DRDGOLD Ltd (DRD) 2022 Q4 法說會逐字稿

Good morning, everybody, and thank you very much for joining us for our results presentation for the year ended 30th June 2022. I'm Niel Pretorius; and joining me is Riaan Davel, who is our Chief Financial Officer; and Jaco Schoeman, who is the Chief Operating Officer.

Now I would like to provide a little bit of context before we kick off. Just in terms of the year, it's certainly been a year like no other. We're almost at a point where we -- with a sigh of relief saying, we made it through another winter. Just in terms of local context, the beginning of the year was deeply unsettling with some of the riots that we saw in KwaZulu-Natal threatening to spill over into Gauteng. We also saw how vulnerable we were in terms of just logistics into Gauteng from the coast with the collapse of Transnet and our overreliance on road transportation.

Globally, what we're witnessing is more and more uncertainty against the backdrop of the war in Ukraine and Russia, an increase in international tension. We're seeing economic uncertainty, inflation going rampant. America for the first time in decades seeing double-digit inflation and the accompanying increase in interest rates.

Closer to home, we've had weather like we've never seen before. The amount of rain that we experienced especially in east where it's just been different from anything else we'd ever experienced in the past. And we had our hands full in terms of clean and warty -- the clean and dirty water separation, rather. Again, we have these -- the blackouts, the rolling blackouts, Eskom really buckling under the strain of delivering into the energy requirements of the nation.

And then, of course, coming out of COVID, the impact that it's had on our economy, hardship experienced in many of the communities where we operate, definitely saw an increase in the -- let's call it, the level of anger, the intensity of social discontent and worryingly, changes in the patterns of organized crime and violent crime in particular. We definitely saw that crimes that in the past were simply just theft that now become armed robbery, relating to cable theft, et cetera, et cetera.

So all of these things were certainly dynamics that were new, dynamics that we had to deal with and we had to navigate our way through that. And worryingly seeing the rise of, let's call them, these crime enclaves where there's almost a dilution of state sovereignty with the police failing to go in, and from where these criminal attacks are launched. So very different approach in terms of security and keeping our staff safe and keeping our assets safe.

So those were some of the things that I think we experienced, that informed our thinking, that's impacting our costs and that we're also having to plan for going forward. And that is the backdrop against which we're also sharing these results with you.

Coming out of that and into the new year, needless to say that we are quite pleased with how the year came -- panned out for us in terms of particularly production. And you'll see some of the cost trends as well. So getting straight into the highlights for the year, the key features. So that both in terms of revenue and in terms of production, things were pretty flat. And that's notwithstanding the fact that there was a slight decrease in the gold price. Where we saw changes coming through against the backdrop of what I just described to you were the costs that were up on a number of scores.

Now they're the typical dynamics that we deal with on an annual basis that have become predictable around Eskom prices, price increases in electricity and so forth. But then there were also some dynamics particular to this particular year when we relied more on the mechanical movement of material as a consequence of some of the volume throughput challenges that we faced. And those being related to both the weather and, in certain instances, also the supply of electricity into areas or units where we rely upon municipalities, on the local councils as opposed to Eskom, where we just have curtailment correction.

So those impacted on the bottom line, impacted our costs. And as a consequence, you can see that both our operating profit, although still very healthy at ZAR 1.7 billion for the year and headline earnings, also still quite healthy at ZAR 1.1 billion. Both of those down by just over 20%.

We still managed to pay our due to make our contribution towards the fiscus with a very healthy contribution, total contribution of just over ZAR 400 million in terms of income tax and pay as you earn. And we're looking forward to seeing the value delivery that we as citizens in this country are entitled to see going forward. We will be pleasantly surprised once that starts happening.

And then, of course, this is also the 15th year of paying a dividend and a healthy one at that of around 6%. It's a little down on last year but a healthy dividend nonetheless within the context of what's been happening in the industry and also globally.

You can see that Women in Mining remained virtually unchanged at 23%. It's an important number for us, one of our key goals that we set in terms of the transformation of our business. Socio-economic spend, which has become very important, even more so against the backdrop of rising discontent, ZAR 52.9 million, and I'll elaborate a little bit more on that during the ESG part.

And then there's also been a slight increase at one or two of the areas where we measure dust. When we get into the bottom of this, we don't think more or less from our own operations. I think it might be related to the infrastructure and also some construction in the area, but it's been monitored, it's been picked up and, therefore, it's also being looked into.

But that's pretty much the year's performance in a nutshell. Getting into a little bit more of the detail in terms of operating trends, there you could see the story. Let's go first to the Ergo operating trends. You could see the story around volume throughput especially in the second half of the year. And a lot of that, the 10.7 million tons as opposed to for the comparative period, close to 12 million, a lot of that related to rough weather and also some of the electricity interruptions that we had.

A lot of material was moved mechanically, and that impacted also the cost, but at least we got the gold, and I think that's where the trade-off comes in. And it's something that we also encourage to think dynamically about achieving throughput and to think dynamically about getting the gold through the plot because of the very high fixed cost component of our cost profile.

