Caledonia Mining Corporation Plc (CMCL) Earnings Call Transcript & Summary

Okay. So just run through the disclaimer now. We're going to run through about the 25-page presentation. A lot of it is going to be pictures. Let's go through that presentation. And then at the end, we will have an opportunity for questions. I prefer people to two questions verbally because then you pick up the nuances better. But if you're feeling shy, you can raise your hand and type -- you can type a question and we could try and do it that way as well. Okay? Okay. So by way of introduction, I'm John Learmonth, Caledonia's Chief Executive, prior to the CFO, as you may well know. I'd also like to take some time to introduce Victor Gapare who's an Executive Director joining the group in January following the acquisition of Bilboes. I would just like to give Victor an opportunity to introduce himself, please, Victor.

Thank you, Mark. My name is Victor Gapare I for Anglo American Corporate in Zimbabwe for 16 years. In my last job in Anglo was the Director for the Golden Pyrites Mining division. I led Anglo American at the beginning of 2003. After I completed the management buyout of the Golden businesses, which I was managing at that time. From 1 January 2003, I became the Chief Executive Officer of Bilboes. So I've been Chief Executive of Bilboes until we completed the transaction with Caledonia in January 2023. Between 2009 and 2011, I was also President of the Chamber of Mines of Zimbabwe. Basically, the Chamber of Mines is the organization which represents organized mining in Zimbabwe. And it includes suppliers and asset providers to the mining industry as well as professionals in the mining industry. During the time, over the last few years from really from 2010, I led the Bilboes team, which raised the $6 million from Resources Trust, which is listed on the London Stock Exchange. So we used that money to carry out exploration. To begin exploration if they Bilboes properties. In 2018, we raised the $10 million, which helped us progress the feasibility study. Also in 2018, we also raised another $7 million debt from the Industrial Development Corporation of South Africa, which has enabled us to restart our operations after we had closed them during the hyperinflation period. So basically, that's a little bit about me. Thank you, Mark.

Thank you, Victor. And then also Chester Goodburn who replaced me as CFO last year. We've got Dana Roets, who is the Chief Operating Officer, have been with us for about 10 years now. Maurice Mason, Vice President of Corporate Development; Adam Chester, our General Counsel; and Camilla Horsfall, who is Vice President, Group Communications. Okay. So let's get into the meat of the presentation. Just in terms of results highlights, production all well disclosed previously, increasing from about 58,000 ounces in 2020 to just over 80,000 ounces in 2022, which is good. We've not been held much by the gold price. So all the increase in revenue is largely driven by higher production. Gross profit up from $46 million to $54 million to $63 million, but you will notice there has been a slight compression in the gross margin for about 46% in 2020 to 43% in 2022. And that reflects the general increase in our operating costs offset by economies of scale. And then also draw attention to dividends, which have increased from $0.335 in 2020 to last year, we did $0.56. And again, more information about that later. Okay. All of this will come into more detail later. Just a few words on safety, if I may. Very unfortunately, we had a fatality in 2022 and a further fatality in 2023. Dana may want to talk about this more, but is it fair to say that the fatalities resulted from nonadherence to prescribed safety procedures. And our response to that has to be to redouble our attempts to enforce adherence to safety procedures. And clearly, fatality is very distressing events, but we just have to work harder to make sure that people adopt the safe working practices that we set out. Other than that, our general safety performance compares quite well with other similar deep-level mines in the gold sector. Dana, would you like to add anything further to what I've said though?

No more because I think it's just important to also note that we did -- we were involved in increasing our labor numbers, which complicate things. And I think a good indication of -- we actually improved our safety record from 2021 is the fact that [indiscernible] ability in the frequency rate, we expect the extra number of employees into account year-on-year improved from 0.26 to 0.23.

Yes. But like I say, it does compare -- if you compare us to other gold producer, I'd say not many of them produce information of the granularity. We actually performed quite well. So can we just move on and talk about the operations, Dana. Can I ask you to go to the next couple of slides.

Similar to what I said about safety, we started a buildup process in [indiscernible] and you can see there that on and [indiscernible] we completed that build up last year. So it was a steady build up over the last 7, 8 years. And hopefully, this year, we can get into steady state. We had record production because we had build up. We achieved our targets of 80,000. We told the market the higher end of our forecast. And now it's time to settle down and optimize and try and improve economies of scale.

