African Rainbow Minerals Limited (ARI) Earnings Call Transcript & Summary

Good morning, everyone. and thank you for taking time to join us today. Welcome to the African Rainbow Minerals Investor Conference Call. The purpose of this call is to discuss the outcomes of the definitive feasibility studies for the Bokoni 180 kilotons per month development project and the recommencement of the Nkomati open pit mine. Please note, this call is being recorded. Before we begin, I would like to remind participants that ARM is currently in a closed period. Accordingly questions and discussions should be limited to the Bokoni and Nkomati project and the associated DFS outcomes. Today's presentation has been published on the ARM website and is available for reference. [Operator Instructions] Let me take a moment to introduce ARM's management team joining us on the call today. We've got Phillip Tobias, our Chief Executive Officer. We've got Jacques van der Bijl, our Chief Operating Officer; and we also have Tsundzukani Mhlanga, Financial Director; and myself, Thabang Thlaku who is the Executive for Investor Relations and New Business Development. I will now hand over to Phillip to deliver the opening remarks.

Good morning, and thank you for joining us. Bokoni and Nkomati are 2 of ARM's 100% owned flagship projects. which are world-class assets that unlock significant long-term value for ARM and its shareholders. Bokoni establishes a material, high-grade growth platform for ARM positioning us as a globally competitive low-cost PGM producer. Whilst the recommencement of operations in Nkomati reestablished South Africa's only primary nickel producer through a low capital intensity and a value-enhancing restart. What gives us confidence is not only the quality of these assets, but the strength, the depth, the expertise and the experience of the management team responsible for delivering them. ARM currently manages most of its joint venture operations and that proven hence, on operating experience is exactly what underpins our confidence in delivering these projects. These are disciplined, well-defined plans, build on proven infrastructure and rigors independently peer-reviewed studies and also led by a team with our operational track record and execution capability and capacity to bring them to successful realization. Having carefully evaluated these investment opportunities, we are now taking a decisive action to position ARM for long-term resilience through the commodity cycle. At the same time, these investments will create lasting value for our host communities through job creation, economic opportunities and sustainable development. On that note, I will now hand over to Jacques to take you through the presentation.