Now of course, it's the stuff that you mechanically are sort of at the lower regions of our recovery sites. It's flow cleanup mostly. And then typically, we also find slightly higher grades. So you can see that the yield per ton was also quite a bit up compared to comparative period last year, bumping against the 0.2 gram a ton. This is an ongoing process. Our focus is not just volume throughput but also optimizing the value of every single ton, and that's why we're reporting this on a per ton basis.

Production kilos-wise up from the previous half year compared to half year and relatively flat compared to the first half of the year. So all in all, looking at where Ergo operates, what it had to deal with in terms of just getting the volumes through, the plant was stable, and that's really important.

Operations were well managed, well contained. And I think testimony to a lot of the work that's been done in the past in managing these various contingencies that we've got to deal with, the risk factors that I referred to earlier in terms of volume throughput, weather, rain and electricity.

Moving on to Far West Gold, its operating trends. Pretty flat, testimony to our operation that does not have as many moving parts, but also that's being looked at very carefully with a keen eye. And that was brought to a level of stability and being maintained at that level.

So in terms of volume throughput, you can see very, very flat. And this is an operation also where obviously we're not running at full capacity. We're running at the capacity which, firstly, is required for responsible management of our ore body; and secondly, also the rate at which we can deposit on to our tailings deposition facility. So it's all about making sure that we don't put stress on our tailings staff and, hence, 3 million tons per quarter -- or rather half year and maintaining the same in terms of production on kilos.

Slightly higher head grades this year and being able to take advantage of that by actually getting the gold out. And remember that this was the first full year that we've had the benefit of the copper elution plant. And a part of the year, we also had the benefit of the new mills. And those mills will be further upgraded this year to become closed-circuit to introducing an even better fraction of material into the CIL tanks for better cyanidation and absorption.

In terms of group operating trends, again on a combined basis, you can see the challenges right at the end of the year from 14.4 million tons to 13.7 million tons. But made up to an extent by slightly higher head grades and improvements on yield, and then production relatively flat. So out of the 4 periods that we're reporting here -- reflecting here, see that first half and the second half were the second and third best out of the steady set.

Riaan will take you through the financial review, and then he will hand back to me at the end to just talk a little bit broader about ESG and strategy. Thank you, Riaan.

Thank you very much, Niel. Good morning, everyone, from my perspective. I just want to echo from Niel's perspective, the intro that is given and the financial results in context of many, many challenges. He named a few and he elaborated further in the letter to shareholders, which I always encourage everyone to read in our results booklet. And also have more detail on the financial results. .

But as he mentioned, high summer rainfall, load shedding, supply pressures, cost pressures, and again, it's a testimony to operational teams at Ergo and Far West Gold Recoveries with -- notwithstanding all those challenges, making sure that the tons come through in our 24-hour a day, 7-day a week, 365-day a year operation. So as always my privilege then to present the results of a team that look at things on a per second basis and cannot keep -- cannot take your eye off anything. So this is the result of 365 days of hard work and my testimony to the teams that produce this.

So within the context that Niel provided on tons, yield and production, Ergo has had a very, very stable performance. Again, its resilience is shining through. We are -- maybe a couple of years ago, it faced maybe less challenges with more sporadic achievement. It's remarkable when I look at these results, the stability that Ergo as our flagship operation producers.

We say that first half of 2021 year was the remarkable 6 months from a gold production at gold price almost ZAR 1 million per kilogram. And it shows throughout, you'll see in the presentation it's just a remarkable 6 months. But year-on-year, Ergo's revenue down by 6%, 3% of that sitting in the average rand gold price received and 3% less in gold sold, but overall stable.

The cash operating cost that Niel alluded to, again, we can see it there, year-on-year increase in cash operating costs of close to 13%. But again, in the operating profit, which is the net result with some inventory movements, also taken into account very stable. And even the second 6 months of lower tons where the yield came through, a very, very solid operating profit performance for Ergo as well.

Going to Far West. Again, marvelous performance as Niel described it as a much simpler operation. But again, in this year, our 2 operations and the diversification that, that gives us again shone through, where there were challenges with the DP1 operation for our smelting and maybe we couldn't use that all the time. Ergo came through, also supporting Far West from a DRDGOLD point of view, so that we can keep on eluting our gold and selling it.

And Far West actually showed a year-on-year improvement in gold revenue of 7% with gold sold up 9%, 8% increase in yield, as Niel mentioned, with the Driefontein 5 dam showing higher head grades but, at the same time, as a result of that site drawing nearer to its completion.

Cash operating costs, similar cost pressures as at Ergo around key consumables, diesel, cyanide, steel, with a 12% increase year-on-year. But with that good revenue performance and increase in gold sold, the operating profit for Far West up 3% year-on-year, so a well-run operation. It was great to also visit them the other day. And what's happening there is really, really exciting for our business.

Then some other group financial trends that I want to mention. You'll see throughout this that marvelous 6-month period of very high gold price. Ergo, high yield, high gold production throughout the results. But if you look at this year from an operating margin point of view, well managed, although it's down 20% year-on-year with the gold price down 3% and then cost pressures coming through.

So if you look at the 32.6%, the second 6 months of the year, I believe that gross will manage very well and helped by a slightly higher gold price than in the first 6 months and, obviously, the yield for Ergo and then for Far West assisting to have a very stable operating margin overall for the year.