It is as if you look carefully at the production, quarterly production numbers in the lower graph, you would notice there is a general quarter 1 is lower than quarter 2. And so production tends to progress as the year progresses. And we'll probably see the same pattern again this year with lower production in Q1 and then peaking in production in Q4. So we'll -- that's all of our operational. I say is that the grades remain consistent at about 3.36 grams a tonne. The recoveries remain consistent at 93.9 gram -- [indiscernible]. The real driver of growth has been tonnes milled as Dana says our objective now is to stabilize production at between 75,000 and 80,000 ounces a year. And then having done that, see what we can do, what we optimize it. So look at ways where we can do what we do, but just do it more efficiently and therefore, control our costs. Okay. Should we move on? Solar projects, it was something that we started out in 2020. That was clearly delayed by COVID, by delays in the manufacture of the panels in China and then the shipping of the panels. It was finally commissioned in November last year. All the way through that period, I'm afraid the grid deteriorated, and so particularly in the course of 2022, we found ourselves spending more money on capital equipment to protect or rent equipment from voltage spikes. And also we have to spend more money on diesel and maintaining generators. But it's worse in October. And it's immediately before we commissioned the solar plant. We're using about 720,000 liters of diesel a month. Diesel cost of about $1.50 and lead to that is considerable. But by January this year, as a result of the commissioning of the solar plant. And also, it's going to be said as a result of improvements in the grid and grid supply, in January, we only used, I think, about 18,000 liters of diesel, a very substantial reduction in our diesel consumption. I am comparing peak with trough. But even so, if you take the average consumption in the course of 2020 with a reasonable expectation, an average production -- of average diesel usage going forward, we will expect to see a reduction in diesel consumption and also the benefit of solar compared to just an average cost of electricity supply, that works out and about $35 per ounce produced, so approximately 5% of the online cost. It's fair to say, we funded the wholesaler project, which cost about $40 million using equity, which we raised in 2020 in New York and then the excess we funded ourselves from cash. Just it's inappropriate really for the business of that nature, some of the business, not to be ungeared. And so we are now completing an exercise to raise a bond in Zimbabwe by the vehicle that owns solar, and we're looking to get about $7 million to $7.5 million in by the end of March. I think just correct me if we're wrong, I think we've got about 4.5 in at the moment. And we're probably expecting another couple of million dollars towards the end of some time this week [indiscernible]. Is that correct?

Receive what we expect to [indiscernible] by the end of this week.

Again, there's nothing we don't really specifically discuss politics, but it is interesting to compare the way that the Zimbabwean authorities have responded to the same electricity crisis that also exists in South Africa. And so whereas the South African government appears to do very little to help facilitate or encourage large industrial users to put in place their own IPPs. By contrast the Zimbabwean authorities were very proactive in terms of encouraging and facilitating a fast-tracking approval process for things like our solar project and facilitating the movement of the equipment across the border. And then another development, which is current is through an initiative called the Intensive Energy User Group, IEUG, which has been established under the auspices of the President himself. We're now hopefully moving to a situation where Blanket can enter into an agreement for import power directory from Zambia or Mozambique, which may have certain cost advantages, but will further reduce our reliance on the grid. Again, that's a development that you would be uncomfortable or unexpected in South Africa. So it's just interesting to compare in practical terms, the way that the Zimbabwean authorities have trying to find -- help people find a solution to the same problem that exists in South Africa. Okay. Should we move on and talk about some other bets. I think we're going to talk about Bilboes now. So could I ask Victor to run us through a few slides on Bilboes, please?

Thank you, Mark. As I already said, Bilboes houses the gold mining assets, which used to belong to Anglo American Corporation in Zimbabwe. Anglo mined oxides treated they are through the heap leach technology. Pretty much recovering. In fact, between the time they opened the mines to the time we finished mining the oxides, they mine about -- we produced about 9 tonnes of gold from the Bilboes assets. Anglo had also started the exploration for the sulfide, which is what you find below the oxides and they drilled about 17,000 meters and established in fair results of just under 500,000 ounces. They the exploration when they were getting out of the coal mining business all over the world, and that's the time when we booked the assets in 2003. Between 2010 and 2018, we drilled further 80,000 meters and established a resource of just under -- or just over 3 million ounces. We also contracted DRA to actually carry out a definitive feasibility study on that resource. And at the end of the feasibility study -- please move to the next slide. At the end of the feasibility study, which was completed at DRI mine with a life of mine of 10 years with a planned average production rate of 2.4 million tonnes per year and the planned average new feeds of 2.3 grams per tonne, that came your grid for an open pit deposit is actually quite a good grid. We are expecting a life of mine gold production of just under 1.7 million ounces and the average life of mine production of 167,000 ounces per year. Actually peak produced 200,000 ounces per year. The peak funding requirement for this project is USD 250 million. This is at 2021 -- end of 2021 prices. The project economics basically at a gold price of $1,650 per ounce. The project is the post-tax NPV of $323 million, a post-tax IRR of 33.4% and an all-in sustaining cost of $826 per ounce. So if you just use the current gold prices, maybe if you upgraded that to about 1,800, you can actually see the impact on the bottom line, basically. In the meantime, when we were drilling the exploration for the feasibility for the we actually also established some remnant oxides, which we have started mining. That picture on the right there is actually the current mining which is taking place at Bilboes. We expect to produce about 12,000 to 17,000 ounces per year from the current site operations and that project is a life of about 2 to 3 years. So at that rate, we should be able to have it over the 3-year period, maybe somewhere between USD 20 million and USD 30 million as free cash from this operation.