Thank you very much, Phillip, and good morning, everybody, and thank you for joining us. Today, I will take you through the ARM approved development plan for Bokoni and later the proposed restart from Nkomati. The purpose is to explain why management believes these projects are strategically important, technically executable and financially attractive. I will focus on the investment in Rational the operating model, the key risk and the value creation opportunity. I will structure the Bokoni discussion around 6 themes. First, Why Bokoni is an attractive investment proposition for ARM and its shareholders. Second, why the approved development plan is different from the earlier operating approach Third, how the technical design and execution pathway have been structured. I will then cover financial returns, delivery risk and controls before closing with why management believes Bokoni can succeed. A good mining project starts with a good ore body, but that alone is not enough. For Bokoni, the Board approval was supported by a complete definitive feasibility study across mining, processing, infrastructure capital cost and execution work streams. The technical basis was independently reviewed and the financial model was also subject to third-party review. Importantly, the Board approval was based on a completed definitive feasibility study with strict stage gate combine criteria. Importantly, Bokoni is not starting from a greenfields position, existing mine workings, the concentrator plant, chrome recovery plant and surface infrastructure provides a practical platform for development. That combination of study work, independent review and brownfield infrastructure gives management confidence in the execution basis. This slide answers the key strategic question, why does Bokoni matter to ARM. Bokoni materially changes the scale of ARM platinum by adding approximately 350,000 to 400,060 ounces annually at steady state. It also improves the quality and resilience of the portfolio by adding a large high-grade asset with a competitive cost position. What is particularly important is that the current 19-year plan only depletes 13% of the measured and indicated UG2 resource. We therefore see Bokoni not simply as another operation, but as a cornerstone asset that materially strengthens ARM's platinum for decades, this slide summarizes the core ingredients of the Bokoni investment case, the project combines a high-grade UG2 ore body, meaningful scale and existing infrastructure. Bokoni has a measured resource of 31,000,060 ounces with a long-term mild grade of 6.1 grams per tonne, the approved 180,000 tonne per month system is designed to improve fixed cost absorption and support margin resilience. Grade, scale and existing infrastructure are rarely available together and that is what makes Bokoni strategically compelling. A natural investor question is why ARM should invest in Bokoni rather than return additional cash to shareholders. Our answer is that ARM is managed for long-term value creation. Mining companies need to reinvest in quality assets if they want to sustain future production, earnings and cash generation. Bokoni provides attractive returns, strengthens ARM's platinum portfolio and preserve significant long-term optionality. Shareholder distributions remain extremely important, but disciplined capital allocation also means investing where the risk-adjusted value opportunity is compelling. Grade is 1 of the most powerful value drivers in underground mining, a higher grade generally means more metal per tonne mined and processed. We support margin resilience and lower capital intensity per ounce. Bokoni's planned average hoisted grade compares favorably with Arm's existing platinum operations. What matters is not simply having a higher grade but what that grade does to margins, capital efficiency and resilience through the cycle. That great advantage is 1 of the reasons why management believes Bokoni can generate attractive long-term returns through the cycle. This is 1 of the most important slides in the presentation. The approved project is not simply a continuation of the early ounces model, in many respects, is a completely different business proposition. The scale is different, the mining method is different and the infrastructure approach is different. The early approach was subscale and relied heavily on low-profile on-reef development. Whilst the approved plan is reserve led, phased, and designed around an integrated 180,000 tonne per month operating system. In simple terms, production growth can now follow infrastructure readiness or reserve readiness and operational discipline. The earlier mechanized plan provided valuable operating lessons, mechanized mining could be implemented, but the orebody characteristics change the economics -- the key issue is dilution with the steeper dip recognized on-reef development would lower the delivered grade and require substantially more tonnes to produce the same ounces. The approved model therefore, combines conventional stoping with mechanized off-reef development. Management selected the model that provides the best balance between grade delivery, capital intensity, operating cost and execution risk. Investors should think of Bokoni as 1 integrated production system. Midline anchors the initial 120,000 tonne per month mining profile where Winterveld providing the additional 60,000 tonnes per month. Processing follows the same stage logic using the existing 60,000 tonne per month concentrator first, followed by the new 120,000 tonne per month concentrator. Tailings capacity is also sequenced using existing facilities initially before transitioning to the longer-term solution. The design is deliberately phased, integrated and aligned to mine readiness. One of the lessons from the large mining projects is that risk increases when production is scheduled ahead of infrastructure readiness. The project has been deliberately sequenced so that planned productivity only comes online when the mine is ready to support it. The schedule links underground development, plant upgrades and new plant construction and production ramp-up in a staged manner. First production is planned from the existing plant with the new 120,000 tonne per month concentrator only commissioned later. The philosophy is straightforward. Build capacity first, then grow sustainably. This slide helps investors visualize the physical integration of the project. Metalpine, Winterveld the existing plant, the new plant and supporting infrastructure all sit within a focused development footprint, the shorter distances between mining areas, plant and supporting infrastructures simplify execution and operational integration. We are not creating an entirely new mining district from scratch. We are building on existing mine access, plant infrastructure and surface infrastructure, which improves capital efficiency and execution practicality. It may be natural to assume that conventional mining means less technology, but that's not how we see the design. The objective was never to maximize mechanization. The objective was maximum economic value. Conventional stoping is the primary ore production method because it is better suited to the dip conditions and great objectives of Bokoni. Mechanized development remains important because it establishes access and improve mining flexibility. The objective is not maximum mechanization, the objective is maximum value and a practical executable mining system. This slide shows the 3D illustration of the conventional mining layout, planned for Bokoni. It uses a breast mining layout with raise lines based at 200-meter intervals. a conveyor belt system in the footwall drive provides an efficient and cost-effective means of transporting ore from the stope horizon to the main decline conveyor system from where it is conveyed to surface. This is a well-established mining layout that has been extensively tried and tested. It minimizes grade dilution and thereby maximize the revenue generated per tonne mined. The credibility of a mining plan depends heavily on whether production assumptions are realistic. For Bokoni, the production schedule has been built using conservative stoping rate assumptions, the average planned stoping rate of 267 square meters per crew per month over the life of mine, remained well below the industry benchmark of 300 square meters shown on the slide. Similarly, the production per half level has been limited to 10,000 tonnes per month to account for the logistical constraints associated with conventional mining. This means the project does not rely on exceptional productivity to achieve its plan. The approximate 