DRDGOLD Ltd (DRD) 2023 Q4 法說會逐字稿

Good morning, everyone, and thank you very much for joining myself, Adriaan and Jaco for our results presentation for the financial year ending the 30th of June 2023.

Before we start, I think maybe just a moment to remember Derek Watts, who passed away yesterday. I think we all remember Derek is a fearless journalist with integrity, relentless pursuit of the truth. And I think his state of certainty leaving a gap in the community, the media community.

Moving on to the first page. That is our disclaimer. We are keeping the content of this presentation fairly light. We're not going to go into a lot of detail, really just the highlights and the events that impacted and contributed to our financial operating performance this year. We'll obviously deal with everything from more extensively in our integrated report.

Just in terms of highlights, the key group features for this year, see that on the back of a very good gold price, our revenue is up 7% for the year, and that also contributed to an 8% increase in operating profit of just over ZAR 1.8 billion. That in turn contributed to a very nice increase in headline earnings, a 14% increase of just 14% -- or rather 14% to just over ZAR 1.2 billion, that has enabled us to pay our 16th consecutive dividend. We're topping up the interim dividend by another ZAR 0.65 to take the total dividend for the year to ZAR 0.85.

And I remind myself that being a shareholder myself, a very large percentage of the shares that I purchased and on which I'm now earning dividends I bought for just over ZAR 2, I think [ZAR 2.39]. So, it's been a bit long-term strategy on my part, and I'm hoping that some of the shareholders are finding results in a similar position.

Moving into the operating trends. We'll deal with both operating segments individually and then we want to be the group operating features. And I think what we want to emphasize here and what the graph is showing 2 things really. The first being volumes coming under pressure, especially towards the second half of the financial year, but offset to an extent by an increase in yield. Obviously, every year, we do anticipate certain things from happening, and we factor that into the -- into our thinking as part of what we provide for in terms of contingencies.

I think there were 1 or 2 additional ones this year in terms of the volume throughput that we were unable to respond to the way that we would have preferred. And that really involved the delay on a number of new sites. You would have seen in the letter that we also released this morning that we consider this year to be an in-between year that some of the earlier sites, the initial sites, the Elsburg site in particular that those are coming to an end, they reach the end of the producing life and they need to be replaced.

Now we have a program of sequencing our reclamation sites. And we work towards a time line, and there were a number of delays in actually implementing that. So you would have seen in the letter to the right trial site, which is the main volume site, the replacement side. It's only come online recently and is only now starting to get to a stage of -- state rather of -- or steady state.

So that being the case, a lot of the throughput this year was supplemented with material from, we call them clean up sites, a few years back. We started a program to start cleaning up some of the legacy sites. So there's a fairly large fleet of yellow machines lifting and stockpiling material. And these were activated and a lot of the material that came into the plant, into the Ergo plant was from these sites. And that helped with recoveries, the [head grade] from the sites typically is higher because it's also material and therefore, the increase in yield of 0.25 gram per tonne, compared to where it was in the past.

And then you would have seen how that impacted the Ergo production output as well -- there's just 1 microphone that needs to go into mute. So that's how you would have seen the -- I mean you could see the impact also on the production throughput right at the end of just over 2 tonnes per half year to just under 2 tonnes per half year. And these sites are -- or these circuits are sensitive both to volume and to grade, grade does help quite a bit higher grade.

Moving on to Far West Gold operating trends. There too, you would have seen in the letter that towards the end of the year, there was a delay in the new site that's been commissioned, the #3 dam. So the first site #5 dam, which is really just a few baby steps away from the Far West Gold Plant, very neat and simple operation.

Let's now move on to the second site. So the #3 dam has also now come online, but that too had its own set of challenges at getting it commissioned on time. And that had to do, by and large, with the delay in the delivery of componentry that we had to import to a logistical issue and we attribute part of that really to global economy and supply lights that have yet not fully recovered following the lockdown, the COVID pandemic associated lockdown.

Far West Gold also had a direct impact of the impact of the low curtailment arrangement that we have with Eskom. And you see that in the production numbers, the yield and also the production number. So it has to switch off it to mills to grind down the (inaudible) material. Its runs a close-circuit mill, but you've got to switch that off and the benefit that you have from the mill has lost. And you could see some of that also coming through both in the yield and in the production numbers.

So on a group basis, a very, very steep decline, which, thankfully, is only a temporary decline. It will start picking back up again now that both #3 dam as we contain #3 at Far West Gold and (inaudible) now that they're up and running again, and there are a few others in the pipeline that will systematically also come online you will see the opposite happening in terms of yield. So it's higher volume, lower grade material. And then hopefully, these will balance each other out, and we can deliver into the guidance that we give at the end of this presentation.

So total production for the 2 half years or for the financial year, so just under 3 tonnes for the first half and 2.5 tonnes for the second take us just to be low 6 tonnes for the year. The 6 tonnes really, I think, is where we want to be, somewhere between 5.5 and 6. That gives us the volume throughput, the weight or the scale that can support the overhead structure of the business.

I think the next is the financial review. I'll hand you over to Riaan to take you through some of those numbers.

Thank you very much, Niël. Good morning, everyone, from my side. As always, a hedge privilege for me to take you through the financial results. Always very helpful with the operating context that Niël has painted today. Before I do that, just 2 specific words of thanks from my side, firstly, to our operational team for delivering these results. We all know that we're a 24-hour a day business. In a sports analogy, what that means is we cannot take our eye off the ball, the ball is always in play. And I want to recognize the operational team that produces ultimately these results.

And then secondly, just a reporting team as well. I know when we talk, as Niël has said, in a summarized way in these presentations that it may look pretty simple, pretty easy, but I can show you it's not. A lot of effort and dedication by the team goes in, and I want to just want to thank each and every one of them for their support and ultimate coming up with the set of numbers for our year, which I'm very, very proud to present.

And then as Niël said, yes, it is a summarized presentation. Hopefully, we'll give you the key features of our results. But please do have a look at our condensed financial statements that we've released. We prepare that booklet with great care, and I know you will find the information in there.

