Anglogold Ashanti PLC (AU) 2022 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the AngloGold Ashanti 2022 Half Year Market Update. (Operator Instructions) Please note that this call is being recorded.

I'd now like to turn the conference over to Mr. Stewart Bailey. Please go ahead, sir.

Thanks very much, Claudia, and thank you to everyone joining us today for the call for our first half results. You have the full executive team here in the room in Johannesburg and Alberto will provide some comments. Ian will talk us through the financials, and then we'll conclude and take questions. What I would draw your attention to, please, is the safe harbor statement at the front of the presentation. That contains important information regarding forward-looking statements that we may make in this presentation, and I do encourage you to look at it when you have a minute.

Alberto?

Thank you, Stewart, and good day to everyone. We started the year with a strong safety performance. We've recorded a fatality free first half, taking us to 12-month fatality free. Our total recordable injuries frequency rate was 1.33 injuries per million hours worked, a marked improvement, about below 40% and well below the ICMM average. We remain focused on major hazards and ensuring everybody knows by heart that 3 or 4 things most likely to call fatalities and the actions needed to prevent them.

This is an encouraging first half with strong production costs in line with plan and guidance intact. We're committed to getting the basics right, and that's what we have delivered. Reinvestment in our bigger assets, Geita, Tropicana, Iduapriem is tracking well and remains on schedule. We're seeing inflation running at about 10%, but we've been unable to limit the cash costs increase to 6% year-on-year. That is we were able to compensate about 40% of the inflation impact. That space had a more predictable operational performance, higher grade and a significant drop in stockpile runs as investments at Geita and Iduapriem start to bear fruit.

The rise in all-in sustaining cost was mainly driven by the higher cash costs. It is worth noting that TSF compliance alone contributed an estimated $42 an ounce to the AISC for the period. We declared an interim dividend of $0.29 a share or EUR 121 million. Free cash flow was a healthy $471 million. That's after investing CapEx of $434 million into our assets. Our balance sheet is in a solid position with low gearing and very strong liquidity. Full asset potential review is making good progress. We're making great headway in Nevada, which continues to look better and better.

We are taking, however, steps to optimize the portfolio as we have spoken in the past. Together with our JV partner, B2Gold, we have decided to explore options for Gramalote, for us that being through the potential savings. Look at the work done to date on the optimized feasibility study shows that the scale and returns do not meet our investment threshold. We are also assessing strategic alternatives for CdS, which is part of the AGA Mineracao contracts in Brazil in order to generate the best value for shareholders over the longer term.

As I mentioned, the improved grades help offset inflation, which you can see in our cash costs. CapEx was up 2% as we pushed ahead with our reinvestment strategy and ongoing compliance with TSF regulation in Brazil. We also continue to invest in Obuasi Phase 3, which will increase volumes and lift productions well into Tier 1 territory. Exploration spend was higher, which aligns with the aim of improving our orebodies. Our cash flow for the period was significantly up, helped by the cash receipts from the PRC.

Moving to the Africa overview. The most important sort of -- and (technical difficulty) (inaudible) we had to deliver was in Obuasi's ramp-up continued to make good progress. Production of 91,000 ounces was within 1% of the plan. We have been hitting lately the 4,000 tonnes per day. We remain on track to achieve our production guidance of around 250,000 ounces. We are managing through a few teething issues made with the paste fill performance, ventilation and fleet availability. But as I said, especially in the last weeks, it's performing much better.

Obuasi is a large and complex operation, but we understand it very well. Phase 3 of the project will continue as planned to the end of the year, in particular the KMS Shaft. Iduapriem, its production was higher as the mine treated higher grade ore tonnes from Cut 2 as our reserved cash cost improved by around 10%. And Siguiri continues to show significant improvements through a combination of better grades and improved recovery rates. Cost control was strong despite inflationary pressures across several categories. The full asset process was completed during the half, showing strong potential for further improvement. In the next set of results, we will give some quantitative sort of findings on Siguiri.