17% stoping headroom relative to the benchmark and realistic half level production rates are important points because it supports confidence in the production schedule. This slide highlights the value of historical capital invested already at Bokoni. One of the 3 decline barrels at Cliphud portal has been completed and connected to the existing underground workings. That materially improves access to MirelpentHill and supports a more controlled ramp-up, a high-capacity conveyor system is also planned for 1 of the decline barrels. In simple terms, the completed decline work reduces future development requirements and strengthens the execution pathway. This is a tangible example of our historical capital already invested is reducing future project execution requirements. At Vintage felt, the plan is to reuse and refurbish existing infrastructure wherever possible. We plan to reuse the existing offices, change hours, workshop and surface infrastructure at the existing Black fountain Merensky shaft and thereby minimize cost as well as schedule impact. New built is limited to essential production enabling infrastructure that reduces duplication, lowest upfront capital and shortens the development time line. This demonstrates the discipline applied in minimizing capital wherever existing infrastructure can safely fulfill the same purpose. Vintage Volt is not intended to carry the project in the early years. Middle pint Hill remains the anchor during the initial ramp-up. Winterveld will produce an additional 60,000 tonnes per month to complete the 180,000 tonne per month production system. This slide shows Winterveld ramping up to steady state by approximately financial year 2030 with an average wasted grade of 5.6 grams per tonne over the life of mine. The processing strategy follows the same principle as the mining strategy. We start with existing capability, then add new capacity when the mine ramp-up is ready to support it. The existing 60,000 tonne per month plant is upgraded and recommissioned first. The new 120,000 tonne per month concentrator plant is then constructed and integrated with the existing processing system. One of the attractive features of Bokoni is the significant processing infrastructure already in existence. the 60,000 tonne per month concentrator plant provides a pathway for first PGM and chromotype concentrate production in financial year 2028. The new completed chrome recovery plant also enhances revenue during the ramp-up period. The early processing capacity helps establish operating knowledge before the larger plant is commissioned. Equally important it shortens the pathway between capital investment and first revenue. The chrome recovery plant creates an additional revenue stream from the existing 60,000 tonne per month concentrator. The additional early revenue generation is particularly valuable while the mine is still ramping up and the new construction -- concentrated plant is being constructed. The combination of high-grade PGM feed obtained from the conventional stoping and increased chrome recovery support stronger revenue generation during the ramp-up phase. This strengthens the early-stage economics of the project. The new plant is what ultimately unlocks the full Bokoni scale opportunity. It expands total processing capacity to 180,000 tonnes per month when combined with the updated existing plant. The design uses proven processing technologies including new Derrick screens as well as Jameson cells. We have deliberately selected technologies with established operating histories rather than relying on unproven innovation. The plant ramp-up has been planned conservatively and is aligned with the mine ramp up. The key message is that processing capacity is added when ore supply and the operating system are ready to support it. Tailings facilities can become a critical path in a mining project. Bokoni benefits from existing facilities, which will be used alongside the 60,000 tonne per month concentrated plant for the first 5 years of milling operations. This reduces upfront capital intensity and supports project value through capital deferral. Again, this approach is practical using existing infrastructure where it's safe and appropriate and then sequencing new infrastructure around the project readiness. This slide brings the mining and the processing strategy together. The ramp-up against with the existing 60,000 tonne per month plant and then transitions to the combined 180,000 tonnes per month processing system from financial year 2030 onwards. The model allows for a progressive buildup in tonnes milled with additional stockpile capacity built into the system that provides additional flexibility. Overall, this is a realistic representation of large mining, how large projects mature, and it supports a more credible operating plan. On this slide, we show how the tech plan translates into a compelling financial outcome. Bokoni has a nominal capital estimate of ZAR 15.2 billion, including a 15% contingency. The project delivers a post-tax net present value of ZAR 5.9 billion, at an 18.47% discount rate and an internal rate of return of 28%. Importantly, these returns are generated using a discount rate that makes full provision for the project's risk profile. We believe the combination of grade, scale and existing infrastructure supports the strength of the financial case. The key message on this slide is the transition from an investment phase to cash generation. The early years are focused on development, capital deployment and building production capability. Once steady-state operations are established, the project becomes a meaningful cash generator with annual free cash flows of approximately ZAR 4 billion before financing activities. The real value of Bokoni becomes visible once the development phase is complete and the operation transitions into sustained cash operation. Note mining project is immune to commodity price volatility. What matters is whether the business can remain robust across reasonable downside and upside scenarios. This slide shows the impact of price and cost changes on net present value. Commodity prices are outside of management controls, but capital discipline, operating performance and grade control are all within our control. Commodity prices remain the principal financial sensitivity for Bokoni. The approval case uses a long-term basket price relative to broker consensus prices sorry, uses a lower long-term basket price relative to broker consensus prices to build further project resilience. This is important because it demonstrates a disciplined approval basis that was followed in evaluating the Bokoni project. The higher price scenarios show upside potential, but they are not required to justify the approval case. We have, therefore, approached the price environment with caution whilst preserving exposure to upside if market conditions improve. The premeal capital estimate is ZAR 15.2 billion, including a 15% contingency. The capital is allocated across mining, underground infrastructure, surface infrastructure and plant. The funding approach includes 3 potential sources, ARM cash reserves, Bokoni operating cash generated during mining ramp-up and debt funding if required. This flexibility of funding structure allows ARM to optimize the funding mix as market conditions evolve. This slide shows not only how much capital is required, but when it required. Capital spend peaks during the period in financial year in 2029 when mining underground infrastructure at landfill overlap thereafter capital requirements decline as the project moves through development into steady-state operations. This phasing in capital helps ARM to manage liquidity, funding requirements and project risk. It also reinforces the point that the capital program is linked to the stage execution plan rather than being committed all at once. Every mining project carries risk, the question is whether is not where the risk exists, but whether it is understood and actively managed. The principal risk for Bokoni include schedule certainty, production, mining ramp-up, capital overruns, mining rates achieved, grade delivery, plant recovery and infrastructure readiness. Each of these risks have defined controls and mitigation measures. These include development buffers, tracking of leading indicators, suitable contingency, change control, grade control, monthly reconciliations and stage commissioning. Management view is that the risks are real, but they are understood, owned and actively controlled. The key point is that none of these risks were discovered after approval. They were identified during the study phase and incorporated into the