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. Deon 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 Resources' 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 pencils a bit in terms of cost of our funding, specifically in this gold price environment. Otherwise, they are supportive partners. We have a world-class constitution without, in my view, any need to change it. 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. 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 impact in the areas in which we operate. It is important that we have our communities understand how interlinked their future fortunes are with our own.
Barberton 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. We'll get to that a bit later in this presentation. Regulatory uncertainty. We need to better resolve the issues around Mining Charter III. Unlike some other miners, we do, however, not have to rely solely on 1% BEE. We are currently 26% empowered 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 Elikhulu soon. Fortunately, our tailing, 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 2009. At the moment, we're arresting 250 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. This list of challenges appear quite daunting, but for the most part, we have equipped and skilled ourselves to manage successfully in this environment. 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. We then move on to slide number nine, 2009 to 2019 at a glance. I believe it's 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, the point has to be made, this is in a much lower gold price environment to what we're seeing at the moment. Gold price in ZAR the year past was ZAR 577,000 per kilo versus the current north of ZAR 700. Clearly, these numbers would have looked a lot better. ESG, we'll discuss ESG.
We're making good progress as far as ESG is concerned. Growth, successfully commissioned Elikhulu. We've had the first gold from Evander 8 Shaft pillar that came in July, a bit ahead of schedule. Royal Sheba, we're progressing. We'll discuss the Egoli Project also. In dividend, I think quite a special occasion for us to reinstate dividend. It demonstrates that as a group, we really are on a better footing. Why not pay down the bulk of our debt first? The dividend proposed is fairly modest, even though a 1% yield in hard currency is much better than negative interest rates in Europe at present. The dividend focuses management on capital discipline. 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 million fatality-free shifts at our Barberton operation. Our Group Health and Safety Manager, Mr. Mandla Ndlozi, is here today. We call him our Attila the Hun on safety. He does not take prisoners. It's also his birthday today, so happy birthday, Mandla. 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. We build infrastructure. We scale up entrepreneurs. We support local business. Our tailings operations clean up legacy liabilities. Our closure liabilities are fully funded. In the last year, we spent ZAR 60 million on demolishing and rehabilitating old shafts and infrastructure at Elands.
These activities in themselves create opportunities and employment as per a 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 a couple of minutes on our financial FY 2019 production and cost summary. 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 rands, quite dramatically. Our tailings business reduces the exposure to above-inflation input costs, such as labor and electricity. For the first time, we produced almost 40% of our production from tailings, and so we'll deal with the tailings in detail. Importantly, we're increasing our forecast for FY 2020 quite dramatically. On slide number 13, this is how we now compare to the rest of the South African industry.
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. It's quite controversial to say that we are the lowest cost producer in South Africa, but it's probably safe to say we pretty much 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 Elikhulu. On slide number 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 BTRP and Elikhulu, about only 10%, 11% of our costs relate to labor and only sort of 15% relate to electricity. That's quite a lot lower than what you see in our operations. On the right-hand side, we have our underground ounces, a very highly leveraged for gold price increases, certainly group profitability significantly in a 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 Elikhulu plant. On slide number 16, let's spend a couple of minutes on our tailings business. Really is something to talk about. Overall, we produced almost 80,000 ounces, all-in sustaining costs of below $600 an ounce. We've increased recoveries, and that really is as a result of the Elikhulu operation now being in full production.
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, the two components, when we talk about surface re-mining or tailings re-mining. BTRP, it's a fantastic asset. Deon has said I should stop saying that it paid itself back in 18 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 BTRP. You can see our all-in costs have come down quite dramatically in the year that's passed. Elikhulu, 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, it's Elikhulu.
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. 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 Barberton underground, a fairly solid performance, certainly an increase from last year. There are some challenges also. Barberton, an incredibly high-grade mine on average. You can see that Fairview delivered at just over $1,000 an ounce all in sustaining. Sheba 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. In terms of all-in sustaining costs per unit or per ounce went up by more than inflation. Why is that? Normally, electricity is something we can't really do much about. As I've said, we've had to spend more on security, that's something we have to focus on. We have to have a sustainable solution, not at the cost that we spent in the last year. Also we processed some surface material that's increased costs as far as processing is concerned. The ounces contributed to profits, it did put up our costs slightly. We have an opportunity to optimize Barberton via what we believe, to simplify as a two-phase or two-stage approach. First stage would be, well, phase 1A, sustain and grow underground high-grade production. A couple of points. We spoke about the subvertical shaft previously.