Geita's production was in line with the plan. Underground ore tonnes were up 50% year-on-year, coupled with a 40% improvement of the underground grade. Q2 production was up 13% and will step up over the remainder of the year. Kibali's production was lower due to lower throughput as a portion of mine gold was used to replenish stockpiles. Production for the year is expected to be in line with last year. Therefore, you will see production improve in the subsequent quarters.

Latin American overview. As we've said before, Brazil's production was hurt by flooding, very significant flooding in the first quarter. We continue to manage plant throughput to keep within our permitted tailing limits, while we fast tracked the transition to dry stacking. A combination of lower production and additional capital contributed to abnormally high all-in sustaining costs. We spent $52 million on TSF conversions and expect a similar amount in the second half. We spent close to $200 million over the last 8 months -- 18 months. This TSF investment is expected to remain material in each of the next 2 to 3 years, albeit decreasing over time.

Costs were also affected by inflationary pressures and the stronger real. AGA Mineracao production was lower due to the underperformance at especially CdS. As we continue to focus on operational improvements at our key assets, we are prioritizing assets assessment of the strategic alternative for CdS in order to generate the best value for shareholders over the longer term. We will provide an update on the CdS strategic review when it is completed. Serra Grande's performance saw a slight improvement. Costs included an additional capital required for the TSF resulting in all-in sustaining costs increased to over $2,000 an ounce. At Cerro Vanguardia, production increased due to a combination of high volumes processed and higher grades.

Australia overview. In Australia, productions were higher and costs were lower despite a number of operational challenges. We continue to experience the compound effect of skill shortages and COVID-related absenteeism. That's causing shortages across the industry, especially for operators and maintaining staff. Nevertheless, Sunrise Dam's production is up 50% year-on-year due to higher grades and recoveries. We're now in the shallow Frankie orebody, which is performing to planned as seen in underground grade profile. Tropicana's production was up 14% on higher volumes and grades. Havana way stripping continues to progress, but the time that is under pressure due to severe shortage of skilled operators. We've adjusted the mine plan to mitigate this impact on gold production. We have also commenced PFS on an underground mine at Havana.

Nevada. The Exco team and the Board spent some time out of the site in Nevada last month. Plant activities are progressing well, and we're excited to see the potential of the district picture shape. The North Bullfrog feasibility study confirms a plan for combined gravity and heap leach processing. The permit application will be submitted this year. The silicon pre-feasibility study will confirm the mining and processing configuration, which will be completed by the end of the year. Infield drilling to improve the resource classification continued along with its stabilization drilling for processing and waste rock sites.

Since putting together the complementary lab packages, we are benefiting from the shared project management, specifically around the synergies related to the studies and the evaluation of exploration targets. On a distance scale, we see these deposits being developed in a sequential fashion, mined initially as open pits and processed using heap leach and gravity recovery where applicable. This suggests low capital intensity to develop in a staged fashion.

With what we currently have, we see a district that is conservatively expected to yield upwards of 300,000 ounces of annual production within the decade for around 20 years at an all-in sustaining cost in the high 900s. That is a Tier 1 in cost. This is developing into an immensely attractive region for us. We're pleased with the position we've locked up and will look to follow and consolidate our footprint and if the opportunity arises. We should be, I forgot to say, in early production by around -- in 3 years by around 2025.

Full asset potential. The key objective of the full asset potential is to complete a detailed analysis of each asset, including mine design, key operating parameters to understand the reasons for the gap between current and best possible performance. The full assessment is designed to identify key areas for performance improvement and to allow a bespoke solution for implementation over the ensuring 18 to 24 months. Sunrise Dam was the first to undergo the process and has identified 33 improvement initiatives overall.

Let me focus on 3 key initiatives that have the potential to improve the cash cost base by between $80 to $100 an ounce per year over 3 years. On underground productivity, we've identified an opportunity to increase development productivity and achieve a step change in underground mining rates to over 3 million per year from the current capacity of around 2.5. And so 20% increase, which is very significant for these type of developments.

The first step involves establishing the underground maintenance workshop, which has added 4 hours of jumbo drill rig availability per 8-day cycle by focusing on priority headings and implemented a new fleet management system, we will improve operational decision-making and outcomes that gives us a clear path to growing underground production over the next 2 to 3 years with only modest capital investment.