project plan. Bokoni will also benefit from ARM's broader project delivery and operating experience. ARM has acted as a managing partner across multiple major projects including commanding and commodity, Turbos and BlackRock. The Bokoni plan draws on this experience through an experienced owners team and EPCM delivery model and deep platinum operating capability. The project governance structure is designed around clear accountability and appropriate oversight. Projects are ultimately executed by people and ARM has successfully developed, operated and expanded mining assets of comparable complexity for more than 2 decades. Procurement is an often underestimated risk in major projects. Bokoni's rent strategy balances 3 objectives: delivery certainty, local value creation and access to specialist capability. incumbent suppliers provide continuity and known performance, the use of local community suppliers promotes local value creation and contributes to increased employment opportunities. International suppliers are used where specialist technology, quality, capacity or commercial value is required. All of this sits under an owner-controlled framework covering prequalification, technical specifications, quality assurance and management of long lead items. Let me summarize the Bokoni case in 5 points. First, we understand the ore body. It is supported by a large grade UG2 resource. Second, we have selected a practical operating model that combines conventional stoping, selective mechanization at a stage sale. Third, the execution plan is phased and aligned to mine readiness. Fourth, key risks are understood and have defined controls. Fifth, delivery accountability is clear with appropriate governance and assurance. Taken together, these factors provide the foundation for a project that we believe can deliver safely, responsibly and with attractive long-term returns for shareholders. Let me now turn to Nkomati. Bokoni and Nkomati are different opportunities. Bokoni is a long-term growth project, whilst in Nkomati is a restart opportunity. The Nkomati investment case is based on leveraging existing infrastructure, existing operating knowledge and a defined commercial route to market. The result is a comparatively low capital intensity opportunity with attractive economics. This section is deliberately shorter and more focused. I will cover project overview, restart time line, operating plan, capital expenditure, financial returns and conclusion. The key question is straightforward. Does restarting Comat create more value than remaining on care and maintenance. Management believes the answer is yes. And the following slides will explain the basis for that conclusion. The restart is positioned as a disciplined value-accretive investment. This slide reminds us that in Nkomati is not a new asset. It has a long operating history across underground mining, open pit mining and processing Mining and processing were placed on care and maintenance in 2021 following a decline in the nickel prices. The restart proposal benefits from extensive operating knowledge and existing infrastructure. That is a major advantage because we are not starting from a blank page. We are reactivating and optimizing existing operation. The significance of this history is that we're restarting a known operation rather than developing an entirely new 1. One of the attractive features of Nkomati is the relatively short time frame to production. The restart and plant refurbishment are expected to be completed within 1 year with first production planned in the second half of financial year 2027. This short execution time line is possible because the restart leverages existing infrastructure and established operating knowledge compared with the greenfield project, the development complexity and time to value creation are materially reduced. In Nkomati, a well-understood ore body, supported by more than 30 years of operating history. The open pit resource include distinct geological zones with different nickel and chromatid characteristic, the PCMZ contains higher chromotype and moderate nickel, whilst the MMZ contains very low chromatid with higher nickel. Understanding these ore types is essential for mining sequence, plant feed strategy and product optimization. The ore body knowledge is 1 of the key advantage of restarting in Nkomati operation. This slide demonstrates how Nkomati monetizes multiple products. The operation is not purely a nickel story. In fact, almost half of the revenue is expected to come from commodities other than nickel. The refurbished PCMZ plant will process both PCMZ and MMZ ore from the open pit mining, nickel concentrate and cause chromatipe production both contribute to the value proposition. The mine plan commences with high chromatid PCMZ or before moving to MZ ore. The sequence follows the geological formation and mine planning logic dictated by the ore body. The proposed plan provides a mine life of 13 years with mining operations at an average of 250,000 tonnes per month. The plan also notes potential to bring the higher grade MMZ or forward, which gives management additional flexibility. The processing strategy mirrors the mining strategy and is structured to optimize recovery and product value over time, processing starts with the PCMZ or with MMZ are introduced later in the pan. Over the processing life, the plan is expected to produce nickel concentrate and cause chromatide concentrate. This multiple product profile helped to diversify the revenue stream and improve the resilience of the restart case. It also provides optionality as commodity market conditions continue to evolve. The production profile reflects the planned transition from PCMZ feed to MMZ feed. Importantly, this slide also identifies future processing optimization opportunities including improved grinding and new flotation technology currently under evaluation. These opportunities are not presented as requirements for the base case, They present potential upside if further technical work supports its implementation. A major attraction of Nkomati restart is the relatively modest capital requirement. The total capital expenditure, including 15% contingency is ZAR 753 million. This is primarily associated with restarting the mining operations, refurbishing of the PCMZ plant and the tailings storage facility. Because this is a restart rather than a greenfield development, the relationship between capital invested and value generated is favorable. And Nkomati benefits from a diversified revenue stream with nickel contributing approximately 49% of revenue. Platinum Group Metals contribute to further 29% whilst other base metal contribute 15%, which provides a meaningful revenue diversification. This diversified commodity exposure enhances the resilience of the operation and thereby reducing dependency on any single metal and mitigating the impact of commodity-specific market downturns. The project capital is ZAR 753 million, including the 15% contingency with post-tax net present value of ZAR 764 million. The internal rate of return is 28.4%, and the payback period is 5.3 years. The recently concluded we lead an offtake agreement strengthens our confidence in the commercial pathway. This slide shows the transition from restart investment to cash generation. The initial funding requirement is followed by positive annual cash flows over the operating period. It reinforces the point that in Nkomati is capital-efficient value unlock rather than a large-scale new development. Let me summarize the Nkomati case. Nkomati provides a practical way to unlock value from an existing asset base. The capital requirement is modest, the execution time line is relatively short and the economics are attractive. The Boliden offtake agreement supports the commercial pathway. Management, therefore, believes the restart is a disciplined and value accretive use of capital compared to leaving the asset on care and maintenance. I would like to conclude with a broader message. Bokoni and Nkomati are very different opportunities, but both are aligned with ARM's long-term value creation strategy. Bokoni is a long-term growth platform to build long-term scale and earnings resilience. And Nkomati is a capital-efficient restart that unlocks value from existing infrastructure. Both projects are grounded in detailed technical work financial review and realistic execution planning. Perhaps the simplest way to think about today's presentation is that Bokoni grows Arm's future while in Nkomati unlocks value from ARM's existing assets Together, they demonstrate our commitment to disciplined, long-term shareholder value creation. Thank you.