All-in sustaining cost margin, obviously, an impact there where we take cash operating cost but we add sustaining capital expenditure. This one is always a positive picture, although it has declined. The 16% in the last 6 months of this financial year is also decimated to more sustaining CapEx. Our sustaining CapEx for the group is up 41% year-on-year.

And as we've indicated to the market, we will not hold back to make sure our business is resilient. We have options, and we'll keep on investing to make sure that we can mine our ore body for as long as possible. So although the all-in sustaining cost margin is down, it also has a very positive picture that we'll keep on investing capital into our business.

Free cash flow number that we're very proud of, obviously, lower than the ZAR 1.1 billion that we generated last year, it's ZAR 871.6 million. It's a number that we closely manage and that we believe is the heartbeat of any business is the cash that you generate because you can do a lot with it, as Niel alluded to it, by tax.

And we continue to hope that, that value is seen through the communities and constituencies that's supported by government, but also through employees and then, as Niel alluded to it, our final dividend of ZAR 0.40 and to return -- keep on returning capital to shareholders, bringing our total dividend for the year, including our interim of ZAR 0.20 that we declared in February to ZAR 0.60.

And then headline earnings, again, seeing that marvelous 6-month period. But specifically, that ZAR 0.727 in the last 6 months is something that we're very proud of under tough circumstances. And as Niel mentioned, overall headline earnings per share down 22% year-on-year and very much in line with the decrease in our operating profit for the group.

Then to the statement of profit and loss, the income statement, and just quickly running through the various line items. So revenue down 3% year-on-year, mostly sitting in gold price. Cost of sales overall up 10%, some positive gold in inventory or process movements there, getting to our gross profit from operating activities down 27% year-on-year.

Then a line item that I was going to highlight, and again, it's showing to -- for me to a business well run, also from a governance point of view, most of that ZAR 91.3 million in other income is as a result of a business interruption insurance claim that we instituted as a result of business interruption experienced with the odd lockdown from the end of March 2020.

So it took a long time to finalize, was a complex claim. But again, we had that in place and we could go to insurers and through that insurance in place, got a covered plan, which, again, as I said, is a testimony to a business well run or from a governance point of view, all the right insurances in place.

Administration and other costs from a share-based payment point of view, where we switched to from a cash-based payment to an equity settle as part of that move and then increase -- slight increase in short-term incentive benefits, increase in exploration and project costs and also IT costs and, again, testimony, as we've indicated to the market in our search for opportunities, we will not stop investing in our 2 operations that we have. But we are looking for other opportunities for growth in various spots. And that's a positive indicator for me as well.

Finance income, stable year-on-year. Finance expense is mostly unwinding of the decommissioning and restoration liabilities. And then income tax, as Niel alluded to, that number, both the result of current and deferred tax and profit then for the year, again, very similar to the operating profit line down 22%, but still more than ZAR 1.1 billion, which we're really proud of.

Then the statement of financial position with the balance sheet. And again, for me, this is a very pleasant reading, and I hope for -- even for non-accountants that it will be. Property, plant and equipment, increased CapEx. You can see in that movement, assets above ZAR 3 billion. Noncurrent investments and other assets, the majority of that balance, more than ZAR 700 million sitting in rehabilitation and other funds.

And again, what we've indicated to the market, if you look at the size of our -- the present value of our rehabilitation liability, that money set aside is at the present value level more than what is required. It is almost a unique position, I believe, in the mining industry. And some -- a position that we're very proud of and that we've built up over many years.

And a consequence of the fact that we take money to rehabilitate on a concurrent basis, and you'll see that every year in our results. We don't wait for rehabilitation. If there's a lift on a dam, for example at the Brakpan/Withok facility, or even at Driefontein 4, we do that rehabilitation as it happens, so we don't wait. Obviously, that reduces any dust exposure. And then there's also in that line, some other investments at fair value, the biggest one being our investment in Rand Refinery.

Cash and cash equivalents of ZAR 2.5 billion will annualize in the cash flow statement. And in other current assets, a slight increase in inventories year-on-year. Then a wide set of pleasant reading, so equity increases. And I know everyone understands that, that normally happens when your assets grow more than your liabilities, which is an excellent position.

Provision for environmental rehabilitation, again, very well managed. It's also a consequence of changes in the life of mine for both Ergo and Far West. Example, for Ergo, we're looking at the possibility and it has been included as a mineral reserve of mining Driefontein. And that obviously has an impact on the manner of settlement and also on the timing to measure the present value of that liability.

Deferred tax, yes, as we invest in our business, there is the possibility always that we'll generate taxable income in the future, of which we will pay more tax so that increase in deferred tax liability. And then current liability slightly increase in trade and other payables year-on-year. So an extremely healthy 4.9 current ratio that we're also maintaining.

And then cash flow statement, just to end off before I hand back to Niel. Very well managed year-on-year, so close to net cash from operating activities of ZAR 1.5 billion. Interest received and dividends, also from Rand Refinery in that line of [ZAR 152 million]. And then income tax that Niel mentioned, slightly lower than the prior year, obviously responding to slightly lower profitability in our business.