A feasibility study indicates that the subvertical will increase production from Fairview by some 7,000 to 10,000 ounces. We now have bottom and top access, so we can start development in terms of the shaft in the next year. This project should be complete in the next 24 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 years, 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 flexibility. The Dibanisa is a project we're excited about combining infrastructure of Sheba and Fairview. It's a busy slide, and so it's a slide that's best discussed in person.
Suffice to say, we believe that the Barberton underground presents a universe of opportunity. That's phase 1A. Phase 1B, sweep and optimize surface infrastructure. We've already started. We've upgraded the plant capacities of both the Sheba and Consort plants in the last year. These plants now contributed an additional 3,000 ounces from surface. Really it's bringing these resources to account in the years to come. We have almost 100,000 ounces now, Hendrik, in reserve that we didn't have there before. It's a nice and sizable resource and reserve to assist. Phase two, new mining projects. I mean, incredible, after so many years of mining, we still have new mining projects. We've elected not to proceed with the open pit at Royal Sheba for a number of reasons. Environmentally, it would've been challenging.
In terms of pit slopes, we believe that the capital was too much. We do have one ore body that we're planning on accessing in the next years in two distinct different ways. Phase two mining, which you see at the bottom, that's 500,000 ounces in resource, 400,000 ounces in reserve. Developing towards phase two via the Red Rose shaft on 23 level, with about 500, 600 meters of development to go. We'll bring that ore body into production in the next years, next two to four years. I'm quite excited about phase one, accessing the old workings and some of the virgin ore bodies via an adit. What we said is we will update the market in the months to come as far as our exact plans are concerned for Royal Sheba phase one.
Move on to slide number 23. Evander 8 Shaft. We might get the question, 8 Shaft lost money again. Why haven't you closed it properly? Operation is pretty much de-risked for Pan African now. We only have about 60 employees still on the books of Evander. The rest of the employees mining the underground are contractors. We needed the water from 8 Shaft in the year past until such time that we moved ETRP into Elikhulu. Clearly, it's no longer the case. 8 Shaft and what you see, the negative EBITDA contributed to in terms of overheads. There would've been care and maintenance costs to incur if we hadn't continued to mine 8 Shaft. That contributed from that perspective. Also now it's opened up the pillar for us. We're forecasting 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 you have to spend about ZAR 30 million in the year past, and we'll spend ZAR 55 million in the 2020 financial year. In terms of a ZAR 700,000 in gold price, certainly we'll make a bit of money on the Pillar in the year ahead. For FY 2021 and FY 2022, producing 30,000 ounces are pretty limited. There's pretty much no capital, should generate significant returns for our shareholders. I will ask Deon to come up and give some color to the numbers. Thank you.
Thank you, Cobus, good morning to everyone. By the way, this is the new smart house at Elikhulu. Quite impressive photograph. Before we start with the 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 as one of our shareholders asked, "Is this now because we're going to get paid in US dollars?" I said, "No.
It's simply to make the results more comparable to that of the rest of the gold sector. In certain instances, we refer to the financial results of the continuing businesses that comprises Barberton's underground and BTRP operations, Elikhulu, now incorporating the ETRP throughput, the remnant mining and venting at Evander's 8 Shaft, and in the new pillar project that Cobus referred to. In other instances, we refer to the combined businesses, both continuing and discontinuing, with the discontinued operations comprises Evander's deep level underground 8 Shaft infrastructure that we impaired last year. 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 to 30 June 2019.
Notable is the increased turnover from continued operations to $217 million from $146 million in the prior year, as gold production increased by 54% to 172,000 ounces, and the ZAR 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 2019 year, the ZAR on exchange rate also depreciated by 10%, resulting in a net 7% increase in the average ZAR price of gold for the 2019 financial year, which assisted in offsetting inflation in costs.