On mine planning and strategy, we see a potential pathway to significantly increase mineral resource and ore reserve, including to cutback at main pit, which extends mine life by 4 to 6 years. This has the potential to increase NPV by between -- by around AUD 300 million, and we expect to be increasing resources by about 1 million tonnes by the end of this year.

On metallurgical recovery, the site team also identified processing enhancements to improve recovery rates by 0.5% to 1% with a longer-term target of 2% to 3%. These initiatives represent options to extend life, increase production and improve margins over the medium and longer term, daylighting significant value in this important task. Importantly, we believe the process will be successful in unearthing similar value at our other assets.

A similar assessment was completed at Siguiri mine, which identified 29 initiatives including the ability to increase mining volumes and raise feed grade. And as I said before, we will talk the quantitative numbers in 3 months on Siguiri. Cuiaba is still in the process of completing the full asset potential assessment, and the team is working through 46 improving opportunities, which will be fully scoped over the next weeks. We'll be leveraging the learnings from these initial pilots in the next wave of our potential assessments, which will take place at Tropicana, Geita and Serra Grande before the end of 2022. We will provide an update on the process at the next weeks.

I will hand now over to Ian for the financials.

Thanks, Alberto. Our cost performance for the first half of 2022 remains solid and is underpinned by operational improvements from both increases in the volume of ore tonnes processed and a higher overall recovered grades. Total cash costs for the first half of 2022 were $1,068 per ounce with the year-on-year increase contained to 6.5% or $65 per ounce despite inflationary pressure and other uncontrollable factors.

Inflation contributed $106 per ounce or 11% to the total cash cost increase and includes inputs like oil and gas, explosives, lubricants and cyanide. The cost environment remains dynamic and uncertain, and we expect higher input costs to remain for the year second half and beyond. We expect to see continuing inflationary pressures with the full year costs, total cash costs expected to be closer to the top end of the guidance range. We saw inflation of around 29% in oil, which compromises about 12% of our input costs. This impact amounted to $41 per ounce out of the total inflationary impact of $106 per ounce.

Our current outlook for the rest of the year is about $105 per barrel versus our original year-end guidance assumption of $80 per barrel. Labor and mining contractors are our largest cost components, making up approximately 65% of our total cash cost base. Here, we saw average inflation of 6% and 8%, respectively, in the first half of 2022. We continue to manage our supply chain risk through increased inventory levels, which has helped delayed inflationary impacts. We are collaborating with strategic suppliers to explore forward buying, especially explosives and cyanide and built in (inaudible) mechanisms in our main contracts.

In addition to the inflationary impacts, royalty costs linked to the higher gold price impacted total cash costs by $6 per ounce, while volumes impacted by $20 per ounce. The upward pressure on total cash costs were partially offset by all stockpile movements of $56 per ounce and the positive impact of higher grades achieved of $27 per ounce. All-in sustaining costs were up 6% to $1,418 per ounce, driven by the higher total cash cost and a planned increase in sustaining capital. Sustaining capital, including equity-accounted joint ventures, increased by $19 million or 6%, mainly due to the ore reserve development at Obuasi, Geita and Brazil as well as the Brazilian tailings storage spend.

Our continued inventory investment to extend mine life and improve operating flexibility remains a key priority. All-in sustaining costs include an estimated $16 per ounce COVID-19 impact and $42 per ounce for the Brazilian tailings storage spend. Our balance sheet remains in a solid position with long-dated debt maturities, low leverage and $2.6 billion in liquidity. Adjusted net debt of $740 million at 30 June is down 13% year-on-year and includes the cash received from Kibali of $549 million, partly offset by the $365 million payment made for the Corvus acquisition.

The adjusted net debt to adjusted EBITDA ratio was 0.41x at the end of June 2022. Our leverage target remains below the 1x target through the cycle. Our strong liquidity provides us with good flexibility. We have around $1.3 billion in cash and a further available $1.3 billion on our revolving credit facility. In June, we replaced the $1.4 billion syndicated facility agreement with a new agreement on the same terms, except for the inclusion of 2 1-year extension options at the end of years 1 and 2, 1 less banking partner and an update to the interest rate benchmark.