Okay. [indiscernible] on the top.

Thank you, Mark. Again, Motapa is a property, which is contiguous to the Bilboes assets. Actually, in the 1990s, Anglo entered into a joint venture with the original owners of Motapa. And mine the oxides from the Motapa claims. They also started drilling for sulfides because the idea was that with the sulfides which we expected at Bilboes and the sulfides at Motapa, we should be able to establish a mine reasonable scale by Zimbabwean standards. However, Anglo also stopped anywhere on this winter, we're getting out of both at the end of the 90s. So the current Bilboes team actually went on the Motapa project because some of the mining which was taking place, there the oxides, some of them were being transported to the Bilboes heap-leach operations. The current plan is actually to put in some money. Such exploration hopefully get some upside because we do know where the targets -- we have some targets for oxides. Maybe if we establish the oxide, complement the oxides which are being mined at Bilboes, it actually hopefully improve the cash flow from that operation. But long term, the idea is to actually carry out exploration for the sulfides because we believe you should combine the sulfide at Motapa and the sulfides at Bilboes, you can naturally get a mining scale with economies of scale in this area.

Okay. So we -- sorry, just sorry to interject. So just before we move on to the financials. By itself, Bilboes is a very attractive asset. It's relatively large. It's relatively high grade, and we acquired it at a very, very attractive price. The work we're doing on the -- these are our own feasibility study, isn't just to revalidate the feasibility study done by Victor and his team to reflect the current environment. We're also looking to see whether it's possible to do that sort of phased -- to do that project on a phased basis with a view to minimizing equity dilution. So there's always going to be a balancing act between achieving growth and minimizing dilution. So you get -- we're solving for the best net present value per share, not the potentially highest NPV of the project. So I think that's quite important. But Bilboes together with Motapa really is potentially a very, very attractive asset. And the nice thing is that we've got the same geological team at Bilboes who successfully identified the resource base at Bilboes, and they can transfer their skills and experience and using pretty much the same infrastructure that they've already got at Bilboes to go and start looking across the road at Motapa. And that's one of the reasons why we wanted to accelerate that process by having the modest equity raise that we completed last week, but I'll come onto that a bit later. So frankly, Bilboes and Motapa together are is now standing at asset package. I think we just move on and talk about the financials. Chester, are you able to just give us a couple of minutes on your slide, please.

On 2020 very much reflects the success story of the 80,000-ounce target we set ourselves at Blanket Mine. And it also sets us up for our future growth phase of our newly acquired mining assets, as Victor earlier explained. When looking at the revenues, I'm pleased to see that it's increase in ounces at Blanket Mine. And later on, we'll also see in the cash flow statement, the increase in cash generation because of that. Production cost in the growth phase remain in check. You'll see that this occurred during a period where our peers had significant increase in inflationary costs, but let's talk about production a bit later. Our G&A has increased but other reasons. We've increased costs and expenses on our advisory services, cost to acquire Motapa and Bilboes. And we've also increased our salaries and the wages all of our senior staff members to set ourselves up for this new future growth phase apps at Caledonia. Our profit after tax includes noncash items such as $7 million of deferred tax expenditures in our tax expenses. We've also got foreign exchange losses, they are unrealized also noncash, and this might feel question on why the EPS is different to the adjusted EPS $0.20 per share. Also included in that is impairment expenses of $8 million that we've incurred is above 750 meters that are mined out and currently not in our life of mine plan. We move over to production costs Our production costs are looking good. Costs decreased per ounce basis due to the increase in the ounces. It went down from $742 to $705. with this, we've increased our wages and salaries in absolute terms. That's due to high bonus paid in Zimbabwe for our online staff due to the higher production ounces that we've achieved. Consumables increased due to inflationary pressures and unforeseen maintenance. And I'd also like to highlight electricity expenses that's come down due to the sale of bonds as connected to the Blanket Mine grid in November. Also, it shows a decrease due to transformers that we've installed at the Blanket Mine, improving our power factor and also reducing our kilowatt hour usage. We move on to the next slide. Our G&A admin costs were higher due to the advisory services fee, obtaining the Bilboes and top assets, as explained earlier. And you can also see the salary expenses that has increased to help us to unlock the value at Motapa and Bilboes Mine. We move on to the next slide. Taxation. Most of our tax is paid in Zimbabwe to the Zimbabwean government. It's got a very large noncash component of approximately $7 million. And it's very difficult to reconcile this back to our USD-based profits as the taxation calculation is formed in dollars. Moving on to cash flows. I'm pleased to see the net cash from operating activity is increasing by $12 million due to the increased ounces. We've balanced the reinvestment of all those cash flows worth returning money to our shareholders, pointing that we can realize cash returns from Zimbabwean assets. And reinvest that in initiatives such as the solar plant and the new mining assets that we obtained. Moving over to the financial position. You can see here that our noncash -- noncurrent assets increased, and that's due to the investments in Central Shaft, Bilboes, Motapa and the solar plant. Our cash has come down due to this. But what is important to note is that our balance sheet remains conservatively geared, and that enables us to obtain potential funding to unlock the future growth phase. The summary cash generation was up in 2022. A good balance was achieved in reinvesting cash generation and new assets, while distributing cash to our shareholders. One is also very exciting to see that our balance sheet is in good position enable us to unlock our future opportunities.