So on the financial review side, as Niël has done, to start with Ergo. As you could see there, Ergo's revenue overall for the year, increased by 11% in comparison to the FY 2022 financial year, which was driven by overall an increase of 16% in the average rand gold price we see, although gold sold was down 5%, as alluded in an environment for Ergo, which had much more difficult tonnes, so lower tonnage, but a higher yield.

Just period-on-period, if you compare the first 6 months of the FY 2023 financial year to the second 6 months, in that time, we saw also a steep increase in gold price. If we compare second 6 months to first 6 months, gold price was up 17%, although gold sold in that period was down 7%. But overall, a very good revenue performance.

From a cash operating cost point of view, obviously, overall, if you look at a cash operating cost increase year-on-year. But obviously, that's in a lower tonnage environment, where the volume was down 22%, but yield overall up 21%, sort of offsets that for us in a very neat way. But yes, the cost pressures are very much there. We noted in the booklet as well reagents, diesel, electricity security, it's a very large focus for us, (inaudible) that Niël alluded to yellow machines for late-stage cleanup. We've experienced very high and well above inflationary increases there. And all of that contributes to the cost overall.

So the net of those 2 have some inventory adjustments then get us to operating profit. And again, what a very good 6 months that you have with, obviously, profitable ounces. And as such, we had high yield and slightly lower tonnages and a high gold price, wonderful second 6 months. Year-on-year, the increase was 26% increase in operating profit for Ergo, which is an excellent result and just over ZAR 920 million is a gross contribution. So excellent performance, I believe, under challenging circumstances from our mothership operation ever.

Moving on to the Far West. A slightly different picture, as Niël mentioned as well. There are not many sites there. It was in the late stage -- final stages of (inaudible). But unfortunately, and that's often how it works in these -- on these sites. We cannot choose the grade, and we work through those sites in a methodical way. But at Driefontein 5, they didn't contribute, it was a lower grade part of the dam.

And then also when Driefontein 3 got online, the parts that we mine in there at the moment is also not close to the average overall of that site. And as everyone knows, those sites aren't homogeneous, the grade isn't spread evenly through out. Some areas are higher than others. And we often look overall at the average grade of that site only. So tonnages impacted that overall. And unfortunately, it didn't have the yield impact that Ergo did. So if you look at revenue then year-on-year, overall down by 2% with gold sold down by 15%, but offset by the 16% increase in the average gold price we see.

If I look at cash operating costs in that context, so up 11% year-on-year. Similar cost pressures as go that we experience in there at this stage of both in Driefontein 5 late stage and the start of the Driefontein 3 site, unfortunately, not that yield offset that we saw very distinctly in Ergo, giving us with some energy adjustments. Overall, on the operating profit side, 6% down year-on-year. in this scenario where revenue is slightly down, costs up. Obviously, that will impact operating profit. But still look at the number, just below ZAR 900 million contribution by Far West to the operating profit of the group, which overall by is still an excellent result.

If we look at the group then overall, operating margin percentage, again, assisted by the gold price as our patients, specifically in the second 6 months, increased 17% period-on-period, a very healthy operating margin and that 36.1% is the highest we've seen over the last 4 half years, and you can see that on the slide. All-in sustaining cost margin, similarly, very healthy at 24% was taken into account that we've spent ZAR 476 million in sustaining CapEx and it's very much in line with last year. So still, even with that sustaining capital investment, very healthy 24.1% margin in the year in the second 6 months and overall all-in sustaining gross margin of 20.6%.

Moving on to the free cash flow. It appears, yes, and that's true that the cash flow, free cash flow year-on-year decreased. Although when I get to the cash flow statement, I'll talk to that, cash generated from operations up year-on-year. So what that free cash flow shows us, and we'll talk to that in the cash flow statement as well is that over ZAR 550 million of capital spend on the growth side. And for me, that is a really wonderful growth story.

So as with sustaining CapEx, also down more and more with growth CapEx. We invest in a business that works and we're investing in a purpose that we believe in. So for me, it's a wonderful result. And I've almost summarized that. So we've invested over ZAR 1.1 billion of investing activities. So you'll see that in the cash flow later as well, which is almost 90% more than last year. Last year, we spent ZAR 626 million.

And remember, free cash flow is a [cool] number. It does not lie. It just take operating cash, less investing cash and that is the answer. So a very positive cash position, but I'll elaborate on that, when we get to the cash flow statement.

And then headline earnings per share, a wonderful result that Niël already alluded to, overall, 13% increase in headlining per share to ZAR 148.2 per share and again, it's a very solid second 6 months of 85.9%.

Then moving on to the statement of profit and loss income statement. Just at a high level, revenue increased by 7% as a result of the gold price increase, 16% year-on-year, offset by gold sold down year-on-year by 8%. Cost of sales, up 5%, so 1 of the other elements more than cash operating costs that come in there is depreciation, for example, depreciation was down period-on-period with lower tonnages that we produced as mentioned, leading our gross profit from operating activities up 15% year-on-year at just under ZAR 1.6 billion.

Other income, you remember last year at 91.3, the majority of that was COVID claim that we successfully been accounted for and received mostly in that period and the last bit in this year. Administration expenses 7% year-on-year increase. Finance income up year-on-year. Obviously, in our environment, we're very fortunate to carry cash balances, obviously, in a high interest rate environment, that means that you earn more finance income. Obviously, if you have debt in that environment, you pay higher interest charges, which we're fortunate to earn interest at the current high -- relatively high interest rates. And that line also includes dividends from Rand Refinery, but you see both of those on the cash flow statement.

In finance expense, as you know, was a small -- just a small portion, only ZAR 5 million of that in cash. The rest is an unwinding -- mostly an unwinding of the discount on our environmental liabilities. And then income tax current and deferred. As you know, in that line, leaving us with a profit for the year of ZAR 1.281 million -- ZAR 1.2 billion, up by 14% year-on-year.