And then a number that I want to emphasize, that we've talked to, now both sustaining and also going forward in growth capital. So the ZAR 584.1 million that we spent, this has increased 48% year-on-year. And we came close to the ZAR 600 million that we guide to market. And we're really proud to manage a number of projects, and that will continue for our business in the foreseeable future, and that's very exciting.

And then the dividend that you see there, the ZAR 513 million, is obviously last year's final dividend. So the 2021 final dividend of ZAR 0.40 and the interim dividend in February declared that we paid in March of ZAR 0.20. So the total of those shows the ZAR 513 million outflow.

And then year-on-year, in a marvelous position, a 16% increase in cash and cash equivalents, which again puts our business in a wonderful position to continue on the sustaining CapEx and growth CapEx phase and also keep on looking for other opportunities to increase the growth in our business.

On that, I'm going to hand over back to Niel for business updates.

Thanks, Riaan. So let me just move on to the next slide and talk a little bit broadly, more broadly about our ESG and strategy going forward.

All right. There we go. That's obviously share price performance. Share price trending by standard of the industry, down quite a lot from where we were a year ago. And then perhaps in anticipation of an economic recovery and a lowering of the gold price, whether that's going to happen, it's anybody's guess. But we do seem to offer quite an interesting buying opportunity at this moment in terms of share price performance.

Right. Then moving on to ESG, the theme of the day. So what is ESG? ESG is a measure for sustainable development. And those of you who've been following our story for the last decade or so would know that sustainable development is deeply embedded in our strategic thinking. Nothing we do without considering the impact that what we intend doing as on the different capital stocks that make up the composite of sustainable development.

And as a consequence, the story that we have to tell is one based on actual fact and one which I believe is different in the sense that it presents a story or a picture of integrated value. And all that means really is that value in the one also contributes to value in the other. It is not independent. These aren't things that run in silos or in isolated -- within a sort of an isolated band.

What we do environmentally impacts on the financial bottom line. And what we do in terms of our operating performance impacts environmentally. I'm quite sure whether this slide is 100% showing what it should be showing, but I'm sure we'll pick up as we go along.

But let me reflect very briefly on some of the parameters here. So a decrease in externally sourced potable water, it's one of our key risks that we identified 100 years ago. And both from an operational perspective as well as an environmental perspective, we committed to reducing potable water usage by at least 10% every year. And we've consistently done so -- on aggregate we've done so over that period. It's a target that we raise (inaudible). So I think last year it increased marginally with the addition of circuitry in (inaudible).

But it's also basis of an integrated closed-circuit of water that stays in circuit at Ergo. All the water that we introduced into that circuit, most of it from rain water resources to obtain -- retain in the circuit itself. And the only water that leaves that circuit is through evaporation. It gets used over and over and over again.

The rehabilitation spend is also something that I think is deeply embedded in our spending profile. And as a consequence of that, a lot of the work that we've done particularly on the planting and vegetation of our tailings steps is nearing the tail end. So whereas 10 years ago, 12 years ago, it drove from (inaudible) into the South Johannesburg through the (inaudible) and it was a windy day to become dust.

If you lived there, you'd be watching your curtains once or twice or three times a month, for those of us it's something of the past. All intents and purpose, the dust on those facilities being contained. And the same applies to all of the other tailings dams that we have. And I really encourage or I invite you, in fact, to come have a look at the state that our permanent tailing storage facilities are in and compare that to some of the others that you might find in the industry, just in terms of planting and vegetation.

I believe that this has truly become work that establishes the benchmark of what good governance environmentally speaking is all about. It comes to the management archetypes and no coincidental. And see what the numbers are there in terms of additional vegetation. And as I said, we're now nearing the tail end of vegetation. Most of the slopes that are in the teeth of the wind have been clouded, have been vegetated, and hence, you see that very significant production in visible dust, settled dust in those areas where those ends are situated.

And just in terms of tailings management, it's become the topic of the day, and one of the things that we think we can offer as an additional service beyond the boundaries of our own business is a complete tailings management solution, combined with concurrent rehabilitation. So apply some capital and the remaining revenue-generating capacity of your waste -- of your mine waste, apply then -- combined it and apply it towards closure and also responsible containment of your environmental footprint.

But in order to do that, you obviously need to be aligned with contemporary thinking in terms of standards of management, quality of management, of tailings dam because that's where our skill set lies. We run some of the largest upstream tailings dams in the industry, not just locally but, I suppose also, I imagine also, internationally.

And although there's a big move away from upstream deposition, where the one benches on top of the next, that sort of moves inward towards the top as opposed to outward. Although the settlement environment is away from that, the reality is that there are many of those out there, and they need to be managed responsibly, they need to be managed safely and in a way that limits their impact on the environment.

And that's where we we're honing our skills. That's where our focus clearly lies in becoming the benchmark in the industry on that. We're maintaining the highest standards. Not necessarily 100% aligned with some of the generic codes that we see at the moment but, without a doubt, achieving the outcomes that are being envisaged in those codes.