The lower cost of production for the 10 months post commissioning on 30 August last year, and the generally improved performance from Barberton contributed to the group's all-in sustaining costs declining by 28% to $987 an ounce or ZAR 451,000 a kilogram, representing a 20% decline in all-in sustaining costs relative to the 2018 financial year. Concomitantly, EBITDA increased by 75% to $57 million and attributable earnings increased to $38 million relative to the loss of $123 million in the prior financial year, after recognizing a loss from discontinued operations of $138 million due to the cessation of deep level underground mining at Evander 8 Shaft. The materially improved turnover and reduced costs contributed to basic earnings per share increasing by 129% and headline earnings per share increasing 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 mine the 8 Shaft Pillar, and in so doing, use 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 million shares issued on 13 May 2018 were taken into account for calculating earnings per share and headline earnings per share in the current year.
Pan African still holds 306 million treasury shares that reduces the total issued shares, number of shares of 2.2 billion to 1.9 billion, 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 ZAR 219 million 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 Elikhulu's commissioning. The other growth initiatives that Cobus refer 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 PA's operations. Evident is the escalating rate at which operational profits increase at gold prices in excess of our break-even costs of approximately ZAR 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 more or less the prevailing ZAR 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 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 ZAR 550,000 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 ZAR 700,000 per kilogram. A sub two-year repayment profile.
If the prevailing gold price on all other assumptions hold. The benefit of having rand-denominated debt is evident under the prevailing economic circumstances, where the dollar price of gold increases and the rand depreciates relative to the US dollar. The bar graph on the lower section of the slide shows the frequency and magnitude of the senior debt principal installments over the next five years with the first installment of ZAR 50 million on the Elikhulu term facility payable at the end of this month, and the first installment of ZAR 250 million on the RCF facility payable on 15 June 2020. With the proceeds of the gold loan that we entered into in July this year, we reduced the RCF balance by ZAR 394 million. 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 2019 and 2020 financial year. With the higher debt levels and the prevailing elevated gold price, it made sense to enter into a series of zero cost collars to lock in minimum floor prices in ZAR gold terms. For the first half of the financial year, a floor price of ZAR 604,000 per kilogram on 29,550 ounces was entered into earlier in this year when the gold price was approximately ZAR 610,000, ZAR 620,000 a kilogram. For the second half of the financial year, a floor price of ZAR 655,000 a kilogram on 50,460 ounces was entered into.
To fund these floors, we sold calls and forfeited the gold price upside on these ounces at ZAR 666,000 a kilogram for the first half of this financial year to December, and ZAR 836,000 a kilogram in the second half of the financial year. In all instances, the same number of ounces on the caps as on the floors. These are typical plain vanilla zero cost collars. Once these hedges run out in 2020, we have one remaining collar in place at a floor of ZAR 690,000 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 de-geared 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 Elikhulu construction and the cessation of deep-level mining at Evander 8 Shaft. Although the dividend is materially lower than in the past, as Cobus 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 Egoli Project in the near future, our intent is to fund, to the extent possible, this project in a manner that ring-fences its funding impact on the rest of the group, so as not to curtail future dividends and the redemption of existing senior debt. Thank you.
Thank you very much, Deon. Let's conclude then. Couple of slides. Investing in the future of our assets. 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 million ounces. 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. I think the point on slide 31 is we have a number of attractive projects, some a bit further away than others. As I've said, we have a good track record of delivering organically. To the extent one can grow your portfolio organically, clearly it makes sense. You don't have to pay for assets. In terms of slide 32, reinvesting in our assets.
We don't skimp as far as capital is concerned on our operations. We believe that if you spend the right level of capital, these operations will return the capital over time. In the last year, we spent about ZAR 140 million of sustaining capital at Barberton. Given the higher gold price, we've decided to spend a little bit more capital in the year ahead. That's for three specific initiatives. We're replacing some of the very old LHDs. We are upgrading switchgear and fire suppression systems. As I said before, we significantly increasing the level of development we're doing underground. All of those initiatives will bear fruit in the near term. If we move on to near-term organic growth. I can just see some people sort of shaking their heads when we speak about Egoli as a growth project.
Clearly, there's a lot of skepticism around underground gold mining in South Africa, and we 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 there yet. 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 end of September, and we'll share that study with the market. Very briefly, the Egoli Project is within three kilometers traveling distance from our Shaft 7. We spent a lot of money in refurbishing Shaft 7 over the last years. Historical development on Shaft 7, that Shaft 7 has made ready access to the orebody possible. Following dewatering, standard footfall development, and further deepening of the decline and on-reach development, associated engineering is required before mining can commence.