Taking our statement of financial position, move now to our balance sheet. Wonderfully, if you look at the property, plant and equipment line as Niel has alluded to, there's a healthy increase as we keep on investing in our business, in our assets, which is always the best kind of investment, if you can build and maintain through the capital infrastructure. And we've seen in other businesses, some of them owned by government, the result, if you do not do that. But we're committed, as I said, to our purpose, and we'll continue to do that. And it's a healthy increase in property, plant and equipment.

Our current investments and other assets, mostly our rehab assets that sits there, also benefit from a higher interest rate environment. So healthy growth year-on-year in that line. Cash and cash equivalents, again, I'll talk through in quite some detail on the next page. But overall, what you can see there is only a ZAR 54 million so-called cash burn year-on-year, but I'll elaborate that on the cash flow statement.

And then other current assets came up year-on-year, but the positive way is that it includes and we alluded to that in our results booklet as well ZAR 185 million prepayment towards solar project capital, which again, all investing activity for us and very positive that we can execute also our solar project.

Equity, how to increase year-on-year, even after the dividend. And again, as you know, the profits contribute overall to the equity of the company. Provision for environmental rehabilitation, fairly stable year-on-year, mostly the unwinding and some other changes that we lead to in the note in our financial statements. Deferred tax liability that increased year-on-year, some property, plant and equipment items that we've already fully claimed for tax purposes under our tax receive. And then current liabilities slight increase year-on-year, but leaving us in a giving us in a very, very healthy current ratio at 30 June 2023 of 4.5.

Then to the statement of cash flows. Yes, my personal opinion, the most relevant and useful primary statement of the (inaudible). Because as you know, it doesn't deal with fair value versus historical cost, pros and cons of both in just deals with cash, and it tells you the truest, in my view, picture of what the business has generated. And for us, really, really good reading. So if you look at the net cash inflow from operating activities, obviously, for any business, I believe, the most important line is your cash generated from operations.

So in my thank you at the beginning of what I said, that's what drives the business. The underlying operations, what kind of cash does it generate. And for us, the year-on-year increase to just over ZAR 1.7 billion in cash generation. Finance income received that I mentioned, obviously, increased year-on-year, as a result of the balance that we carry and cash that we still generate and then the highest interest rate -- high interest rate environment.

Dividends you see mostly from Rand Refinery. You can see there separately. And there's the ZAR 5 million finance expense paid in cash that I mentioned, relatively small in context of the other numbers. And then income tax paid from my viewpoint, is a significant contribution that our business also makes directly in that income tax line, also in other tax lines to the fiscus and we always hope that, that money will spend in a responsible way.

The net cash flow from investing activity is also very happy reading. If you look at acquisition of property, plant and equipment, so at just over ZAR 1.1 billion, almost double from last year, which is, I believe, an excellent message. So we keep on investing in our business and more and more so also in nonsustaining or growth capital expenditure.

And then environmental rehabilitation payments, we'll continue to do that. I still believe not many other mining companies get that right. We continue to spend money. And most of that spend is to currently active tailings facilities, so Brakpan/Withok and Driefontein 4. And sometimes it's challenging if it's -- as it has been a very high rainfall summer, sometimes those activities are slightly delayed on the vegetation and some other challenges, but that's something we're committed to, and we'll keep on spending money to rehabilitate concurrently.

Then on dividends, as Niel has already mentioned, we paid just over ZAR 0.5 billion in dividends in this financial year in cash. So then that's the overall that ZAR 63 million netted off by the positive exchange rate variance. That gets us to the ZAR 54 million essential cash burn for the year. But overall, from our perspective, we've invested more than ZAR 1.1 billion in property, plant and equipment, paid over ZAR 0.5 billion in dividends and our cash position stayed virtually unchanged, which I believe is a really magnificent result.

Then, yes, this is always the sort of handover slide to Mr. Pretorius. And maybe he would like to speak to this, because as this is also a very, very happy reading. As you can see, we have it there from last February. But even if you go slightly back, we've had a really wonderful run in our share price, and I believe we're one of the best-performing shares on the Johannesburg Stock Exchange for this calendar year. We take 1 January to 30 June, but our run started slightly earlier. So we were hovering around just under [10] in October and moving to November. So if you just look at that, from [12] to around [24] is more than 100% increase. So a wonderful result, I believe, our shareholders in this period.

But with that, I'll hand over to Niel to maybe say something on that and then talk to the ESG and the rest of the presentation.

Thanks Riaan. Yes, it has been a good period for us in terms of share price performance. I think you could see that the share price is still tracking the gold price, albeit to the multiple might be slightly more steeply gear to the gold price than some of the other companies. And to Riaan's point, on performance year-to-date (inaudible) launched, I think basically, he kindly emailed me some statistics in July, suggesting that year-to-date at that time, DRD gained 58%.

But I think that the 1 number that I feel (inaudible) performance, gold sector performance or return over 10 years, which is 794%. And that's what DRD is all about. It's the long-term performance. It's a sustainability focus. That's hopefully taking us into the future and is setting us up to take full advantage of our body and continue to deliver into the multiple value focused areas that we've made part of our strategy.

And that takes us into sustainable development, the very next slide, what we've been doing in that regard. So moving on to the environmental aspect of that. being tried to reduce potable water usage by relying increasingly on industrial water, recycled water or water that we harvest that continues. And again, we saw a 10% decrease this year. And compared to where it was 10, 15 years ago, it's come down every year for most years, and we're now at a point we're roughly 90%, which is more than 90% of all the processed water that we use. In fact, all the water that the we use in our process is non-potable, which I believe is an important part in terms of the sustainability drive.

We're having power issues now. We know that in the not-too-distant future, we're going to be adding to those issues, namely not enough water because of the -- simply the size and the availability of water for use for personal use. So it's a good way to set ourselves up to not just from an environmental perspective, but also from the business resilient perspective.

Dust exceedances 0.87%. And those are, by and large, not related to tailings, thus from tailings, but more infrastructure, so dust from grows or from where vehicles are moving in terms of reclamation of materials. So that also is a number, which I personally find encouraging. The rehabilitation spend remains high in the circumstances. And remember these are costs that are directly attributed to rehabilitation categorized in that line. We know that our mining process, in the essence, is rehabilitation with the removal of tailings from areas where were they shouldn't be and processing them and storing them elsewhere. That's about ZAR 42 million.