Thank you, Chester. Okay. Then I'll start off with just a few words on the fund raise that we did last week. in conjunction with the announcement of the 2022 results. So we raised about $10 million in London, and we're currently -- and that was through an accelerated book build. That was primarily to allow us to fast track. We'll get going on some of these new properties that we've acquired. So in particular, the feasibility study in Bilboes kickstart the exploration project at Motapa, where we're hopeful, not just a long-term objective of finding significant sulfides, but maybe also the potential to find some near-term oxide material that we could turn into cash quite quickly. We'd like to -- we need to establish what we call a shared services center in Bulawayo, which will allow us to begin to realize the synergies of having Blanket in the south -- towards the south of Bulawayo and Motapa and Bilboes to the North of Bulawayo by having a shared facility providing things like financial accounting, HR, technical services and a procurement and goods receiving facility so that we can actually try and realize some synergies there. And then finally just initiate some exploration work that Maligreen. It won't be lost on you that the -- our net cash position at the end of December was about $1.5 million. And we -- it's fair to say that we -- whilst Blanket is highly cash generative, we have the effect or been using Blanket as a to fund strategic activities that don't relate to Blanket, in particular, the initial purchase price of -- for the Motapa, the fees that we've incurred -- which were quite substantially because of the complexity of the transactions on Motapa and Bilboes. And then historically, looking backwards further, the acquisitions that we made of Maligreen and also the -- when we look to things like [indiscernible] and [indiscernible]. We -- so we did a modest raise. We're looking for about 10 million in the U.K. Why we chose the U.K.? Is we want to say, well, it'll be relatively quick [indiscernible] in the States would have seen quite a bit longer because of the SEC registration requirements. And also, it's fair to say that we wanted to give to U.K. a fair chance to see if it works or not for us with -- we've spent a lot of time and effort over the past years marketing in the U.K. and we wanted to see whether there actually was to just test the strength and depth of demand from institutional investors in the U.K. And I'm pleased to see that we got 3 new institutional investors on the register who are mining specialists and will, hopefully, they recognize the vision going forward and hopefully will provide further support as we go forward. It was done at a difficult time when our share price shot up earlier in the week of marketing and then stabilized. So the issue price was about a 3% discount to the 20-day VWAP. And that's the -- that's where we the fundraise. The Zimbabwe approximately $3 million is still open, and that is to allow time for Zimbabwean institutions to get the liquidity in place. So that they can participate. The nature of the investment climate in Zimbabwe is that whereas institutions have appetite to invest in us, but don't always have the money at the right time. And so they need a bit more time to be able to sort of shuffle things around and subscribe. So that's the fundraising. Can we just turn to the dividend. This is old news, really. We've paid a dividend for 10 years or so. Initially, it was denominated in Canadian dollars when we're a Canadian company until 2016. But it was a USD 0.07 per share per quarter. And then in early 2020, we started as we were getting closer to the end of the Central Shaft project, and we were more comfortable with our cash flows. We felt able to loosen the purse strings a bit. And so we started increasing the dividend by about 1% per quarter. We paused in March, April 2020 to just allow us time to see what the effect of COVID was on the business. That once we've done that, we then felt comfortable to continue the rate of increase. But by the time we got to January last year, it became apparent to us that we knew we were going to be getting -- moving to a situation where we were going to get our hands on new assets, and that would put us into a position of have been becoming more of a growth company with a requirement for capital. And so in that situation, we felt it just disingenuous to continue to increase the dividend further. So the dividend policy is to put it simplistically, is our dividend policy is to pay dividend. Our intention is to maintain the dividend at current levels, about [ $4.14 ] per share per quarter. Keep it about that level. And then as and when we bring new projects on stream and they become cash generative then to resume dividend increases. So for the foreseeable future, I wouldn't expect to see any increase in the dividend. Having said that, though, barring any unforeseen eventuality, I wouldn't expect the dividend to be reduced. Should we move forward and give a look forward for -- this is expected from an we put out in January. So gold production for Bilboes is -- and this is from the oxides is approximately 15,000 ounces for the year. We say between 12,500 and 17,000, Blanket between 75,000 and 80,000 ounces. So that would be for the year and between 87,000 and 97,000 ounces. Online costs, now we split -- online cost, we need to be a little bit careful about how we explain this because the online costs of Blanket having -- looks to be in the order of what, $770 to $850 an ounce. That's quite a wide range because it is fair to say that we are experiencing some input inflation, and it's difficult for us to predict where that would end up. But a Blanket -- Bilboes, as the online cost of Bilboes will be considerably higher because that is a low-grade oxide project, cash generative but much higher cost in terms of the cost per ounce. And so blending those together, the online costs at Bilboes is about 1,200 to 1,320 plus the online cost of Blanket was 770 to 850 gives a blended group online cost per ounce of about $900 to $1,000 an ounce. But that is clearly largely skewed by the effect of the Bilboes oxides. It's also fair to say that the cost -- the online cost per ounce that Blanket of 770 to 850 doesn't reflect the benefit the $35 an ounce I referred to earlier. It doesn't reflect the benefit of the solar plant because the solar plant is by Caledonia, not by Blanket, and we own 64% of Blanket. So the idea is that we Caledonia, we sell power from the same project to Blanket at a price which reflects Blanket's long-term average cost of electricity, which is that the minority investors in Blanket are neither advantaged nor disadvantaged by the solar project. And the benefit of the $35 an ounce is reflected at group level in the all-in sustaining cost, which is between what 1,150 and 1,250. If you were to reverse out from the online sustaining cost, the effect of the online cost that Blanket -- the all-in sustaining cost, excluding Blanket, would be in the order of about $1,000 an ounce, which is about just 1% or 2% higher the cost that we incurred in 2022. So I just think it's important to put the projections for our costs in context with the effect of -- the short-term effect of the Bilboes oxide project. CapEx for this year is going to be about $31 million at group level. $28 million of that is a Blanket. Of that 28 million to about 10 million is going to be spent on a new tailings facility. The old tailings facility is now pretty close to its maximum capacity, and we will need a new facility, which will be -- which will set the business up for the next tens of years, but we need to get that up and running before the end of this year. And there's going to be another $10 million or so spent on the deep level capital development at Blanket Mine, which is the effect of the horizontal development from Central Shaft at very low levels to allow us to continue production and also gives us platforms to resume our level deep level exploration. So I think that is a relatively quick canter through the formal presentation. We can open that to questions.