Thank you very much, Jacques, for the detailed and cycle presentations. Ladies and gentlemen, we will now move to the question-and-answer session. Before we begin, I would like to reiterate that ARM is in a closed period, and as such, discussions today should be confined to the DFS outcomes and project approvals relating to Bokoni and Nkomati. In addition, I will not be participating in further investor discussions and media inquiries until the release of our results on the 4th of September 2026. We therefore encourage participants to make full use of this opportunity to raise any questions relating to the information presented today.

[Operator Instructions] Tim Clark? the floor is yours.

I'm not sure if you can share it with us, but many mining companies do actually share the full details. So if at all possible, we would really appreciate that to work through the details of our models because certainly, some of the detail you've given us today and the slides will take quite a lot to, to run through and digest and full. When speaking to investors, the primary concern that's been raised is reaching that full capacity. And I appreciate the commentary you've made about below benchmark stoping rates, et cetera. But just geologically, everyone -- I'm not a geological, technical person, but geologically, the commentary is that has always been that there's faulting, there's various issues with the ore body and the reaching steady state and maintaining steady state production is the difficulty. And obviously, that massively would influence your returns. So I suppose my first question is, can you just try and give us a little bit more color on some of those risks around the ore body, how well you know the ore body, how detailed and how far out your drilling. Secondly, just on CapEx. I suppose 1 of the things we've seen in the industry over time is that we get told when projects blow out a little bit or CapEx increases that the detailed engineering hadn't been completed and that we needed to be at a totally detailed engineering level of at least 60% to get assurances and we have had detailed engineering uncertainties that have then led to, especially with retrofits of plants have led to significant CapEx increases over time. So perhaps you could give us some sense of how far you are with the detailed engineering and therefore, how much risk there is on that side. I'll leave it at those 2. I think there are others with questions.

Those are very good insightful questions, thank you, and I think goes to the heart of risk of any underground mining project. I think what gives us coming to the geology first and the underground achieving that mine plan. What gives us a lot of confidence is the fact that we have operated with early ounces model that mine. And we did multiple different mining techniques. So we did on-reef development, waste development, both of those mecahanized as well as conventional development of the raise lines and conventional stoping, so it gave us a very good insight of the ore body itself and the particular risk. And all of that has been accounted for or taken into account in the detailed definitive feasibility study. I think, firstly, relating to the operating history, in particular, the UG2 that was mined at Bokoni all at Middleton Hill is all where Midland Hill, the ore body is basically outcropping against the hill and hence the name, but it's all very shallow. So the earlier mining, especially on the conventional side, where they have had challenges worth hanging wall collapse is just because of the very shallow nature of the ore body in that aspect, and you don't have sufficient horizontal stresses to maintain clamping forces of your hanging wall where we are planning to commence mining with this deeper within the ore body. So we're only starting at 2 level going down. And from the stoping as well as development that we've already done the we've already seen that there are sufficient clamping forces that you don't have these sort of challenges with hanging all collapse. So that gives us a lot more confidence that what we've had the operation experience in the past will not continue going forward. We've also, with regards to a ramp up quite well advanced with the development. We have already accessed 4 level, so we've got access to 3 out of the 6 levels required to ramp up the mine to a steady-state 120,000 tonnes. So that's level 2, 3 and 4. So what's remaining still is 5, 6 and 7. As we are speaking, those decline developments are progressing and continuing. So that also derisks as well as increases the rate at which we can ramp up the mine compared to let's say, a greenfield conventional mining ramp-up. On the adjusted terms also with regards to faulting and other geological disturbances what we have seen at Bokoni is very little faulting. So the ore body is extremely homogeneous. If we compare it for instance to Medicare, Two Rivers a lot less unlating. the ore body horizon on the UG2 is extremely stable, very low bottle intensity of only 9%. So the only challenge that we did have in the upper area is the hanging wall collapse that I spoke about, but that's not really due to the geology. It's more just the nature of the shallow nature of where that mining was happening at. With regards to the capital cost estimate and the risk associated with the engineering, we benefit from the fact that a lot of the brownfield refurbishment work has already been done during the early houses, where you're probably most of your uncertainty and risk it live. So we've fixed up the 60,000 tonne plant. We've fixed up the underground conveyor infrastructure at Middleton Hill. So a lot of that work is fortunately behind us. With regards to the new plant design and new infrastructure design, we have designed it up to a 40% design completion, which is in line with our stage gate policy for a definitive feasibility study. which gives you a 10% accuracy, Notwithstanding that, we have increased our contingency to 15% to provide us with a little bit more additional headroom. But we are quite well advanced with the mining as well as the plant infrastructure design that we believe that we would certainly be able to execute within that capital estimate. Just an example of it, one of the key things and lessons learned from our Two Rivers Merensky project implementation was geotechnical uncertainty in the plant design. And because of that, we have done extensive geotechnical investigations already at Bokoni and all of that has been incorporated into the design of the plant.