And then another 25 hectares are permanent storage facilities, tailing storage facilities have been vegetated during the course of this year. And to a large extent, the dust risk that these facilities pose to surrounding communities. I'm talking about the Crown facility in particular. That has been dealt with fully, which I believe is very important. And I remember like it was yesterday, 2006, when we were presented by a budget proposal by the then General Manager of Crown. (inaudible) saying that we won ZAR 16 million had to start revegetating these tailings. And now many years later, 15 years later, we could stand back and reflect on what's been achieved over that period, so that the people living around this facility are no longer suffering being convenience of dust coming off those facilities.

Moving on to the environmental add, which is the next slide. So there too, I think what I want to focus on here is more what you can expect to be seeing going forward, particularly in terms of the electricity consumption aspect and the carbon emissions aspect. So there, you could see the trending from the '21, '22 and '23, where as we go. And of course, with 20-megawatt of solar power coming online in the not-too-distant future, that consumption from the national grid will reduce.

And 18 months from now at the end of the next calendar year, we hope to have an additional 40 megawatt put in place together with very significant storage capacity, 160-megawatt storage capacity or (inaudible) and then the carbon emission number would look quite differently. The electricity consumption of the grid would look quite differently. And our risk profile would it differently. The impact on cost would also start flowing through.

And this is what we like about our model is that we're really taking 4 out of 5 sustainable development capital stock boxes integrated value that it's really, very going to be alive. So this is an exciting time for us and it's pleased to be investing money. I'll reflect a little bit more on that later on in the presentation.

So moving on to the next slide on our social investment aspect with long been containing for the notion or be supportive of the notion that you cannot run a business. It cannot be an island of stability and an ocean of anarchy. So it would be stability of societies around your operations is essential to be successful in business at some stage, frustration falls over and this could be very disruptive when it comes to business.

And the money that we spend in that regard, particularly in terms of community development, the broad-based livelihood part of the business. I think that's really taken off beyond expectation. And it's contributed towards a very significant network that we have access to and a little bit more about that later on. The one thing that we do believe we should be cautious of, especially now that the private sector has become increasingly involved some of the gaps that have been left by the state is to become a proxy for delivery in terms of the state.

This company, which is one of the smaller companies on the JSE, ZAR 314 million, ZAR 320-odd million in income tax in the last year. And I think it's important that we monitor the extent to which some of that is being reinvested by the state in the communities where we operate. This cannot be a situation where private sector pays taxes and then still expect it also to deliver into what essentially is government's responsibility.

And one of the things that I think we will be increasingly focusing on in the years to come and the months to come and the years to come, would be awareness, to create awareness through our network that yes, it does make an impression if you have a protest. And if you're disruptive in response to lack of services or the absence of services, but they're better ways of doing that. Many of these things that form the subject matter of protest action are services that society is entitled to in terms of constitutional guarantees.

And failure on the part of the state of delivering to those is a failure to delivering to a constitutional guarantee, and there's a legal process available in terms of which departments, both local, provincial and national can be held accountable. They can be ported to delivering to those services, and if they fail to do so, they can be held and content. And somehow I just think that we're at a point where the likelihood of a positive result of an official getting locked up for content at court is better than just be burning another tire. So that's certainly -- and we're not going to be causing uprisings in stuff like that, but we will be talking to communities to maybe just make them aware of some of the remedies that are available, that are legal remedies that are enforceable and they are effective in terms of the desired result that we want to achieve.

Looking on to the next slide. This is the community support aspect. Now here, too, just on the longer story line of sustainable development and overlapping value. So it's not always easy to motivate the capital spend in terms of corporate social investment and on existing communities to empower themselves. It's not always easy to motivate those in terms of brands and central to motivate commercially. But what we are finding is that the networks that are being established through these initiatives are increasingly becoming part of the consultancy platform or the consulting platform rather that is required on so many levels when it comes to regulatory compliance.

So you apply for a license, whether it's a water usage license or whether it's an environmental authorization. Many of these things or most of these things have an element of community consultation that's required as part of the process. And we believe that this [was] value and we're actually witnessing that now (inaudible) value being recognized through this network. And this is increasing the facilitating consultation.

And I know I hop on about this, but this is once again an instance where there's multiple integrated value delivery and the notion of sustainable development. And also in terms of social investment that's now been 8, 9, 10 years in the making. We're finding that there's another level of value that's been delivered in this regard. And the same agency that's been conducting many of these initiatives on our behalf, they broadened their service delivery -- proposal service delivery ability to also include the type of consultation that's required for regulatory approvals and so forth.

So we'll continue with those and our approach remains the first step out of poverty, poverty deviation, to a knowledge and a match very keen focus still on youth education, math, science and accountancy and we're starting to actually see some of those candidates finding their way to our bursary scheme and also into employment with our company that we're very pleased about and very thankful for. But those will continue, and hopefully, we can broaden them in terms of some of the material that's been created over the last few years, the circled 5 pillars of sustainable development within a community. Some of those are not finding its way also into our social and labor plans. And I'm really excited about the impact that, that we've had just gauging by what we've seen just out of a very modest program otherwise.

So moving on to the next slide. This is on the excellence in reporting. There is something I wanted to say about tailings management. Just want to make sure that I'm still on the right track here. Somehow I seem to have skipped over that. So that is in the letter in terms of some of the governance steps that we've taken there and how that's being dealt with.

But moving on to excellence in integrated reporting, we're very proud of the delivery of this particular team and also proud of the rest of our colleagues in providing the material that we can report on that is sort of quality that supports recognition of this kind. And this is a lot of effort, a big part of this is from announced resources. So we want to congratulate our team. And also, we want to congratulate our service provider in this regard for assisting and guiding team also delivering to this very, very good result.