From a credit ratings perspective, Moody's affirmed in April, our Baa3 investment-grade rating and lifted the outlook to stable from negative, in line with the SA sovereign rating. In February, Fitch also confirmed our BBB- investment-grade credit with a stable outlook. S&P affirmed in April, our BB+ sub-investment-grade rating and changed the outlook to stable.

Our cash conversion received a boost from the $549 million received from Kibali in the first half of 2022. The cash received effectively clears our backlog lockup of $499 million that existed at the December 2021 year-end. Our remaining share of the outstanding cash balance at the end of June was $41 million. It is expected that routine cash distributions will follow on a quarterly basis. As a result, the outstanding balances owed to the group in the form of cash, VAT receivables and export duties came down by 51% during the first half of 2022 to $431 million. VAT lockups at Geita and Kibali and export duty receivables at CVSA remain a challenge and focus area.

In Tanzania, the net VAT receivable increased during the first half of 2022 by $6 million to $148 million. $22 million of that claims were verified and processed by the Tanzanian revenue authorities, which was set off against corporation tax payable. New claims of $28 million were submitted during the same period. We continue to engage with the Tanzanian authorities regarding the mechanism to recover the historical VAT accumulated between July 2017 and end June 2020 of $118 million, net of discounting provisions. In the DRC, our share of recoverable VAT and field duties decreased by $2 million to $77 million, net of discounting provisions at the end of June 2022. In Argentina, the export duty receivable decreased by $4 million during the same period.

Cerro Vanguardia had a cash balance equivalent of $149 million at the end of June. These funds are available to settle previously declared offshore dividends. Application to transfer a portion of these funds has been made to the Central Bank. The total cash balance continues to be invested at attractive rates of return locally and remains fully available for Cerro Vanguardia's operational requirements.

Guidance. We are on track to achieve full year guidance for 2022 as stabilized operating trend continues and sequential quarterly improvements in production and costs are expected for the remainder of the year. In line with past trends, production this year is expected to be second half weighted 55% with Obuasi expected to continue to ramp up, marginal improvements anticipated at Iduapriem, Siguiri and Geita and steady performance is expected at the remainder of the assets. Production for the full year is expected to end in the top half of guidance.

Total cash cost guidance remains unchanged between $925 per ounce and $1,015 per ounce. Although we anticipate that current inflationary pressures are catered for in the current guidance range, we remain aware of the ongoing cost pressure created by this inflationary environment and anticipate that total cash cost will end in the top end of guidance by year-end. All-in sustaining costs are guided to between $1,295 per ounce and $1,425 per ounce and expected to end in the top half of this guided range with elevated sustaining capital continuing to underpin our reinvestment strategy. Total CapEx is guided at $1.05 billion to $1.15 billion. And once again, we remain on track to end the year within guided levels.

Our guidance continues to exclude any incremental impacts on production costs related to the COVID-19 pandemic, which have been muted so far this year. Argentina was marginally impacted early in the year and is almost back to normalized underground capacity and production, while in Western Australia remains a high risk from absenteeism and shift losses, and we will continue to monitor that.

I will hand over back to Alberto to conclude.

Thank you, Ian. So we made a good start to the year in order to see operating improvements and remain focused on continuing to make improvements and delivering more consistent results in line with the target we've set out. Our guidance is intact in a world of 10% inflation and the full asset potential is working as intended, with it on track. We have the right people in the right place and the right organizational structure. We are focused on improving operating and capital efficiencies.

Our world-class exploration team continues to add value through the drill bit across our properties. Our technical team continues to uncover value in Nevada as they work to bring the resource into a consolidated reserve. So why AngloGold Ashanti? We have a high-quality asset project volume, a self-generated project pipeline, good people and an excellent balance sheet. Those are the critical foundation blocks for the long-term success of any mining company.

We are doing what we promise. We're taking meaningful steps to achieve our full potential. Rates are improving, so is cash conversion. We're embedding a more focused operating culture. We're taking clear steps to focus our capital and efforts on the right assets. We're showing leadership in ESG, particularly environment. We're on a clear path to take AngloGold Ashanti and its valuation back to its place on the top gold mining companies where it belongs.