Should we deal with some of the written questions first, Mark. There's a few. And then if anybody else has questions, they can just raise their hand and we can deal with those as they go. The first of -- two questions from Howie regarding earnings. Well, partially, I think has already answered that in terms of the difference between adjusted earnings and cash earnings in terms of did we earn $2.20 or $1.36. So I think Jess has really dealt with that in terms of adjusting out the noncash items. The second part of the question is how do you justify the sale of stock for 6x earnings and a relatively expensive cost of equity? Mark, I don't know if you want to take that one?

As I said, it was a very modest raise. It was done to test the strength and depth of the London market. It was to -- made good to the treasury that we raided late last year to fund strategic acquisitions and kind of we don't -- we can't determine the rate at which transactions come along. And ideally, we would certainly done the top a deal a bit later that the opportunity presented itself. And we -- the internal rate of return on the main Bilboes project is substantially higher than it was in this phase. So it's not something that we'll choose to do every day of the week, but we're comfortable with having done it.

Some questions on costs, a question on what percentage of cost is expected to increase in 2023. There is a Slide 20, which is on our website, which details cost guidance for -- the online cost and the all-in sustaining for the group and per asset. So shareholders can look there if they're looking for cost, Chester. I don't know if you have any comments on cost increase and what we're expecting this year on budget? I mean, we have already given guidance. I don't know if we can say much more than that.

So in the balance numbers, will increase due to the oxide that would add cash to our coffers and perhaps skew the numbers a bit, but at the Blanket level, we're looking at a 4% to 10% increase, and we've got some savings that are locking that by the solar plant efficiencies.