We'll speak about the results on the next slide. As I said, a study is expected by the end of September. Then we are considering funding options. As Deon said, we believe if we do proceed with Egoli, it'll have to be on a ring-fence basis. We've actually received a funding proposal from a financing institution, a non-binding one at this point, but very encouraging. Very briefly, Egoli versus Evander 8 Shaft before closure, what are the differences? Depth, Egoli is a lot shallower. Access, certainly the access at onto 24 level at Evander 8 Shaft is very difficult, very convoluted. Access at Egoli directly from 7 Shaft, from shaft system with only one decline. Tramming and traveling distance, talk in cheese, 3 kilometers versus 13. Transfer points, only 6 versus 20. That certainly is going to assist with mine pool factor. Head grade, pretty similar.
Waste and reef, you have no ability to split waste and reef at 8 Shaft . That certainly limits your ability to develop, also dilutes your head grade. We can start from scratch, clean slate at Egoli. Employees, ability to pick and choose a workforce, make the workforce tailor-made for the project. As I've said, it's a significant resource and it's certainly on our radar in terms of progressing it going forward. If we finalize and conclude this presentation, a health check and deliverables. What have we focused on and what will we focus on in the year ahead? Continued emphasis on improving our safety performance and ESG compliance on sustainability. Production, we've delivered into our guidance for the year past. We're on track to deliver into FY 2020 guidance. We need to ensure that Elikhulu delivers, and we've obviously completed the ETRP incorporation into Elikhulu.
That's running very smoothly. As I've said, we need to implement initiatives to further reduce all-in sustaining costs, specifically at the Barberton underground. From a financial or finance perspective, balance sheet de-gearing. If the gold price stays where it is, you certainly should see that de-gearing coming through, and we've reinitiated the dividends. Growth. In terms of the way we look at capital allocation, firstly, we reinvest in our assets. Secondly, we have to give shareholders a return and de-gear the balance sheet. Thirdly, we also have to continue to look at growth opportunities. I mean, we've grown via Elikhulu. We're busy with Evander 8 Shaft project. We'll update the market as far as Royal Sheba phase one is concerned in the months ahead. I hope to also update the market as far as Egoli is concerned before the end of this financial year.
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 in 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 will now take some questions from the floor and then move on to the conference call participants.
Good day. Arnold van Graan from Nedbank. I've got a few questions. I'll start with the easy one and then progress from there. The first one is, what is your all-in sustaining cost guidance at 8 Shaft in 2021, 2022? It's quite high still.
Yeah
next year, I understand it with the CapEx, but I want to get a sense once all that capital is spent. That's the first question. The second question is, what is your views on hedging going forward? I understand now you've put hedging in place to mitigate the risk associated with your debt. What's your view on that given where the gold price is now, and the longer term? Yeah, I have a third one, once you've answered those.
Okay. Let's answer the second question first. Shareholders generally are allergic to us hedging too much. The reasons why we would look entering to hedges would be to protect the capital spend, ensure that we can repay our debt, potentially, possibly for a dividend. We're quite conservative as far as level of gearing is concerned. Also, we don't go and hedge along dated ounces. Who knows what the market will do. We're quite satisfied that at the current level of hedging, we've protected the downside, and we should be able to very much de-gear in a year and a bit ahead. Shareholders want exposure to the 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.
Again, no massive need to gear there. In terms of the first question on the forecasts on 8 Shaft, our sustaining cost, as you point out, we will expect that cost to come down quite dramatically, in terms of FY 2021 and 2022. 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 20. We're guiding 30,000 ounces. It sounds quite attractive and hence we're quite cautious on over-promising. I was down on 15 level a couple of weeks ago, it's incredible. You walk out of the station, literally 15 meters later, you're into the pillar. It's the nicest conglomerate reef that I've certainly seen at Evander. We've taken a lot of care in terms of rock mechanics.
The key is not to over-mine, to make sure you do it in a phased and planned approach, and very cautious. I think the upside as far as the pillar is concerned is quite attractive.
Okay, thanks. My final question comes to growth and growth in M&A. I understand the need to grow. I mean, obviously, your company's a certain size, you've got a certain overhead, so growth definitely has a benefit. How do you add value through M&A, especially now at a high gold price? How do you add value by doing M&A into Africa? In other words, what do you bring to an asset? You're clearly good executors when it comes to projects, building projects. We've seen that with Elikhulu. You've got greenstone belt expertise. How will you, in Africa, come into an asset, buy it and do better? Is it really just buying an asset at the right time in the pricing cycle? How do you approach that?