Thank you, and for this, I open to questions.

(Operator Instructions) The first question comes from Jared Hoover from RMB Morgan Stanley.

Alberto and team, and thanks for the call. A few questions from my side, please. I thought I would start with your grade performance. I mean on the face of it, it's up 10% year-on-year and your underground grades that is. And I mean, that does show that the reinvestment across the portfolio is working. But I just wanted to get some color as to if there were any assets in the portfolio that you were disappointed with in this period and potentially didn't hit your planned grades. And my thinking is that, yes, the grades are up 10% year-on-year, but the base is very, very soft because this time last year, the company had a very, very soft operational performance. So maybe that 10% year-on-year grades should have actually been a bit higher. I'll leave it there for now, and then I'll follow up with 2 more.

If you look at the last 4 years, our grade have been declining. And so it wasn't only last year. It's been quite consistent. And -- this is, in the end, it's about how much you invest and the right investment into your assets? So we do see this as a reversion of the trend and not as a one-off. And yes, I think a 10% increase in underground grade is -- for those of us who've been in operations, it's not a minor achievement.

Okay. Okay. So I guess you weren't -- so I guess the Australian operations weren't necessarily -- you're not too worried about the labor movement and that impacting material movement, and therefore, grade because, I mean, once this reverses, it's really just kind of transitory rather than structural?

No. Look, what we are concerned about in the Australian operations is that there has been labor shortages. We've said it in all these calls. They have been impacted by COVID. And so that meant that the team on the ground had to prioritize production over development. So we have fallen behind on development, but -- for the production that you will see in 2024. So we need to make up for that. And that's what we have said before, but this is just something related to not the orebody or not investment. It was just the impact of how they managed COVID and the impact of how they managed immigration.

Okay. Then I guess sticking with Australia and maybe just moving to the full asset potential program. I guess my question is really -- I'm just trying to contextualize the execution risk in some of these initiatives that you've highlighted in the release because I mean on paper, it looks pretty good. You've given us some NPV impacts and where recoveries in development could potentially get to. But my understanding is that ramping up the underground tonnes from Sunrise Dam is not something that's new. It was always probably in Sunrise plan. It just hasn't happened for whatever reason. So I guess my question is, has it not happened historically because it's been too difficult to do? Or is it the case now that you have a healthy balance sheet and new management and more focused teams that you can actually get it done? So really just some commentary around execution risk on the FAP.

Yes. Look, I will ask my colleagues to go deeper into this. But it is the former understanding is that even though this was contemplated as an option for a long time, the actual technical path to have a plan like we have, which is very advanced. We are moving now into feasibility study. So the actual being able to get the plan of where we are today demanded very advanced analytics. It is not as simple as saying, oh, we moved from open pit to -- from underground to open pit. And I've said it in other calls, but that is always a very difficult move. And I can say from a previous company I've had Olympic Dam, that's always been the issue. They have never been able to find a way to go from underground to open pit. It's, in general, a very difficult thing to do.

They have found a way, and I -- probably I'll ask here Ludwig to tell us a bit more of why is it difficult. And then your confidence in or we have said with a lot of confidence that we're going to be able to add 1 million ounces of reserves by the end of the year, but just talk about that, too.

So Jared, so obviously, we're doing the work now, and this will continue into next year on the feasibility. Like Alberto said, it's quite complex. It requires the knowledge and the resources from technical people is we're using from the outside as well to basically guide us through this process, how to do that, not too sterilized. We reach our underground production by doing this. So that's what we -- the work we're doing at this moment. And yes, at this moment, it looks good. But there's still a lot of work to be done in this regard.

In terms of your question around the execution of getting the underground production up, I think what the difference is this time that we've actually shown again the pathway. Through that, there are experts that help us how we can do it. So now it's actually very clear for the operators on the ground. And we've got a tracking system that actually, I think, is very good, which we can actually see every KPI and every initiative how to execute that. So I think that's a difference only for us.