Yes. So we are seeing a reduction just to what Chester was saying, the benefit of Solar isn't reflected in the online cost, the benefit of solar is reflected in the all-in sustaining cost for reasons I just explained. But having said that, the solar is displacing or was previously a much limited use diesel. And so by displacing diesel, we are going to hopefully see a lower electricity charge of Blanket than we had done previously. Labor, we pay our labor in U.S. dollars. So I think we'd probably see modest inflation in our labor rates. The way the chamber works now is the Chamber of Mines and the sort of the collective bargaining system, I think our quarterly wage renegotiation. So I don't expect too much damage there. Where we are in the same position, I think, is -- there's all other gold producers is the inflationary effect on inputs like steel, explosives and what have you. And then we just got to rely on our quite efficient procurement business based in South Africa to be able to get the best price. So consumables only reflect 1/3 of our costs. The other third labor, we've got hopefully subdued inflation and then the remaining to electricity, we may even see a cost reduction. But in terms of the all-in sustaining cost, as I just explained, if you strip out the effect of the high-cost operations of Motapa oxides, we're looking for the all-in sustaining cost to increase from just below 1,000 to approximately $1,000 an ounce. That's excluding us -- if you strip out the effect of the Bilboes oxide. So some cost increase, but I don't think enough to get alarmed about. A question -- the effect the tax -- I'm very pleased with Chester can talk about the tax rate. Our tax rate as the previous CFO, I don't think Chester went clearly enough. The bulk of the tax we pay is tax in Zimbabwe. And the Zimbabwean in tax computations are done on the basis of local currency-denominated accounts, okay? We actually report our accounts in U.S. dollars. And so if you can try and reconcile the U.S. dollar tax charge back to something that makes sense to you, it won't work because the actual underlying calculation is done on the basis of different -- completely different currency, which means you've got very different realized exchange gains and exchange losses. I'm very happy to hand that over to Chester for further clarification, if you can Chester.

Yes, I'll think I'll leave the fact that it's calculated in dollars. I think you explained that well, Mark. Also something would be noncash items that we don't get a deduction for, impairment expenses of approximately $8 million. You don't see the benefit of that and the profit before tax. Unrealized foreign exchange losses, that's also before tax. And you'll note that the deferred tax is a very big component of our tax expense. That's a noncash item, approximately $7 million.

We also -- there's other 2 areas of inefficiencies in our tax structure. The first is withholding tax as withholding tax as we move money around the group. So in particular, we incur withholding tax on the management fees paid from Zimbabwe to South Africa. And then further, we incur withholding tax on the distribution of dividends from Zimbabwe up to the U.K. And then the second area is the -- now we are looking to -- and so we also end up paying tax in South Africa on intercompany profits made in South Africa. And the taxes South African intercompany profits are primarily from our procurement business. So to try and minimize that we are setting up a procurement business focused on Bilboes, so it will service Bilboes based in Dubai, so that we will -- it's a lower tax regime than in South Africa. We can't move the existing procurement business from South Africa to Dubai because that would be a deemed disposal, which will give rise to South African CGT. The other area of tax sort of inefficiency is the fact that we're the top company is based in Jersey, where the tax rate is 0 and that means that expenses incurred in Jersey don't have any tax relief. So I think all of those things together explain why our headline tax rate is quite high. Having said that, the underlying tax agreements in Zimbabwe is a, very stable; and b, is quite sympathetic in particular because you get 100% capital allowances in Zimbabwe for capital expenditure in the year-end, which is incurred, okay? So that's the tax rate. So a question here about EPS. We don't give EPS guidance we used to. And it just became an absolute nightmare because there are so many variable factors that we cannot control, so things like foreign exchange gains, foreign exchange losses. A few years ago, you have the export credit incentive scheme, which saw us being paid the premium. It just became -- we went end up chasing our tail in terms of trying to reconcile and explain stuff over which we had no control. So we gave guidances to production costs, CapEx, and you can make your own view on the gold price. And then everything after that, and frankly, you have to take your own view. We found ourselves just getting into ever-decreasing circles on that. A question on interest rate on the bond. Look, Andrew Cook asked a question on the interest rate expected on the bond. Chester can provide details of that. But I would caution you that we're talking about the financial -- we're not talking about Wall Street. We're talking more about sort of Robert McGurty Avenue. And the sophistication of the Zimbabwe capital markets is not as advanced as it would be elsewhere. And so there is appetite for green bonds outside Zimbabwe, but this is a purely domestic issue, and I don't think it's particularly tenured green. And the reason we're not offering those bonds internationally is that then we would be expected to provide guarantees as to future ability to externalize capital. And we're not in the business of backstopping future government policy over which we've got no control. Chester, do you want to talk more about the terms of the bond raise?

cost side is 9%, 9.5% per annum. We pay interest twice a year and tenure of the bond is 3 years. Affability of options are limited. And green bonds, as Mark said, were available in country.

Okay. The question regarding mining conferences. I mean, one of the -- we've mined conferences that we're planning to attend. And you will notice the analysis of G&A, that the Investor Relations cost has increased quite substantially as a function of underlying numbers, but it's in it somewhat. And that reflects a return to face-to-face set a conferencing, which -- we just made a point that we have to do these things, but they are very, very expensive. And we are trying to be much more selective in terms of which conferences we go to and which ones we pass on because some, frankly, are very good and some frankly are less can you give guidance as to which ones we're currently planning to do? I know come the road.