How do you go through that process and make sure that if you do M&A, there is value?
Yeah. It's actually not that difficult a question to answer. I don't think we've done any silly M&A. We are very cautious in terms of capital allocation, in terms of returns, which is one of the reasons we haven't actually gone and done M&A. There are some opportunities, and opportunities really is, I believe, the world has changed in the last year. Five years or 10 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. That might be an opportunity.
Again, it comes down to the asset and the ability to have a look and a hard look at a conservative gold price and say, "Well, we're going to generate the requisite returns for shareholders." I mean, we're constantly looking at M&A. We don't mind looking, but as I said before, every time we look at an asset, we actually learn a little bit about our own portfolio and what we're doing right and what we can do better. We're under no imminent pressure to do M&A. We've sort of been in and out and looked at opportunities. Again, we haven't done any silly M&A, and certainly, we don't plan to do so in future.
Okay. Thank you very much.
Hi, Cobus. It's Myron from Metal Investment.
Hi.
Hi. Well done on Elikhulu. I mean, 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 yields did you recover, and what's the all-in sustaining cost just on the Elikhulu 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 on that.
Yeah. We've done a lot of work in terms of drilling the dumps. We understand where we're mining, and there is some grade variability. We've guided 65,000 ounces for the year. You can take sort of the cost for the last year and put, let's call it 8% on top of it in terms of all-in sustaining costs. When you're treating 1.2 odd million tons a month, you do get some law of averages, fortunately, that come through. The guidance should not be a significant increase other than an inflation mean from the cost in the year ahead. Yes, 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've budgeted only ZAR 20 million of sustaining capital for Elikhulu in the next year.
Recovery percentage?
Well, I mean, you saw we achieved 49%. We have a bit of play in the plant. We can play with throughput, in order to get our ounces. If recoveries fall a little bit, Jonathan, on occasion, we can squeeze the plant or push the plant a little bit.
1,000 tons.
Yeah. We've built in a little bit of flexibility there to get to our ounces.
Morning, Cobus. It's Leva 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? My second question is, when you think about your portfolio over the long term, Elikhulu seems like a mechanized operation. It looks like you're considering Egoli, which is more conventional. Do you have a preference, or do you have a certain direction that you want to take your portfolio or are you open to both?
I think the Carbon Tax liability here is very limited. We budgeted about two odd million ZAR, two and a half million ZAR in the first years. Clearly, it 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. I think we are successful greenstone miners. We like to think we're some of the best greenstone miners in the world. Some of the analysts might have said, "Well, you guys made a mess of 8 Shaft." That's a difficult one, and we've 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. I think it's not clever to only limit ourselves like some other companies to say, "Well, we're only gonna get surface," because we might stumble, or not stumble, but come upon an attractive opportunity that's not surface. The bottom line is, can we mine it safely, sustainably, at a cost that is attractive and generate the 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, Cobus. It's Rene Hochreiter from Merian Capital. Well done on your results. Very nice to see that tremendous increase in earnings and other stuff. When are you going to close Consort down? I see it's running at $1,900 an ounce, AISC. Just my second question, 53% internal rate of return on the Egoli Project. That ZAR 700,000 a kilo is a great return.
You mentioned pensioners before. If you didn't go ahead with that project, what could you possibly do with that money?
It's a sensitive issue. We're not talking about closing Consort at this point. We've certainly highlighted the issue to our staff and employees at Barberton. Even though we're running at a loss, okay, and any loss is not acceptable, there are other benefits. If you recall, some years ago, Consort was actually the highest-grading mine at Barberton. What we've said, you'll see in the slide dealing with the strategy as far as underground's concerned, is 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.
It's great to have unfortunately, when you find a dividend, if you have a 5% dividend yield, stock will re-rate, and you might find yourself having a lower yield. 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. We're the guys who get sort of called at 3:00 or 4:00 in the morning from the underground. 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?
This is the thing, is Egoli, including the plant, peak funding is always estimated in the order of ZAR 750 million. If this Egoli was anywhere else in the world, with this grade, with 1 million ounces, it would be a separate company listed with a market capitalization of, I don't know, I don't want to guess. The key is, if a company had the credible ability to deliver, the company could be listed and would have, I think, an attractive market cap. We mustn't look sort of only at 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. Where else in the world can you find 100,000 ounces at a reasonable all-in cost for ZAR 40 million? It's not many places.