Very last question for me, please, on Nevada. I mean this asset looks like it's shaping up quite nicely. And you did mention now that you see it coming into the production by 2025. So I guess my question is you put out aspirational targets to be somewhere between 3 million and 4 million ounces, but importantly, at a cash cost between $800 to $900 an ounce. But is it critical for Corvus to come in to hit those aspirational targets? Or can you actually hit those targets from the existing portfolio as is with the full asset potential improving those assets? I'll leave it there.

No, this is at this stage, and we've now for a time being, optimizing the whole province. So we're talking about the combined -- the assets we had in exploration and the assets that come from Corvus. And it's now run as a single integrated sort of study. Now how it works and we've talked about it in sequential, is that you actually start what we have most advanced and actually Corvus had most advanced was North Wolf Rock. So we will be finishing this year the feasibility study. We are already pursuing their environmental license. And that's the first one that goes into operation. And that will be by 2025.

But we -- at this stage, we think that we will be hitting the 300,000-ounce threshold by the end of the decade, on '25, we're a 100, and then you start bringing others and you start ramping up production. But what is more important is that at this stage, we have identified the resources to be able to sustain a province for circa 20 years and around 900s in an all-in sustaining cost and the plus 300,000 ounces. And probably I'll add -- I'll end by saying, we continue to invest a lot of money in exploration there and continue to be very positively surprised that we are finding. There are things that at this stage are preliminary, so we are not discussing it. But I would say that on the risks of probability, the upside is much higher than the downside on this -- on Nevada.

The next question comes from Dominic O'Kane from JPMorgan.

2 questions, if I may. The first is with the Gramalote project now postponed and the net debt of the business now down at 0.5x, I think it's conceivable that you could be close to 0 net debt EBITDA in the next 12 to 18 months. So I just wonder if I could ask the question I've asked previously, is there any better investment to AngloGold than buying its own shares here? My second question is a bit of a technical question. The depreciation guidance you reiterated for the year implies quite a big step-up in depreciation in the second half of the year. Could you maybe just help us understand where that's going to be attributed to? And I assume it flows into 2023 as well.

Okay. I'll ask Ian to help on the depreciation. I'll start answering the Gramalote. Look, I've -- we've talked about this in the past. If we had a crystal ball of whether our gold price was going to be, I'd probably be more open to buybacks. And you can see the volatility of this. The gold price lost nearly $100 in a few weeks, then it went up again. Probably it's going to soften a bit again. So how I see things is the next 2 or 3 years are critical and are unusually high years of CapEx, especially on sustaining CapEx, the TCFs and catch-up CapEx that we absolutely need to do.

And we just -- we've done different modelings for the finance team, and we just want to make sure that in every scenario of (inaudible), let's say, 98% of these scenarios that we contemplate, we can continue with the program that will, in the end lead to regaining cost competitiveness with our peers. So at this stage, I -- we are not contemplating buybacks, and we think that the most prudent is to continue the policy -- the dividend policy that we announced. Let me probably end with something. And I was in the home, but I got a nice e-mail because this was discussed 3 months ago. The e-mail was from one of our large shareholders who said, congratulations for not doing the buyback. You would have been killed because obviously, the softening of the gold in the past months have been significant.

So it's just you never know how these things work, and -- but I'm not close to it. If in 18, 12 months, we're generating cash and there's no better use of the resources, and we have confidence in the future, we can talk again. But at this stage, I just want to make sure that under every scenario that we can think of we have the resources to be able to regain that cost competitiveness that we lost. So Ian on depreciation.

Yes. On the depreciation sides, we do expect a step-up in the second half of the year on that charge. The Obuasi Phase 3 development comes into commercial production and amortization of that will start. That's a big step up. And then obviously, the ongoing TSF spend in Brazil, as that comes through, creates further depreciation and heightened levels of depreciation in the second half to bank reasons.

Okay. I will not ask you next quarter about the buyback.

The next question comes from Leroy Mnguni from HSBC.

My question is for Ian. Your Brent assumptions have increased by about 30% or so from the last time you gave us guidance. And yet your all-in sustaining cost guidance sort of remains unchanged. I know you're saying you're probably now coming closer to the top end of the range. But are there any other items that maybe offset that such that the impact of the oil is not as pronounced? And then if you could maybe please remind us of the sensitivity of your costs with the cash costs or all-in sustaining costs of the changes in the oil price, please?