In London and Europe, we are probably going to do the London one-to-one in November. I don't think we're going to do the Precious Metal Summit there in Zurich. So at the moment, it's just the London one.

And then also -- that's just in Europe and U.K. and we're also going to the Denver Gold Show, which we found very good.

Denver and Bela Creek as well. And then the one in June.

Yes. I think it is fair to say that we don't -- some of these U.K. European-based events are a little bit anemic compared to the U.S. events. And -- and whilst it's not particularly expensive for us to get to Europe, the registration fees for these things are quite expensive. And you just got to be sort of circumspect about where you spend your money. The CapEx estimate for 2023, we've already set out, is just over $30 million, of which I think from memory, about $28 million is a Blanket. The bulk of that comprises the first phase of the tailings facility and continued capital development then the difference between what the CapEx at Blanket and the group CapEx will be capital expenditure on the -- at Bilboes. Then grade. Dana, would you want to talk about the grade the grade apparently coming down, the forecast of the grade expectation to come down?

Mark, if you look at our measured indicated resource, which is what we've got high confidence in, the grade is not coming down softly. So I don't know where this is coming from. And then if you look at our inferred resource with the latest update we did, the grade debt come down, but it's also because of the high gold price and the cutoff grade that came down. So we -- a lot of low-grade resources were added, which will skew the picture. So the credit is going to be struggle going forward, coming down slightly because of the higher gold price, but there's no serious grade issues that we see.

Yes. Chester, would you like to address this question of the significance of the impairment of the assets above 750 meters -- and will we be closing access to that area. And will that have any impact on the resources and reserves. Would you like to address that?

Yes. Commercially, there's no significant, it's a noncash item. It was areas of capital development above 750 meters knock now life of mine plan. We were thinking that we might be able to explore but more above 750 meters. That would be a bonus, but being able to justify that we wrote those areas off. But if this got no effect on value, doesn't have life of mine plan, never our planned cash flows.

But it is fair to say that we do still intend to go exploring above 750 meters. We've just not got around to it because of the logistical constraints and that we're focused on production, also, we've had some capacity constraints in terms of the personnel, our exploration personnel. If we do go exploring there and if we find more material, you'll find that those impaired assets impact. We've got a question -- I don't know if you can see the question, Victor, but quite a detailed question about the oxide heap leach are you able -- to provide more context on that, Victor?

Thank you, Mark. Dana, you can come in if you want. Basically, a bill was we've got 2 crushing plants, one in [indiscernible] and one at [indiscernible]. At the end of the day, what we are doing is really mining off What we have put in the plan is probably to achieve in all crushing of around 40,000 tonnes the plant basically, mining from those 2 locations. We are expecting high production of maybe around 40, 45 kgs per month basically.

Yes, I've got the variation in the production is largely because of variation -- anticipated variations in the grade that we're going to be putting on there. But I think it's fair to say that the -- there's -- one of the questions is what's the -- how much material is already on the heap leach that can be leased. But my understanding is that heap leach pretty much exhausted. It's been leached so many times. We're really...

Yes, they are. So Mark, when you look at it, as we mine, we placed the new ore on top of the old core, and you continuously leach that ore. So basically, that's ore is leached a lot of times. But you still have both there, which is probably locked up in maybe some bogus which when we -- when Anglo started the heap leach operations, they didn't crush the ore. But when we have tried to crush that ore, the problem is always better in the sense the fine material then results in other problems in terms of leaching cycles.

But I'm going to say there's oxide thing, it's well, it's a little bit more than but I don't want people to get obsessed about it because the real focus of Bilboes as Motapa is the larger sulfide project. So the oxide heap leach project at Bilboes will produce at about 45 kilos a month. So just multiple about 30 gives you an approximate comp...

If I can come in, we are building up about 2,000 ounces by the end of the year. And as you said, it mustn't be seen as a [indiscernible] It's an interim arrangement because we've got some oxides that we've got to go through anyway to do the sulfides, sort of an early start of the sulfide project. But it's also just helping us to cover the cost and cover the cost of the feasibility study until we really start the project.