Just a follow-up then. Just on contractors. another 1 of those things that comes through is that the South African construction skills have largely or have weakened somewhat. And perhaps you can give us some indication of what you've got in terms of the contractor kind of security to ensure that we -- everyone talks of getting the A team, the B team and C the team, and there's certainly quite a few projects going on in PGMs at the moment. How can you convince or how can you make us comfortable that there's an A team on this project.

Yes. I think first and foremost, it starts with a very strong owners team. So we've got -- our owners team have got project manager, Morrison Maseko has got more than 25 years' experience, also supported by very strong operational people that have got a long track record on project execution as well as operations such as JJ Uber, Yvon Janssen, and they all integral part of the project team. Secondly, we believe in appointing a very strong EPCM model, the engineering procurement construction management model. That's the model that we've used successfully over the last 20 years in executing many big projects. We're probably 1 of the last mining companies to successfully execute and build a PGM concentrator plant, which was the 200,000 tonne plant at TriMas. There were certainly a lot of lessons learned during that implementation all of those lessons we have built into our project plan for Bokoni. Your point is valid about contractor maturity and availability in South Africa. However, in execution in Travis Merensky, we found that the skill set and the contractor capabilities that we found there was well up to standard. So we are confident that we would be able to secure the right mix of skills and capability to be able to successfully execute on Bokoni.

Next question will come from Betty, Andrew Sojan you may proceed. .

Sorry, I put my message on chat. So I'm a bit surprised you called me. Anyway. I was just -- my understanding, tunnel boring technology as well as narrow reef technology has been implemented at Bokoni, maybe you could just speak to what you're seeing in terms of results from that so far? And in your assumptions that you presented today because I didn't pickup that you mentioned either of those? Are you assuming any benefits from this new what's new technology, you could argue into account? Or should we consider any gains that you achieve from better efficiencies, et cetera, from this as additional upside to what you presented today? That's the first question. The second question is also just on the CapEx of ZAR 15.2 billion at Bokoni. How much of that is U.S. dollar-denominated versus rand. And maybe you could just share the rand on exchange rate that you're assuming in that? Because obviously, the rand dollar is incredibly volatile of late, that could be a driver for potential overruns.

Thank you for those questions. Andrew. I'll answer the first question. And then the second question, we'll just get feedback from our financial colleagues to be able to give you accurate numbers on those. So with regards to new technology employed at Bokoni. You're quite right, during the early ounces, our strategy was to try and implement a mechanization as much as possible, and that included both the development as well as the ore body stoping. For narrow reef equipment to be able to get access to the ore body, you have to provide truck less access to the stope horizon to be able to implement NRE. And we used a low profile machinery, similar to what we used at our 2 Rivers board and pillar operations. And that low profile or development produces quite a lot of dilution, specifically on the ore body dip at Bokoni we're in excess of 20 degrees. And with the significant contribution of those tons, making up 50% of your overall volumes, that reduces your overall head grade mild. So in the 100% recognized case, we were looking at stoping grades coming in at 6 grams a tonne However, your development grades coming at 2.5 grams a tonne, which then reduces your overall branded grade into the mill at 4 grams per tonne. For that reason, we specifically in this -- having the knowledge and the insights gathered from the early ounces implementation decided to go back to more a lower dilution, higher stoping contribution towards the total ore mix and in the current mine plan that we're using, it uses conventional stoping supported by mecognized off-reef development. So we've relocated all our access tunnels from the ore risen into the waste nor right, which is a lot more stable and a lot more favorable. And we're seeing that benefit now already for the last 2 years since we've done the development. So we're achieving very good efficiencies and productivity rates with our current development crews on site at Bokoni. So the current mine plan doesn't make use of any NRE narrow roof equipment. But I just want to say that the NRE itself delivered on all our plans when we implemented during the early ounces, it delivered the required stoping production efficiencies, et cetera. What -- the reason why we elected not to go forward with it is just purely the economics specifically linked to the Bokoni ore body, which we have with the benefit of all that inside of implementing at early ounces. chosen a more optimized mining method, which is the conventional supported by off-reef development. Coming to your second question on the tunnel boring machine, it is correct. We are currently deployed or a tunnel boring machines operating at Bokoni, opening up the Winterveld project. tunnel-boring is part of our plan for the Winterveld project. However, it's not dependent on it. So the advance rates that we've assumed for the tunnel boring is very conservative, and it's based on what our current performance is at Bokoni with the current TBM, where we're currently doing 100 meters per month face advance on a 2-shift operation. So that's only working weekdays. and we are planning to go on to a full cycle soon, which will increase that rate to 140, 150 meters per month. And that's the rate that we've assumed in the feasibility study. However, in the unlikely event that TBM is not successful, you can achieve the same development targets worth trackless mining when attacking from both ends, so essentially doing 75 meters spend, which is well within the reaches of trackless single end development. Then the question is why did we go for TBM is because of the potential upside. These TBMs, in particular, the type of TBMs that we're going to secure from international suppliers can operate up to 400 meters plant. which creates significant headroom for further improvement. And that's all additional benefits that's not currently built into the feasibility study. So we went to a deliberately conservative numbers. that in the event that it doesn't work, we always have a fallback plan without compromising the overall plan. However, the TBM does provide significant upside if we are successful in achieving those at higher admins rates, which means that we can open up the ore body significantly quicker, have a faster ramp-up and also overall improved the economics of the business case. Thank you.