So the Brent price, as I've mentioned in my script, the oil price constitute only 12% of our total cash cost. So a 30% increase on that base was -- with what was in our guidance originally assumed at $80 per barrel. You need to take that as a 30% increase on 12% of your total input costs. So we have catered in our guided ranges for that level of step-up, but that's why we're comfortable to maintain that guided range there.

On the sensitivities, a change -- sorry, Mark, can you just help here with -- yes. So for a $10 change, every $10 change in the oil price at $10 per barrel gives you an ASIC impact of about $9 per ounce. Gives you a sense of what the sensitivity is there.

Well, let me probably add something. So there is no doubt that the biggest impact on the inflation that we felt in the first half was diesel by far. It was, I think, close to 40% of the whole impact that we felt was at. That is pretty bad, but there is some -- that's going to be good for '23 because in '23, in spite of, I think we will still be having 7% inflation. Currently, as things stand, obviously, we should see a decline in -- we are seeing in the futures versus today. Let's say, Brent at 90s versus 107, which has been the average that we will pay this year. So that should help something balance up any still remaining inflationary pressures for 2023.

The cost of inflation will be in the second half. And what we've said is that we have catered in our guidance for a 13%, 13% inflation in the second half and that even with that inflation and with the expected increase in production, basically, we have like a 45-55 split in production between first half and second half. So if you combine those 2 and we're able to deliver and inflation is around 13%, we should be still within guidance in the cash cost. We are much more comfortable and highly confident that we will be within guidance, way within guidance in all-in sustaining costs and that we will be in the high end of the guidance in production.

The next question comes from Adrian Hammond from SBG Securities.

I have 3 questions. Alberto, firstly, you recently acquired Corvus. And do we see further M&A as part of your overall strategy for the group? Secondly, project delays due to ESG is becoming a increasing headwind and a trend. I think amongst your peers, yourselves have recently with Colombia -- you've done a project, some in Chile and also in Nevada. So I guess my question is, do you foresee any potential stumbling blocks for a 2025 start for Corvus given this surge in the pushback from environmental authorities?

Adrian, let me start with at the high end of M&A. And what I've said is, at this stage, and the life of AngloGold, what can at the most value for AngloGold is internally. It's doing the basics right. It's recovering that cost competitors. It's doing the full asset potential. Now as always, there are exceptions to the rule. And so Corvus was an exception because the synergies of Corvus with the existing exploration ground that we have were enormous. What does it almost mean? Basically, it means that we could basically share and use the same infrastructure that we were going to use for the land of exploration, but now for the combined exploration ground and Corvus acquisition.

So if we extrapolate into the future, are there any bolt-ons to places where there are evident synergies. If there are -- yes, we would look at them. And there's a whole team under Terry. It looks up opportunity for bolt-ons. What I can tell you is that we are not looking and we don't foresee the shorter term anything of significant (inaudible) scale because of what I said before.

Regarding project delays and ESG, the answer is we are not seeing or have not seen anything related to that. The delays in Quebradona were not really related to ESG requirements. They were related to a probably misunderstanding of what the environmental authorities was demanding that we prove and the type of information that we delivered on the project to basically talk of those to basically prove that the hydrological impact of the project would only limit itself to one community and not to 2 communities. So basically, what we did was we proved through modeling that there was a separation and that they were not connected and the view of the authorities. And technically, they could be right.

They say, well, we see your models, but you need to prove it with empirical information. So what we are now doing is proceeding to put piezometer on the ground. We've drilled plenty of homes and put this piezometers on the ground. And then we need to spend 12 months to recollect the information of water that will allow us -- to hydrology that will allow us to prove what we believe and instead that municipalities are not connected.

We believe that, that will -- that's the biggest stumbling block in the discussions with and with the environmental agency. That's what we're doing now. But we have not seen any delays on projects. So going to Nevada, there's a good relationship with the environmental agencies. We've actually received already a permit, the Eagle permit that we were working on and we received that permit. We are now working on something that is well known for the team over there. We're working with the Bureau of Land Management that reports into the Ministry of the Interior. It's a thorough but well-known process.