So moving on to the last slide, which is looking at 8 slide. In terms of guidance, we are seeing a nice reversal of trend in terms of volume throughput. So we are in a position to be slightly more ambitious in terms of our production guidance for the year. And then also you'll see the cash operating cost guidance of R770,000 per kilo. It is up from last year, but you are looking at a slightly more complex circuit at Far West Gold. And then, of course, pleased with the normal cost pressures as well. We do have our cost (inaudible) under controller. And hopefully, we'll be able to match the previous year's performance in terms of guidance insofar as costs are concerned. And hopefully, also in terms of production.

We did land in terms of production for the current year, we sort of landed in the midrange of guidance. We're expecting to spend about ZAR 3.5 billion on capital in a number -- so that this is still a number that catches the eye considering where we were a few years ago and what we're tackling now and just the relative ability to actually venture into these things. And I'll spend a bit of time maybe just talking about the environment into which we're investing this. Now a very large chunk of this ZAR 3.5 billion will go into the solar plant. And just on some of the conversations that we've had -- we've been having in that regard. The -- we believe that this is a very sound investment to make because it's -- strictly speaking, it's not just mining investment.

So it's not dependent solely on what happens in mining, what happens in the gold price. This is something for which there is a very significant national requirement. And we happen to be very well positioned geographically also in terms of the national grid. So we are delivering power into the grid is not a challenge to us at all having gone through the regulatory process (inaudible) process we actually do that. So this is probably something that you're not going to be stuck with. So we will be taking a bit of funding in that regard, and then Adriaan can elaborate on that if it required to. But we think that it's a solid responsible investment in current circumstances to be investing in solar power to the extent that we have.

The second part is we are -- we're determined to mine as much of our resource as we possibly can. And we've been talking about blend and sequencing dams for retreatment (inaudible) now for a long, long time. In the Johannesburg area, we treated more than 138 dams over the life of this company, cleaning up in excess of 2,000 (inaudible). So a big part of that is now more recently land that we ourselves earned. So sustainable land use and how that can contribute to certain quality of life in Johannesburg. I think those are going to become topics of conversation going forward. It's a very large area, that's (inaudible) area, that's my final place, and will be cleaned up over the next year or so.

And that these are areas that are very near or very close to where people actually work. So hopefully, where -- the areas where development is taking place, where those have been moving further and further away from the economic hub of the Johannesburg and surrounding areas by opening up these areas, that will reverse. We're encouraging other landowners where we cleaned up land and we're in a position to hand them over to do just that, to make that contribution to reduce the duration of the (inaudible) into something that can bring quality to the lives of the communities, who up until recently live next to a tailings dam, now they are living next to an area which has been cleaned to a very, very high specification. And that can now be used for something different. And we're hoping to see that.

We're hoping that those areas once they handed over, don't become (inaudible) informal settlements but they are being put to us that we can actually see evidence of sustainable lands. But that's been part of what's been driving us, cleaning up these areas, making them available and contributing towards a different kind of society in Johannesburg placed us more space closer to where people work. And that is dependent on one very important ongoing qualification and that is to make sure that we have adequate deposition space.

So when you look at the money that's being spent at Far West Gold, the ZAR 800 million, a big part of that tailings dam and in the not-too-distant future amount not quite as high, but a similar amount will be spent at ERGO in order to also expand the size and capacity of the Brakpan (inaudible) tailings capacity so that we can deliver into this site deal. We're not going to be running out of resources anytime soon. But we do have to manage tailings deposition quite carefully, and we do spend time collaborating on that in related to shareholders on the design challenges and the regulatory process and how we just aligning ourselves closer to what we believe the contemporary thinking on that, what that involves.

So in summary, ZAR 3.5 billion for the next year, a big part of which is going into (inaudible) and a big part of which is going into long-term sustainability by creating the position facility. Of course, in the Far West Land that drive -- the Phase II drive of the Far West Land operations, that involves this lifting a whole range -- a whole cluster of tailings from areas where at the moment, they still built over environmentally sensitive areas and pose a risk to underground water. And the big part of the environmental authorization associated with the Far West Gold operations. A big part of the motivation involves the removing of those tailings from 2 areas where they no longer pose that risk.

So there's a societal aspect. There's an environmental aspect. And most part of it (inaudible) doing it, we can contribute to the economy and provide to delivering to the (inaudible) deals in South Africa. So a question obviously that one has to ask when looking at these sorts of numbers is, are you investing in the sort of environment where it's responsible to invest this kind of money. And we switch on the television and maybe you would wonder -- you read the Fraser Institute report and maybe you would wonder. If you look at where capital is going, and a lot of it is going away from South Africa, not much or less is coming into South Africa. So one has to reflect on these things carefully before you commit your shareholders running into that.

And we believe that there is -- it is responsible to invest in South Africa. We do believe that South Africa doesn't stand or fall based on the quality of political governance in the country. There's a private sector and there's a society, which when they join forces become unstoppable and can really turn things around. So increasingly, in order to assess whether or not it is responsible, one looks not so much at the kind of challenges that we face, but you also look at what has been the response or what is the response to those challenges. And the responses to some of those challenges, in fact, I believe, have been remarkable.

What we are seeing, well, firstly, what we are seeing is that the face of political leadership is systematically changing. We're seeing a different kind of leader emerging, younger, dynamic with lots of energy (inaudible) firm values. At the moment, maybe still more at proven -- at local and provincial level. But increasingly, I think we'll start seeing those faces and those profiles finding their way into the national leadership as well. People who are externally focused are genuinely wanting to deliver into the well-being of their constituency. So that certainly is changing. It is going to take a while before it changes completely. But we are seeing very positive first indications of a changing face of political leadership. I think the second thing which is really encouraging is that it seems that the private capital has found its voice.

We are seeing less in the way of nuanced (inaudible) on the product business leaders for more direct communication and more and more very prominent leaders are becoming involved in initiatives that can contribute towards some of the pricing challenges that we are faced with, like crime, like logistics and so forth. Very recognizable events, very influential people who have command over vast capital, and that can activate the capital over which they have concerningship, activate that quite quickly and bring about positive change. I think something which is also very encouraging is the way that we see private capital being mobilized with thoughts towards -- that which is strategically important.