On the CapEx 1. Okay. Andrew, so just your question on the CapEx, about how much of the ZAR 15.2 billion is U.S. dollar denominated. That percentage is about 20%. 20% of that ZAR 15.2 billion is U.S. dollar-denominated. And it is for some fleet, fleet equipment as well as processing equipment. On the exchange rate that we modeled to purchase that U.S. dollar-denominated equipment, we used ZAR 17 to the U.S. dollar. So a bit of an upside from our current levels.

Andrew, do you have any follow-up questions before I move on to the next participant.

No, I'll give others a chance.

Next, we will go to Brendan Ryan.

When the original capital estimate for this project made by our former CEO, Mike Schmidt, 4 years ago, was ZAR 5.3 billion. Now you're over ZAR 15 billion. Can you please explain the difference.

Yes, certainly. You're absolutely correct. The estimate was ZAR 5.3 billion. That estimate was also based on 180,000 tonne production plan. It was based on the assumption that we would refurbish the existing Merensky plant. So at Bokoni, we've got 2 plants a 60,000 tonne UG2 plant, which we have already refurbished and fixed up as part of the early ounces and 110,000, 120,000 tonne Merensky plant. The plan was to basically repurpose and change that from a mill float 1 to a mall flow 2 plant. And essentially, that would make up 180,000 tonnes. However, upon after acquiring the asset and doing a lot more detailed investigation into it, we realized that the condition of that Merensky plant was much more extensive work to repay. as well as requirements to convert it from a mill load on to a more players a bit more onerous than initially our estimates allowed for. So that was 1 -- and for that reason, we've decided to rather go for a new plant, a 120,000 tonne plant that is built in design, specifically around Bokoni's mineralogy. And it also affords us the opportunity to include some of the more latest technologies such as sales as well as Derek screens on the combination. So that's 1 part of the additional cost increase. The second cost increase was generally what we have seen also over the last 5 years, that ZAR 5.3 billion was a real terms price in 2021. Is there has been quite a high double-digit cost capital cation and we witnessed that at Arturivis Merensky concentrator build as well especially during the years, 2022 and 2023 -- COVID we covered to the impact of logistical supply chain, et cetera. And the combination of that basically led to the increase in both the plant as well as above inflation capital cost increases. And then I think lastly, the contingency provision that we've made in this latest capital estimate is also higher than what we've put in before.

One more question, please. Your proposed new mining system this optimized mining system, which is going to be conventional plus mechanized. Doesn't going for conventional mining expose you to the same kind of risks that the previous owners of this property battled with and were unable to overcome.

Thank you very much for that question. We have considered a number of options. And as Jacques mentioned earlier, I mean, there was a mechanized option of the employee in the narrow reef equipment. So following that period of that early ounces, we went back to the drawing board. And if you look at the nature of the ore body is generally a steeply dipping ore body at 25 degrees. So hence, going back to that based on the ore body characterization, we had to really go back to conventional stopping layout. Yes, risk exposes us to the same risks, but we have to come up with mitigation measures to make sure that we certainly address those. One of the things that Jacques mentioned earlier on, mining at shallower level with basically key blocks. But now we're going to mine at depth with the support regime that you're going to be employing it will be more prone to withstand whatever geotechnical challenges and issues we're going to face. So the risk assessment has been done, and we do believe that we can manage safely and optimally still using the conventional mining method.

[Operator Instructions] Next, we have Debo Hanson from Investec. Dahan, you can go ahead.

I think my first question is just around understanding of operating costs. So can you please quantify and unpack how operating cost on a rand per tonne basis, I expect to evolve from the ramp-up to 60,000 tonnes and also value to the 180,000 tonnes level. and how much a steady state the fixed cost will contribute to that total an estimated cost of around ZAR 2,061 per tonne. What is the 6E post-blood on Bokoni and the other question is around CapEx, where I mean given the fact that 55% of the Bokoni CapEx requirement is concentrated between FY '27 and FY '29. And this is the during ramp-up phase. Can you break down how the 3 funding methods will be funding that project during that period? And the question -- the final question is around what is the normalized SIB CapEx of Bokoni at steady state in FY '32?

Jacques, will you address the operating cost deviation of the pro -- split. And then Tsu can discuss the CapEx concentration of the financial year '27 to '29, and Jacques can address the last question. .

Yes, certainly, can maybe I ask Tsu to start first. I'm just pulling up that full split quickly.

No problem.

Okay. All right. No problem. So Debo Hanson, as you would have seen, I think, in the presentation, we disclosed peak funding of about ZAR 10.4 billion. and that will be funded through a mix of ARM cash reserves, cash generated by Bokoni from the -- plant when it comes -- when it starts producing in September 2027, as well as a little bit of debt funding. So how we are looking at it and just to provide, I mean, we're still at initial discussions with our lenders as to what that would actually look like in terms of concrete percentages, how much would be funded from each bucket. But I think there was a slide, I can't remember which slide, which did show -- is it just me or are they frozen -- sure that we maintain balance flexibility as well as still being able to declare and pay a dividend to our shareholders in line with our dividend cutting principles. I hope that answered your question, Dan.