If you just read the bottom, is where I'm pointing at my screen here, and you can't see that, but if you read the bottom part here, I hope you can see my cursor, of the stuff that's happening there in terms of tailings management, then this is governance of a very good nature, of a very high standard. The independent Tailings Performance Management System as we have with international authorities, independent international authorities have seats on that panel, and they hold up a mirror to what we do. And they point out the things that they believe we ought to be doing in order to get closer and closer to the status that we're trying to achieve.

What I can tell, some of those standards, for example, (inaudible), which is an important one, the one that if you neglected brings you closest to an overtopping and a failure of tailings. We're way ahead of what the international standard is, even in terms of our own and given in terms of the (inaudible) that we apply.

But this is being monitored independently. And there's a direct line from this into the Board. So there's no sugarcoating of information. What they see is what the Board sees. One that I'm particularly excited about because I do believe that technology plays such an important role in managing an industry that is this complex and of this scale, and that is the use of InSAR imagery. This is a satellite imagery that really picks up the slightest movement in just the shape, height, width of a tailings facility.

So if there's any movement of a sidewall, then this gets picked up and it's brought to your attention. Then you know that there's something happening on levee of that dam that you need to be aware of. And more often than not, it would be involving phreatic surface, it'd be related to the management of water.

And then there's the quarterly drone surveillance as well to make sure that all of our facilities are working, all the drains are draining, that you don't have washouts, that you don't have open wet holes appearing, that could compromise the safety of that dam. So something that we take a very, very close look at it and try to maintain high levels of diligence and good governance.

Then in terms of the environmental value add, our environmental governance is all about containment in terms of our tailings dams and restoration and reversal of the impact of mining on the landscape, on the environment in terms of the retreatment. So the sites that we retreat, a retreated back to a point where they can either be applied for sustainable use or restoring nature, many of the other tailings dams around the Johannesburg area are built in lower lying areas where -- are spoiled, potentially (inaudible) areas -- environmentally sensitive areas. So from a diversity perspective and from a restoration of environment perspective, these are important considerations.

So just looking at the performance for the year, new hectares vegetated 58 with the various -- with the amount of rainstorms that we had, obviously, we had some damage of vegetation as well, some of the dams and about another 25, maybe 30 hectares of damaged areas were also vegetated during the course of the year, so closer to about 80 if you add this to the number.

You can see where the electricity consumption was, slightly down, but we use what we can get us, but not really. There were some units that were running for certain parts of the year. But that's, of course, going to change quite a lot over the next year, the next 3 years, in fact. In the near term, 20 megawatts of solar power coming in, so when we use power it's going to change, when we use power off the grid, because part of this process in the first year involves installation of power storage units, where we'll be storing power during peak hour -- during off-peak hours and drawing power during the peak hours.

And it's one of our financial model that basically pays for itself if use it only for that at the current pricing profile of the utilities company of Eskom. But that's an important one that we're looking out for and will more than half the common footprint of the business.

So moving on to the next one. Our social involvement, just under ZAR 53 million spent on socio-economic development and here too focuses on sustained sustainable development or sustainable sustainable development that makes us -- what we really want to achieve here is not just something that contributes towards the quality of life of our communities while we're around but that outlives our involvement. So a little bit more about that, 2 slides are for this one, I'll talk a little bit more about that.

Importantly here also, in terms of social performance is the well-being of our own staff, creating a working environment that's both emotionally and physically safe. We have a very keen focus on gender-based violence, on creating awareness, on addressing behaviors and attitudes that lead to gender-based violence. It's something that the entire group, I believe, is excited about and we get really good cooperation in that regard, putting that (inaudible) around communities.

And then also employee support. Coming out of COVID, with the financial pressures, with the isolation, et cetera, et cetera, so many pressures being down on people, the safety situation and security situation, the commute to getting back into sort of the normal churn of things in terms of commuting, just how these costs are just escalating. What we're seeing is that staff are under pressure and staff support in that regard, providing a facility that can do that, it's actually playing an important role. And many of our staff members are making use of this. It's not stigmatized. It's in fact encouraged, a lot people actually do that.

So the next slide is slightly off the topic of social capital and into the governance aspect. The various codes and standards that we aspire to and against which we measure our performance with reference to our governance and with reference to sustainable development reporting. We believe that our programs are aligned with these and that we are trending closer to them. Responsible, accountable, impact assessment, contribution in the long-term, sustainability is part of the narrative, is part of our business language that we've founded and developed over the last decade or so.

So back to the social investment aspect and community support, I made mention of just the deeply unsettling events of July of last year when we saw rioting, destruction of property. I believe the impact on the economy was close to ZAR 55 billion. We've always believed that it's impossible to conduct business successfully in the state of anarchy, believing that you could be in an island of stability in an ocean of instability is fully. And as a consequence, there's always been a keen focus in our operation and our business on social stability and on the social well-being surrounding communities.

What we've intentionally steered and cleared off is creating platforms for self-aggrandizement, political self-aggrandizement and empowering individuals and then communities. We've really gone to community members themselves grass-root level. People who genuinely want to change their lives for the better and all they need is just a bit of a nudge, a bit of knowledge and an enabling environment.