There are several companies that have been before us that have followed that process and have been able to get the environmental license. At this stage, we have no evidence to tell us that we should have any, let's say, significant delays in that process.

Can I ask the tenements you have in Nevada relating to Corvus and Silicon. Do they fall on private states or federal land or all the above?

Federal. They fall under federal jurisdiction. Let me put this way.

Thanks, Adrian. I'm going to ask a couple of questions now from the webcast to the team in the room. And I'll start off with Arnold Van Graan from Nedbank who asked if we've had any interest in assets in CdS. And are we confident that we'd be able to sell this asset? And the third part of the question is, are we still happy with CVSA.

So on CdS, we've just started what we called a strategic review. You can understand that we -- when we have something, we will let you know, but we really don't comment on ongoing sort of processes like this. In CVSA, what I've said is that we have generated profits in the last 2 years that would have surpassed the value that we have received for that asset or the value that we're expecting, where we were trying to sell it. So actually, right now, we are happy owners of that asset. It's what, it's 170,000 ounces. They did -- as I've said, they were one of the ones who did much better in this half year versus the previous half year.

The GM and Luis, who used to run it, who is the -- he is the Senior VP in charge of the whole Latin America. They understand that asset. They run it well. And so it belongs in the portfolio.

Great. Thanks, Alberto. Next is from Sandile Magagula from Umthombo Wealth. He says, "Can I expect interim dividends to be sustained in the coming reporting periods?"

Yes. So what you can expect is that we will apply the policy that was approved of 20% of the free cash flow, excluding growth capital. We will be abiding by that policy in the foreseeable future.

The next one also from Sandile. I think you've answered, but it's asked in a different way. Would you consider M&A opportunities given the strong balance sheet that you have at the moment?

Yes. The answer is as you said, we, at this stage, the biggest value for our shareholders is internally, and that's where we are focused. There's always an exceptional bolt-ons, but nothing that will be significant.

All right. And then the last question, I think, before we sign off is what levers are you looking to pull in order to maintain these high cash conversion rates that we're seeing at last.

Look, there's no particular levers. We have -- we are in permanent communication with our JV partner Barrick, and that's something that we track. It's a very significant amount of money that we receive periodically. So far, we're quite happy with -- we're happy with the progress of the last 6 months. We're quite happy with having brought that what was of course $500 million to 0. So that's a quite good news. I think it's also positive even though with small baby steps but in Tanzania, it's mildly smaller sort of lockdowns. Even in Argentina, it's very small, but still smaller. It's not growing.

In Tanzania, we are -- always there's a team always in discussions with the government, and we are confident that at some point in the future, we'll be able to have a pathway towards that. In Argentina, it's more about the macro situation. It's not a particular mining issue. All companies are suffering that. At some point, Argentina is going to be able to solve the issue that they have with black exchange rate that is 3x the official exchange rate, and that will begin to solve issues. So the important thing is that in every place we have a lockup, our money is secure. We're in control of the U.S. dollars. There's no like risk that our -- U.S. dollars market are not in our hands.

Good. Thanks, Alberto. I think that's it. Maybe just a closing remark before we'd sign off.

I thought we were signing off. I'll -- the closing remarks. I'll tell the closing remarks. I had a -- we had a townhouse with all of the employees around the world. And I -- there's sometimes you stop and say thank you. I think the team is performing very well. I think the assets, there's a lot of good work done. Change is not easy, and there's been a lot of change in this company in the past year. And it's just pleasing to see everything fitting together from the team, the executive committee to the teams at the assets to the operating model working together. And then when you see that the production is as planned, that our guidance is as planned, that we're able to offset the highest inflation the world has seen in 40 years, and we were able to offset it 40% of that. I -- sometimes you can step back a little bit and say, well, yes, I'm pleased. I'm particularly very proud of our 30,000 employees.

Thanks, everyone. See you next quarter.

Thank you very much. Ladies and gentlemen, that does conclude today's teleconference. Thank you for joining us. You may now disconnect your lines.