I read a very interesting article just this morning, suggesting that the amount of energy that's being generated from rooftop solar panels, that's now reached 4.4 gigawatts. It's 2 phases of load shedding and it's jumped almost doubled in the last year. So the private sector has come to realize that sitting around and waiting is not going to be the solution. We've got to jump in, and they're jumping at a rate that I think is catching us by surprise. So 4.4 gigawatts of electricity already being generated. That's not the conduct or the behavior of somebody who's given up on the country. So we're seeing capital at work.

We're seeing young people at work. We are seeing a different kind of energy. People are not waiting for government to step in and fix it for them, but communities doing it for themselves. So the same sort of resilience that we've been working hard at as a company to establish to overcome some of the challenges that we're facing. We are undoubtedly seeing that becoming a feature also of our society, more and more pockets of society while behaving in this way. And South African people becoming an increasingly resilient people.

So yes, what has happened in the recent past in terms of how we positioned ourselves. We positioned ourselves favorably in terms of water. We've positioned ourselves favorably in terms of security and we're positioning ourselves favorably in terms of (inaudible) much larger sections of society are doing the same thing, either getting involved or doing it for themselves. So we do believe that this is (inaudible) and looking towards a better future for South Africa.

Yes, I think that's pretty much it, Adriaan. I don't know if you want to add to that. I don't know, Jaco, if you want to jump in, but I think that's what we wanted to share for purposes of this presentation. There are -- I just want to check. Anything else, guys? Or can we go to the questions.

Okay. Wonderful. Thank you very much. So I just wanted to ask the master of (inaudible), can I move on to the question for lack of a better description.

So we seem to be -- Okay, good stuff. So we can move on to that. So Arnold from Nedbank, once a breakdown of the 3.5%. I don't know I think I sort of cover that in the looking forward in terms of the solar and the large part also in terms of tailings. And then, of course, there's element of sustaining CapEx as well, Adriaan, I don't know if you want to elaborate on that?

No, that's right, Niel. So the majority of it, as you said, was the solar project at ERGO, then different than to what is if expansion is the ZAR 800 million, and roughly, that difference, as I alluded to around ZAR 500 million to the sustaining CapEx for both operations. And again, it sounds quite a number and it will be a challenge to spend all of that. But again, for something like the battery, I think a lot of that is happening as we speak, and we're confident that we will be able to execute that. Joco, I don't know if you want to add any comments to that.

Adriaan, you are 100% correct, can you hear me. So the -- as you said, the majority of that is on base and Phase 2 of Far West and in some reclamation sites at Ergo. There will possibly be some capital from the solar and batteries running over into the next year, but that's a normal cash flow.

And then (inaudible) with the next question from Alexander. Your contribution towards decommissioning liabilities that come down? What informs its reduction and what future contributions can we expect? On average for.

Yes. Thanks Alexander for the question. So yes, you note well. Maybe just some of the points that we're also elaborate in our results booklet. For example, on Far West, we only spent -- we only vegetated 5 week days where we vegetated (inaudible) last year. But in this year, that positive maximum available CapEx that we could (inaudible) So it's still a relative good achievement. At Ergo for Brakpan/Withok tailing storage facility, yes, so we experienced for a long wet season. There was some rain damage caused, which avoided us to vegetate the tailings dam to the extent that we would have liked. And there's also some community disruptions sadly that hindered our vegetation program on the ground complex.

But to give you an indication now, so that's not the level that we would like to spend at. And we've again committed to up that to at least between ZAR 30 million and ZAR 40 million for this year and hope to achieve, and we'll continue to do that. So specifically on our tailing stands to keep on with the concurrent vegetation program. So hopefully, that gives you a sense of what we want to do. Unfortunately, it's not always possible for us to keep that up in the way that we would like but we'll definitely continue to do that.

Thanks. Arnold has a question about JSE and I'll deal with that question. But before maybe that's a broad strategic issue. Before I do that, there is still a question on some of the numbers beyond which I'm also going to deflect to you. And that is Nic asking -- Nic Dinham asking the discussion around the (inaudible) and reflecting that it's positive and optimistic and an early build up, plus he has question about the expected Phase 1 build and also the NPV improvements on the project. I'm not quite sure the extent to which we can delve into the specifics, but we're in a position to give an indication on sort of the range.

I suppose the 1 thing before you go into that -- the 1 thing that we should maybe just point out is the fact that the regional tailings facility, the design that we've now submitted, which is an amendment, will enable us to perceive tailings in addition to our own resource. So once we've depleted our entire owned resource, there will still be an efficient space on these tailings dam to receive very significant quantities of material exit from surrounding mine. So everyone in that area (inaudible) and who wants to remove it, or (inaudible) take in to remove that because of the impact that this infrastructure is having on underground water, there will be an opportunity to do that.

And I think a good way of describing that would be a sustainable solution, environmental solution, but also a collaboration or consolidation of sorts. So we're setting it up for the next generation of operators to bring about an enduring and effective solution environment (inaudible) on the capacity that we're creating in terms of the tailings not going to be all in one go. And this thing is going to be built here over 6 or 7 years, if I'm not mistaken. You can correct me if I'm wrong. But once it's there, the footprint is there, that it does provide a very significant opportunity to bring about a wholesale cleanup of the (inaudible). Adriaan if you want to maybe reflect on what Nic Dinham is asking then.

Yes. So specifically I agree with Nic. It is very exciting around the route that you also alluded in related to shareholders and Niel around that are relatively taking for the (inaudible). So we're not pursuing the interim solution that we indicated last year. But going for that both (inaudible) if and as we indicated, that has always been our objective from a Far West consolidation point of view. So we're planning for much more resources than what we currently own, but we know those resources are in that area. So -- and a lot of work has gone into that design. I know over the last year and we're very optimistic about the next steps.

And then this new one maybe on the detail of that. As everyone knows, this is how -- just contains financials that we give out. So no reserve changes that we're anticipating. But more detail, obviously, spelt out in our integrated report and other reporting that we do towards the end of October around the 20-F filing and its related documents. But we're very enthusiastic about this, Far West project, which is hopefully coming to fruition. And I'll maybe ask Jaco if he wants to add anything to that.

No, Adriaan, I think you've covered it well.