And what we've seen here several years down the line or more than 800 -- 8,000, rather, direct participants in our BBL program, the merits of this program have really caught on. And we saw that again now in the Far West there. In the recent past, I mean there was an interruption in income for many of those communities. Then suddenly, there was a surge also in the number of individuals taking up this BBL program.

So this is not a hydroponic scheme flapping in the wind, after four, five years people sharing and thinking that they've been given a job, this is an opportunity to create your own future, to really you write your own script. And it's been taken up a number of notches. Not everybody wants to be involved in vegetable farming. So be into more future initiative, which is more about life skills, about preparing you for life, making the right decisions when you contract it with crossroads, et cetera, et cetera.

Those are just one level opportunity, levels on equipping individuals for the life outside of the informal settlement, outside of the situation that they've been situated to their entire lives, poverty, slum and hopelessness. And these we fund are programs that are gaining in credibility and also establishing a very good platform for the next phase, which is a phase based on 5 pillars of informal settlements into sustainable village, so to speak, villagers, so to speak, quality of life, an economic model, there's sports and culture, there's an aesthetics element as well of cleaning it up and making it just more aesthetically pleasing, less of a rubble keeping and more of a pleasing village, so to speak.

This is something that we're doing in collaboration with our partner of many years (inaudible) and also the University of Pretoria. 27 programs have been picked out of 41, and we believe that those will start to get a bit of traction now in the year going forward.

This is essential. These are important dynamics we believe, they're important programs, which all corporations should really involve themselves in. Some of the commentary that came out in the weeks after the riots last year is that to believe that you could protect yourself against this sort of thing by simply just increasing the height of the fence around your business or around your community, it's not going to work, it is not sustainable.

What we also saw was that it was society, it was private individuals gripping together and fighting off the riots. So it was the establishment of different social relationships, of new social partnerships, reaching out. We all have the same goal of living at a better life, and these programs, we believe, can actually be a catalyst in that regard.

So it will remain core for many, many years to come until we've achieved the outcomes that we set up. It's not a substitute for business, and it's also not us saying to that -- rather it's not a substitute for government or the state, and it's not a business saying to the state you're absorbed. You don't have to worry about your duties anymore. We're going to do it for you.

There's maybe an expectation that business will keep promises made by state. It doesn't work. What this does achieve is to equip people with knowledgeable opportunity, to improve their own lives in anticipation of better political governance and a different approach from the state, which here and there we've seen starting to happen.

Right. So moving on to the next slide, looking ahead. So in order to flow in South Africa, in order to prosper in South Africa, you do need to take a very specific approach in terms of risk and in terms of some of the business interruptions that one may experience. There's the security element. There's the water element. There's the electricity element.

We believe that those things are things that are -- that we as a nation are capable of overcoming. We believe that South Africa has many good years ahead of it, that society is just strong enough. The people of South Africa are resilient and determined to make this work. And therefore, we will continue to invest in this, and we will continue to collaborate with those with a positive energy, moving in the same direction, and they share our consensus, our view for the future.

And we are, therefore, quite happy to offer the following guidance in terms of our production. 160,000 to 180,000 ounces for the year, again, depending mostly on -- only our throughput. Cash operating cost slightly up, and that is both as a consequence of rising costs. We spoke about some of the logistics, we spoke about some of the availability. The fuel price has gone up 80% in the rest of the year. And with an economy relying mostly on road transportation following the collapse of Transnet. So you're obviously going to see that in some of your pricing but also slightly lower production. But still healthy against the gold price where it is.

And then expected CapEx of ZAR 1.4 billion, half of which roughly is strategic CapEx. And a big chuck of that in generating own power. So for Ergo, all eyes are on the solar project of the 20 megawatts, and the storage project. And then we're moving further east in terms of our mine plan, Riaan mention the Driefontein, which is also now being included as part of the future life of mine and the reserve state there.

For Far West Gold, commissioning of Driefontein #3, that's the second dam in our connection of dams. And this is going to be the catalyst also for opening up some of the other dams. Once we're in a position to up running throughput to 780,000 tons per month. When we're there too, when we're slightly East, further East and combining material from at least 2 dams to make sure that we optimize the exploitation of this resource as well that we cannot take our eyes off prematurely.

So lots to be excited about going forward. There is a realism in our organization in terms of what it is that we're up against. We're not cynical. We're not trying to be funny in how we see some of these things or try to be mean. We're really just calling it by its first name because that's really how you identify for what it is. And then while moving forward with all those who are keen to collaborate with us on building a better future for this country and its people and making sure that we don't leave value on the table. That this ore body that we've been interested with, that we deal with them responsibly and benefit primarily for our shareholders and, ultimately, also for the benefit of the remaining stakeholders.

So that's it then in terms of past 12 months and a small glimpse into what we anticipate for the 12 months going forward. Thank you very much. We will now take your questions.

So I just want to open the chat feature here, and then I should be able to see the questions. Is it just me or are there no questions? Riaan, looks like we covered everything.

I just see one. I see one from -- let me read it, from Arnold Van Graan. Niel, could you please give us a sense of how you see your spend, business CapEx evolving over the next 3 years?