Move to the question on the pool split. So I've got it here. So on the Paul split on Bokoni, the platinum contributes 37%; Palladium, 40.7%; rhodium, 7.6% and gold, 1.3%, routinium, 10.6% and Iridium 2.6%. And you've also got minor metals, nickel, copper and chrome. We have more as part of the chrome recovery, a roughly 7% yield of plant feed. which is in line with what we're achieving at Modikwa and Travis to make chrome concentrate 40% saleable chrome concentrate. With regards to the operating cost, the steady state long-term cost for Bokoni is ZAR 2,061 per tonne milled. If you compare that to reverse, which is currently running at about ZAR 1,500 per tonne mill, and Medica, probably about at ZAR 2,300 per tonne mill. We think, given the scale and complexity of Bokoni, our internal benchmarks, it benchmarks well. On the evolution of the cost obviously, to be able to get those long-term real operating cost of just over ZAR 2,000 per tonne, you need certain economies of scale. So when we start off with the initial processing at 60,000 tonnes, your operating cost would be higher because of the high fixed cost nature of PGM mining, and that will be roughly about ZAR 3,000 per tonne and then it will progressively come down to ZAR 2,000 a tonne as the amount of milling production volumes increased up to steady state at 180,000 tonnes. all of these costs that are giving you is in real 2026 terms. So when you -- we do see those costs coming through in 2029, 2030, we'll obviously just have to escalate it for appropriate escalation. I think your last question with regards to SIB capital costs. SIB capital cost is between -- and a ZAR 1 billion per annum. And that's also in line with what we're seeing in combination between -- running slightly higher because of the higher volumes processed at 2 of us, we're doing 300,000 -- per month, and also being 100% mechanized mine, you've got a lot higher mechanization in terms of traction as well as -- so we do think that both from an operating cost as well as cost. -- we've done in tens of benchmark. from Other notations within 1 late and that compete well and that it is achievable. -- as part of our third-party review done by -- as part of our stage gate approval for the DF tested by the third party to compare change...

Frozen that we had last connection. Debo, I am going to use you to please help me. Can I check if you heard all of Jacques answers?

I had all of Jacques answers, it's -- to his answers -- actually, Jacques, I only started hearing from the -- when you said palladium was, I think, at 40.7%. So if you could repeat the pros split, but in the rest I heard. Through in the middle, I did not hear. But which -- my question was essentially asking when do you expect essentially the early revenue from Bokoni to then start funding that CapEx.

So I think what we will do is just ask Jacques to repeat the pro split and when Jacques is done, I think you need to under all of the questions from scratch. I apologize.

Thank you, Dan. So the pro split for the Bokoni UG2 ore body is platinum is 37.2%. Alladium is 40.7%. Rhodium is 7.6%, gold 1.3%, rethenium 10.6%; and Iridium 2.6%. Thank you.

ZAR 15.2 billion -- the total capital build to be spent over the 7 years -- ZAR 2.3 billion, that ZAR 15 billion before offers ushered in the presentation, first revenue is expected in September 2027. And from then on, we're then expecting the ounces that are generated -- or sorry, that are produced will then start funding -- partly funding that capital bill such that in our peak funding instead of the ZAR 15.2 billion drops down to ZAR 10.4 billion .

Hunt you have any follow-up questions? .

Just 1 last question team. I think, look, it's around capital allocation. I mean, ARM has already deployed ZAR 6.5 billion, including acquisition early development in Bokoni, right? And now is committing a further ZAR 15.2 billion. Why is the Bokoni project, the best use of capital given the size of investment relative to the implied value that it will create or even versus allocating capital to other projects or M&A opportunities.

It's a very good question. It's something that we obviously evaluate very, very carefully. So as far as ARM in our criteria when we evaluate projects, we've got a very strict capital allocation guidance system, looking at it. And we always -- when we're evaluating a big project such as this compare against other opportunities available at that time. and then using a ranking system to see strategically what is the best interest for ARM and its shareholders in which how to allocate those capital. When we compare Bokoni's attractiveness and returns relative to other projects, what really attracts us about Bokoni is the long-term scale and possibility with Bokoni, but more so the cost competitive position that we foresee it will occupy on the industry cost curve. So due to its high grade and in that slide that we've shown relative to 2 rivers, more than double the grade. And at Modikwa, I think it's a 30% improvement compared to medicate grade that we'll get out of Bokoni that directly translates into much more competitive unit cash cost position. And we think that gives Bokoni significant resilience, once the enabling infrastructure and the platform has been created by which requires the capital investment to sustainably be able to produce 180,000 tonnes per month. And that combination of position from a competitive point of view. It's cash-generating ability through the cycle that we've seen as well as its long life means that it's caused quite high on our capital allocation metrics. But we rigorously every time test our assumptions as well as our strategic objectives in reviewing these projects and before making a capital allocation decision.

Next, we will move to Brian Morgan from RMB Morgan Stanley.

There we go. Jacques, when you talk to us about the decision to fix up a 60,000 tonne plant. I'm a bit worried that it's small and old subeconomic at us maybe about the decision to refurb that and build a 120,000 tonne versus building a whole new 180,000 tonne?