Thanks. And then (inaudible) question on guidance. So his comment is that the guide for higher production, but the mid guidance ranges around this year's gold production, does this mean you guide for an unchanged gold production. I think if we do hit midrange, then yes, it's in essence, we are guiding the same. But I think we're guiding within a tighter range because of -- hopefully, we passed this what I referred to as an interim phase or a change however yet with some of the higher volume such now coming on stream. So effect which we're assuming and that which we're anticipating and that which we're factoring into our planning for the time being, if that were to play out then hopefully in the range -- the volume range will be tighter than last year, we'll get closer to that. And of course, if we sort of hit the higher end of that range and if we can maintain plant efficiencies. And then hopefully, we'll be better than this guidance. We are not guiding in order to meet to -- to hit midrange. So we're guiding hopefully to (inaudible) to test the higher range of guidance. But yes, I think it's a valid comment. So its a tighter range and hopefully less uncertainty based on current assumptions in terms of volume throughput. And then with higher CapEx, the interest income will be less and with higher cash operating costs and unchanged production this does mean that net income will be negatively affected by the higher CapEx. Yes, I'm pretty sure that we'll see less in net cash flow.

And then the 20-megawatt solar plant will be online during next year, how come we do not see positive effects on the cash operating cost. We're sort of talking about that internally, but I think we want to see exactly just what the actual reduction is going to be. And then we might want to factor that into the guidance as well. But the guidance that you're seeing, you're absolutely right, does not take into account the potential flow-through of benefits from the solar in terms of power costs. I'm correct in saying that, Adriaan.

That's right. And maybe I can -- you alluded to it. So that's something, although we're executing it flat out the solar and battery project at Ergo. We (inaudible) fine-tuning, let's say, the structuring, and we have many possibilities there because it is under our control to optimally structure for, as you mentioned, we need to make sure that we do not only benefit Ergo, but also because it's not only an asset that will contribute to Ergo. That's why we planned it, but there's also other possibilities. And we're setting that up to ultimately what the capital that we're spending. And clearly, it's clear from our cash balance now, what we're spending, what we'll generate that it is that time towards the end of the financial year that we need refinancing in place for that solar project.

I mean, it's ideally suited. It's a wonderful project, and we're doing it almost the other way around. We're taking up cash, building it and then refinancing that with the best terms possible. And those benefits and what you (inaudible) is asking will then optimize around how do we account and how do we allocate to show the benefit in Ergo to Far West definitely for the group, and then very precisely say how we muted that. So that's an exciting development. But like I say, the most important bid is to around build it, and we know it -- we're busy doing that and then to update the market as and when we've progressed on that funding solution. But ultimately, we're aiming for that to be in place nothing later at the end of our financial year 2024.

Thank you, Adriaan. I think that also deals with question that next also on the EBIT close to on the solar project and how we'll see that in the numbers, also in terms of its sort of let's call it, stand-alone valuation. We have a few questions from the floor from Bruce Williamson. Before I take Bruce's question, I just want to answer Arnold's question, which was, do you still see any value in being listed on the JSE and the answer is, we do and the reason why we do is significant register then we're certainly seeing some names popping up in the register, which we find encouraging local names, local funds, some money that's finding its way into the register, which we've been hoping to happen, and that is finally starting to happen. We don't consider it to be particularly (inaudible) we don't consider -- we don't see any downside in the investor on the JSE.

So yes Arnold, we didn't see that as a benefit. Remembering also that we are the oldest system in Johannesburg that's still in business. Maybe that has been a tradition there as well, but we are looking at the value proposition. So please, Bruce Williamson, as you stand up, happy to take your question, please.

Yes, Niel, and good day to Niel and Jaco. Thanks very much for the update. It's been great. Also your closing remarks on the interaction between this additional private expenditure and some pretty positive outcomes with society, and that's great to hear. Can you maybe just tell us whether that is spot over and that the security side of things has improved. And then secondly, could you sort of look a little bit further out and say, let's say, over the next 5 years, your confidence in continuing to convert resources to reserves and possibly just a wild guess of how much more CapEx would you spend over 5 years on infrastructure, tailings storage, et cetera. And then finally, third one is any progress on the PGM recycling opportunities?

I'll deal with the first one. Let me deal with the second question first on the wild guess of CapEx going forward. Since we've been required to file a technical summary report, for the SEC, we no longer take wild guesses. We're very careful about what we put in there and this is also to a question that Nic Dinham is asking of a contradiction between the SK 39 production cost guidance on this guidance and tries to explain the reason for that. As much as we do qualify the numbers that we published, and we do list the assumptions on which we rely and we try to be very thorough in using the contingencies associated with that.

Then we reassess them from time to time and as much as those assumptions have changed, we apply them. And hopefully, it's not seen as a contradiction because of an oversight or is there anything that we got wrong. It will be seen as a number that's been adjusted because the assumption on which it was based, which at the time was a responsible assumption at some of those assumptions (inaudible).

To give these forecasts in the sort of environment that we're in and where the volatilities and contingencies associated with that environment, there are a lot of things over which we do have control, but then there are also a whole lot of things which you do not have control. And you need to take a view on the things over which you have not control. In fact, you've got to take a view on both. And sometimes, you don't get it right. And if you don't get it right, you've got the same way. You've got to explain why and then explain what the basis is for whatever the new assumption is.

And I foresee -- and this is based on my experience over the last many years, looking at life of mine plans year after year after year, looking at the sequence at which we want to bring certain resources in and others out, that you will see an adjustment on these numbers every year. And sometimes, they will be material to the point where you actually have to file an amendment and sometimes they will not be material. But there's 0 chance that you will get your life of mine plan 100% correct going forward. There are just too many moving parts. And that's part of the industry.

I think we do explain that very, very clearly, both in our 20-F filing and also in the second quarter summary report. And that's the nature of mining, that's the nature of investing in this industry. The other industries that are less volatile like fixed income, this is not fixed income. We have -- we filed a 20-F, I don't know how many pages, and a very large portion of those pages deal with contingencies, risks and so forth, so read those. And I think that will then also give a perspective as to why from time to time you will see changes. We do have basic forecasting. So we do our basic to interpret them and perform a view. But (inaudible) signs -- precisely the other question that you asked, and I'll come back to the other question that you asked was, the impact of the investment in society on crime and crime patterns and crime tendencies.