Yes Certainly, Arnold. So obviously, the key focus areas for -- oh, spend in business CapEx for the next few years. So (inaudible) business is mostly focused on opening new pump stations and new tail -- new dams for retreatment. Two of those are happening in the next year. That's the number 3 dam and then also further east of that, (inaudible). So there's quite a bit of CapEx going into that. And then work to the plant itself towards the improvement of efficiencies.

And then from next year onwards, there's not a lot for this year other than the purchase consideration for the land where the RTSF is going to be bought, about ZAR 50 million set aside for that. But from next year, the next financial year onwards, you'll see some big numbers coming through in terms of the expansion of the Brakpan tailings dam and also work on expanding Far West Gold's tailings deposition facility.

The Far West Gold RTSF is going to be up and running in 2029. So we bought ourselves 5 years of interim deposition while we deal with the design specifications of the RTSF, the regional tailings facility. Construction there has to start 2 years before deposition, and depositions will start in 2029. So that gives you a bit of a profile in terms of that. That's sustained on business side.

We don't look at the investment into solar, the staying business. But I suppose it's part of that because it unlocks some of our resources by making power affordable or less expensive and more secure by having a flat cost profile for power going forward. Some of your resources convert to reserves. That extends life of mine and improves the margin. So quite a bit of that's going in there as well for the next 3 to 4 years.

Are there plans for self-generation of power at Far West Gold, similar to those that you have at Ergo? Not individually. I mean we are looking at wheeling and drawing power at other Eskom substations once the 60 megawatts is up and running. We are, however, in conversation with Sibanye-Stillwater. So if something was to happen there, it will happen in collaboration with Sibanye-Stillwater, but individually, Martin, we won't be building our own power station. Not as yet, I mean, we don't have immediate plans to build one there. We'll be generating surplus at Ergo and then pulling some of it off the grid there.

Next, please give us a clearer idea of what's happening at Ergo, roughly the legal issue and Withok. All right. So there isn't a legal issue in respect of (inaudible) that I'm aware of. We have a prospecting permit over the (inaudible) dams, but -- and it's in resource. We're not including it in reserve. There is a claim of common law ownership in respect of those dams, but we think it's opportunistic but no legal issue as yet.

And then in terms of Withok, and Withok, in order to expand the size of Withok, we are -- we have to apply for a new water usage license. Certain portions of Withok have not been in use for a period of time. And there are provisions in the legislation guiding this, that provides that if certain portions of land -- some portions of land lies out of service for a period of time, before you put it back into use, you have to bring an application for a license. So that process is up and running. We're going forward in terms of that process.

Incidentally, a part of Withok was never decommissioned, was incorporated into the Brakpan tailings dam. Whether that is something that we believe we can lie on is yet to be seen. But we're approaching it from the point of view of applying for a new license for Withok, a water usage license for Withok.

And then in terms of capital for Far West expansion, capital for Far West for the next year is about ZAR 0.25 billion. And about half of that is in terms of the #3 dam for the upgrading of the plant to doubling its size. And also for the RTSF, there's not much CapEx this year, there's certainly no CapEx this year for the doubling of the site. That will only happen in year 2 versus to year 3. And in terms of the tailings dam itself, we're just buying the land. We're not starting any major construction of the dam just yet. It's about ZAR 0.25 billion is going into Far West.

And then Martin is saying going forward, do you expect to be recovering value from dams internationally in the same way as you are in South Africa? It depends. It really depends, Martin, on what you find. Dams are difficult to mine for greenfields -- of a greenfield site. And in order to mine dams successfully, there has to be a measure of, let's call it, sub-capital of existing infrastructure in place. And those then get converted. I suppose one could construct a model depending on just how big it can go and how much water is available and the size of the tailings dam that you could build. But whether there are many of those out there, it's difficult to say.

We believe that the near-term value for us remains with Sibanye-Stillwater on being a little (inaudible). Their focus is on rock mining. Our focus is tailings retreatment. And the two are well aligned. There is no friction between those two models. And we believe that the shortest route for us towards growth, both locally and internationally, is by staying close to Sibanye-Stillwater. And we've been having very good conversations with them in that regard. And hopefully, in the not-too-distant future, we'll be in a position to say something tangible about that moving forward in terms of that.

In terms of offering our services as part of our business value proposition, offering our services as a complete tailing solution and impacting the rehabilitation exposure or liability on businesses positively by bringing concurrent rehabilitation into their model, driving that sort of thing. But certainly, I believe that we can add value in that regard. I believe that the sentiment is moving more towards being a -- being seen to close a mine as opposed to selling noncore businesses sort of 5 years or 6 years before they're closed. And within that context, we do believe that we can offer that. But that will be more sort of a services offering. It wouldn't be a commission model.

I think the total CapEx is not in the public domain just yet. You're asking for Far West CapEx estimate over the project life, not just next year. That's not in the public domain. The reason being that the model hasn't been finalized. So once it has been finalized, we'll be able to put those numbers into the market. For the near term, it's -- for the next 12 months, it's just over ZAR 250 million.

And then remember, one of the reasons why it's not in the public domain just yet is that we did a feasibility on the model as big as it can be. So a 1.8 million ton plant and 800 million ton tailings deposition facility. That model works. It's robust. But in this sort of environment, you're not going to be spending all of that at the same time. You'll see in the [letter] that I again referred to the idea or the notion of planning big, but implementing incrementally.