Good answers. Thank you.
Thank you.
Cobus, just to follow on one on Egoli. 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. 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 Numis.
Thanks. Hi, Justin.
Hi, guys. Good afternoon, and congratulations on a much better year. My first question is just with regards to balance sheet management. Do you have a view of how much, I guess, cash you'd like to save for a rainy day? On the dividend policy, 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 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'll be a great position when we have cash, and I think then we'll sort of talk to shareholders in terms of how much we pay out and how much we keep on the balance sheet. Hopefully, that's a discussion we can have in a year and a bit, Justin.
Okay, thanks. 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? How does that rate versus Egoli in terms of priorities?
One of the key issues we had, Justin, before with Royal Sheba as an open pit with successive plant was the capital. The capital was north of ZAR 500 million. It wasn't attractive on that basis. If we develop what we call the uppers, which is circa, at this point, a resource of 160,000 ounces, the capital, Justin, will not be, in my view, more than ZAR 60 million-ZAR 70 million. The return on that, I think, is quite attractive and certainly we can fund it internally. As I've said, we will update the market in the months ahead as far as Royal Sheba is concerned.
Okay, perfect. Just my last one is on where your all in sustaining cost or cash cost guidance is for next year? Other than improvement at Evander and inflation, are there any other moving parts that we should be aware of?
No, I think we've highlighted issues in terms of capital. There's no massive cost increases other than what you normally find in South Africa that we would be anticipating. With a full year of production at Elikhulu, 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. Then just my last one is on the grade profile, especially at Barberton, I guess what are your expectations? Is there any variation through the year? Do you expect to be roughly at a similar point?
Yeah, we target 10 grams a tonne. You'll see in the results, the underground delivered a head grade of 9.8 grams a tonne, close to 10. That is diluted by some of the surface material. You'll see that we report a little bit lower, eight grams a tonne, but as I said, that's a result of surface. 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 on a high-grade MRC that we're mining. For the full year, you should see that come through.
Okay. In your forecast, do you have much in the way of surface for this coming year?
Yeah. You'll see that we reported a resource for the first time on surface. As part of underground, you should see some 3,000 to 5,000 ounces from surface.
Okay, thanks. That's very helpful.
Thanks, Justin.
The next question comes from Tim Hoff of Hill Hunt.
Hi, Tim.
Yeah, hi. Thanks for taking the call and great for the numbers. Just three questions from me. You've run through a lot of the different growth options, and given some time frames on the Subvertical shaft as well as the ZK shaft, your timelines there. Could you give us a little bit of an idea of where you're thinking Dibanisa fits into that as well?
Tim, I think over the next year, we have to refine Dibanisa and then communicate to the market what the plans are. I think we highlighted in the presentation that a key area of focus of us in the next year will be the Barberton underground, as it has been in the years past. These ships don't turn as quickly as what you want them to. Hopefully, we can update you as far as Dibanisa is concerned in the next six months.
Okay, that's great. On the div, you've been pretty clear about your dividend policy, OCF minus sustainable CapEx and debt commitments. I was just wondering, does that mean you're prioritizing the dividend or dividend growth over some of your growth projects? You do have quite a few growth projects that look like they could require capital in the coming year or two.
Sure. Tim, I think it's a balance. That's what we try and strike between returning money to shareholders and growth. Shareholders are difficult creatures, and rightly so. They want growth, they want dividends. They don't want to pay for any of it. That's a balance that we are paid to try and strike. We don't get it right always, but that's what we look at. Growth, it's not growth at any or all costs. It has to be value accretive growth. Normally, we 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, then potentially one has to say, well, one has to relook at the returns of the specific project.
Yeah. No, that's fair enough. I had a feeling you guys were going to balance it all out. Then the last question was just a follow-up on the other Consort, identified that you know exactly what the issues are there. Have you given yourselves a timeline in which you want to fix that before having to maybe make a strategic decision?
Yeah, we have to be careful because we haven't officially communicated anything. Yeah, we have a timeframe, and I would not want to stand in front of shareholders again with Consort 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.
James, there are no further questions on the line. Thank you.
Great. Thank you very much to everybody for attending, we will be outside if there is anything else. Thank you. Cheers.