So the societies where we operate to a large extent, they're not the criminals. They suffer at the hands of the same criminals that pose a threat to our operations. Whilst you might have community protests from time to time, while you might have angry community members from time to time demanding to be accommodated in employment and that sort of thing, those aren't -- that's not crime. Crime is a group of people are showing up with heavily on group of people cutting through your cable network, or hijacking your vehicle or shooting a security guard on their way to do a theft, that's crime.

And no degree of investment into society that's going to alleviate that. That's where the authorities step up and step in and start dealing with it. And we're hoping the initiative that's now been launched between the private sector and the prison will start bearing fruit because these are behaviors that need to be categorized as special crimes. And we are canvassing for a regime in terms of which are dealt with in a very particular way procedurally. So without violating the principles of our constitution, it's becoming apparent that the criminals who tried these crimes need to be removed from society for an extended period of time, and then not be allowed to find their way back into these domains where they perpetrate these crimes.

There are certain areas where there's been a loss of sovereignty (inaudible) and I'm talking about illegal mining, in particular, where it's simply too dangerous we're pleased to go there, considering their current resources and the current capacity and training that they have at their disposal. That needs to be restored. So -- and that is a problem that all of South Africa's space, but the communities where we operate directly, they're really at the short end of this neglect, to maintain law and order and (inaudible) them.

So there's just a whole host of factors that combine to make life in those areas quite tough. We're trying obviously to do our part in enabling these communities to self mobilize and to become self-sustainable. But an intervention is required, we can certainly no longer have these gangs of people ripping apart our infrastructure, sealing electricity infrastructure, mining below the streets of Johannesburg maybe even potentially contributing to a street getting blown up and at the same time, also mining illegally in areas and having shootouts and bringing terror to the communities where they operate. That is something that requires a national response.

We've got means to protect ourselves. We have been serious about that, where they go, how they get exported, et cetera, et cetera, we make use of technology. We're a private company, and I do not believe in private armies. There are private armies in South Africa. Some of our stock were held up by one of them not too long ago when they were violating a taxi route and they were pulled out of their cars by people yielding AK 47. So very disappointingly, the police didn't do anything about it and refused to prosecute them because maybe 2, they are being (inaudible). So that's what a private army does. That's what it could turn into a -- the private sector has no business having private armies. The government, police and then the army need to step up in that regard. And sorry, Bruce, I didn't just repeat your last question, the third one.

It was on the possibility of the PGM tailings project. .

Yes. So it's been a project that we've been involved in as, let's call it, almost in a consultancy capacity in providing and collaborating in defining what could potentially become a project and the plans have been finalized. And I think what we're waiting for now is to see whether we could sort of transition from being a so-called consultant into being an operator. But that is -- remember, it's a binders asset. It is binder's choice as to whether or not they want 1 of their subsidiaries to operate that or whether they want to do that in us.

We remain keen, and we think that we can make that contribution. But it's a decision that will be made on the basis of where the best value contribution is. And obviously, we have a responsibility to all of our shareholders, so we need to make sure that whatever structure is decided upon is for the benefit of all of our shareholders. But the opportunity is certainly there, and we're certainly keen to be part of that, but it's going to be -- it's a decision that's going to be taken at a different level.

But I have to say that, which is very important to present. And I think this is something that we only appreciated the deeper we got into this study is that this particular, the layout, is very complex, and it is extensively integrated in existing operations. But they're also -- it's a very complex legal structure, they're minorities that own different parts of the whole (inaudible) PGM footprint.

I remember that entire footprint -- that Fraserburgh footprint is made up of several companies that have been acquired over time -- that were acquired over time, and they have different empowerment structures, et cetera, et cetera. And then the one thing that I never do, but that's become I find confusing but also that it's been explained to me is that, it would seem that different entities have conflicting or competing interests in different parts of the basket of minerals that come out of what we refer to as a PGM resource.

And then that also needs to be thought about. So it's not easy to sort of just wondering, you don't just open a plant and say, "Hey, I'm (inaudible) PGMs. It's a little bit more complicated than that. Having said that though, it's an exciting project. It's got exciting prospects. So it's certainly doable, and we dead keen to be part of that, if given a chance -- given half a chance.

I think that covers it. I don't see any more hands. And I think we have a new question...

There was 1 earlier question by Alexander (inaudible) asking about portable water, if you're comfortable, can I answer that?

Yes, please do that. Sorry, I saw 1 question by Alexander, I didn't see the second, thank you for pointing that out, please carry on.

So just on optimization of the portable water, we specifically look at optimizing the usage and reusing of our water from the tailings dam by investing in infrastructure and distribution and collect infrastructure, making sure that we take the water back to the mining sites. Secondly, we utilize additional water from (inaudible) drainage. And then the third source is dams that were created to cumulate rainwater. We also utilized that in the circuit. And only once all of that has been depleted to actually look at the potable water circuit itself. So that's the way that we reduced the amount of water intake -- portable water intake into the operation.

Second section of your question was just around the radioactivity. All of the resources that we are currently tweaking are below the exposure limits. So that's not a problem for us. And then as mentioned, the third section -- the third question you had is on (inaudible). Are we intend to maintain (inaudible) at Far West operations. We've moved over from Driefontein 5 tailings dam to Driefontein 3 tailings dam. Both tailings dams have got very similar head grudge. But Driefontein 3 being a much larger resource than Driefontein 5.

Going forward, as part of Phase 2, we will obviously look at bringing in additional resources, as Neil has said, and that will look at -- those resources will be at (inaudible). But for obvious reasons, (inaudible) and therefore unit costs also comes down. So I hope I've answered that question now.

Right, I think that covers it. I don't see anything else. So I think we can call it a day. Thank you very much, everyone, for listening in, and we'll obviously update as we go along from time to time. And thank you for dialing in. We appreciate it. Thanks, everyone.