So first doubling the size of Driefontein 2, the plant, then making use of -- at the same time, making use of, let's call it, a group asset in collaboration with Sibanye-Stillwater, then getting the design finalized. The design -- the model works, mind you also on the basis of the current design, the current conditions with the synthetic liner. but it's a lot cheaper to not have a synthetic liner. But you have other means of environmental containment that is equally effect. So once we've decided on that, we will be putting those numbers out as well.

And Riaan, I think, the next question is for you from (inaudible). Can you please kindly provide guidance on the effective tax rate for '23? Why was this (inaudible) in 2022?

Yes. So obviously, as you know, we determined that by the gold tax formula, obviously impacted this year by the amount of CapEx we've spent. And then you would have noted a good guide, maybe for '23 but not specifically for that year going forward, is our measurement of the deferred tax liability. You saw that in -- or you will see it in the detailed booklet where for Far West, we decreased that rate from 30% to 29%. Obviously, as you know, the corporate general income tax rate also decreased. So that impacts the gold tax rate formula as well.

And then for Ergo, we decreased the deferred tax rate from 25% to 22%. And again, it's an estimated rate based on that formula take into account assumptions around gold price, CapEx and spend over the updated life of mine. So hopefully, that will give you (inaudible) of deferred tax and how we look at that over the life.

And then your question on grades, that is given for us. That's something we deal with. But we look more -- as Niel alluded to, more towards volume as well. And yes, so if you look at our mineral reserve overall, yes, the grade is declining over time. So we'll have to manage that. And hopefully, we will be able to talk to that, as Niel said, at a time that we put that information together around fewer sites, managing our cost per ton and managing it, the declining grade, through volume and also stability in our operations.

I guess, that's something we have to deal with over time. But hopefully -- and we will be publishing more information about our life with our -- obviously, this process now continues to our integrated report and full financial statements and also our 20-F filing in the U.S. at the end of October with additional information that we will provide to the market at that point.

So at the moment, for example, we have 15 operating sites. We hope to at least half that over the next 2 to 3 years. Many of those operating sites at Ergo are late-stage cleanup sites. So everywhere we have a presence that adds to your operating costs. So by reducing the number of sites, by reducing the complexity, the makeup of the business, you're going to review that we're going to be reducing our cost profile as well. By mining mainly from large volume, individual sites, so fewer sites but more volume from a particular site, the cost profile also changes. So you see a reduction in cost per ton.

And then finally, in terms of efficiencies, we -- there's an ongoing process to try and improve the recovery efficiency on a per ton basis. And this is something that will never stop. We refer to this project as cracking the code. And there's always something new that comes on board. At the moment, these are small incremental improvements as we go along. And this year was a good example of that.

Then notwithstanding the fact that operating conditions were very tough, especially weather-wise, managing your densities when the weather is like that, when it's raining, always raining or when there's interruptions in the flow, stopping and starting. It's not that easy, but the system has been adapted and improved to a point where it's being overcome a lot easier than what it was in the past. What used to be a 3-week stoppage is now a 2-hour inconvenience because of the changes that have been made over time.

And this is ongoing. So it's advanced efficiencies. It's a simpler model, and that's mining from higher volumes from fewer sites. That's how you offset that. But you can't fix the grade. I mean the grade is the grade, you just need to do something with it. And then by the way, also it levels out. So the -- it's not a linear trend that you have -- again, great at a particular level, and then your resource changes, then it adjusts. And then it sort of -- it levels out again for a period of time until they move on to the next site.

Nic, I think in terms of your question with regards to budgeted operating cost forecast, we've been very conservative in that regard. I think the -- what's been factored in is -- Riaan, I mean you can help me out here, but I think it's -- we're not looking for lower prices. We sort of -- we were fairly conservative especially on the reagents side, and we saw some big changes there.

Yes, a simple answer there, so we have forecasted or taken all the increases into account in our forecast or the guidance that we provided, Nic. We have, yes, so we're comfortable with that. Obviously, we'll have to work hard to still get the tons and the kilos out because that's obviously not an only cost measure. But yes, it was a difficult budget, as we've alluded to, in an environment with many products, services across the board increasing. So we believe we have factored that into the budgeted cash operating cost.

Jaco, do you want to add to that in terms of CapEx maybe?

Yes. I mean so to just add with what Riaan said, so the only one that is still outstanding on the cost mix there is that the Eskom increases. So we've allowed for a significant increase. But we do understand that there was a case won by Eskom recently. And the full extent of how that's going to be implemented, we're not 100% sure. So that's the only portion which we haven't allowed for 100%. But we have allowed for a significant portion of that already.

And then from a capital perspective, we've -- as Niel has indicated, we're expecting to build or to spend approximately ZAR 1.4 billion worth of capital during this year. A significant increase in capital expenditure in one year.

Thanks, Jaco. All right. I don't see any other questions. I think that is a wrap. Thank you very much, everyone, for joining us and for listening to our presentation, watching our presentation. And we'll keep you updated as we go along on anything material. You all have a good day. Thank you.

Thanks, everyone.