So it should make about $1 million a month, perhaps for let's say 2.5 years based on what we -- the resource, the oxides that we know exist. But please, I don't want people to start sort of thinking that we spend effectively $65 million on a project that is producing our best sort of 1,500 ounces a month, 2,000 ounces a month. That's not the case. That is actually an unexpected cash flow that we haven't factored in into our evaluations. A question about, any plans to improve the liquidity of the shares in the VFX? Our shares may have traded on a Stock Exchange. I don't know what we can do about it. We've got it down to our brokers to make it work. There is -- if you can't create liquidity without the existing owners selling. So we need to get the existing owners to sell, that they don't want to sell, and they seem to be wanting to accumulate possession. So I'm not sure what we can do about that, but I've got to say it's not something that particularly keeps me awake at night. We are positioned in Zimbabwe such that we have institutional investors who want to buy our shares as and when they have liquidity that's available. Okay. A question here is the government policy on ForEx retentions. So previously, the government policy is that -- previous of the government policy was that if you had incremental production as we do, we've got incremental production, we've increased production from what, 57,000 ounces in 2020 to about 81,000 ounces last year. And under the previous -- under the rules that apply previously, that incremental production, if you were listed on the Victoria Falls Stock Exchange, you've got 100% of the revenues arising on the incremental production in U.S. dollars and the balance in local currency. And so on that basis, we went off on listed on the Victoria Falls Exchange. We -- the rules are now -- the rules have now changed. So under the previous regime, our blended average split of currency -- local currency to U.S. dollars was about 72% in U.S. dollars and the balance in local currency. Under the regime that was announced a month or so ago in respect of existing operations, that's now moved to 75% in U.S. dollars and 25% in local currency. So it has improved very slightly. And it's also fair to say that we do not accumulate a pile of Zimbabwe dollars for which we've got no purpose. If anything -- at any point in time, we are typically overdrawn in Zimbabwe dollars, okay? So that's the first question I'd like to address. We believe that we have -- the change in the regulations, which then effectively unwound that relaxation such that if you move from the Zimbabwe Stock Exchange, which is a local currency-denominated exchange, the Exchange, which is a U.S. dollar exchange, people were doing that, even though they're domestic companies with a view to try to get increased revenues in U.S. dollars. Our understanding still is that for the Bilboes project, we will continue -- we will get 100% of the revenues in U.S. dollars. So whilst the change in policy may have taken the shine a little bit off the Victoria Falls Exchange, it doesn't -- we don't believe it affects our position going forward. So I can't comment on other people's aspirations and why other people might want to list in Victoria Falls Exchange. It is their business and not our business. What I'm saying is that if effects are, the policy change as far as far as we are aware, it does not affect us. A question about to what extent has been mined out. I understand this is a large ore body conducive trackless mining, what is the predominant mining method going forward for the next couple of years? That's the question. Dana, could you answer that?

[indiscernible] mine is basically mined out. There's lower grade big. And so main one extends and it doesn't really feature in future production. Yes, it was a large ore body up to 50 meters wide, and we use in ore main body. Going forward, as far as mining are concerned, it will stay a hybrid method. We are -- we sort of got a rule of thumb when it starting with or below 400 meters, we're doing unarranged And if it is and that we are looking at in our long-acting, it doesn't always mean suitable for stoping. But generally between 1.5 to 6.5 meters we start changing over to long hole stoping. And it varies. ourself is predominantly long-haul stoping. Blanket ore body, it's a combination right in the middle where the juice that's on the edges, it is under stoping. And then you see similar sort of hybrid methods going to most predominantly and stoping. And then at we also have some wider areas where we have a combination of long-haul stoping and stoping.

A question as to why the forecast guidance range for Blanket lower than the 2020 achieved? The guidance range that we put out, I think, for Blanket in 2022 was I think 72 to 80. This year, it's 75 to 80. Blanket is a steady-state operation. We see little prospect to increase production above 80,000 ounces. So it's a realistic assessment as the Blanket should be able to do between 75 and 80. Whether it's the bottom end of that or the top end will just depend on the ordinary vagaries of mining as I'm sure the person who asked the question understands. Chester, there's a question about the increase in the overdraft with the overdraft. Do you want to talk about the overdraft in Zimbabwe?

Yes. We want some debt funding in our business. We were conservatively or unlevered to a large extent. And we're looking for some debt funding overdrafts who are available in country. There's not a big markets in to obtain term loans and long-term debt. So you utilized overdrafts to do fund some short-term funding gaps at Blanket, and it should be repaid by the last part of this year.

I think the other thing is dollar-denominated overdrafts in Zimbabwe have only relatively recently become available. Is that correct, Chester?

That's right. So dollar-denominated debt, that's I think we are in a fortunate position to get it in-country, and we utilize that to lower the short-term gap.

Yes. I think the other thing to understand is that in the course of any month, cash typically you can be quite lumpy and you got the cash should hopefully build up over the course of the month as you get deliveries and you get paid for those deliveries. And then as a big outflow, the under the bond as you pay your creditors and you'll pay your workers. But it is quite lumpy. And it just helps to smooth our treasury and our cash management if we can extract cash by way of dividend payments and another payments. It just helps us smooth things out. But one of our other objectives -- strategic objectives as to what I did use the phrase make ourselves relevant in Zimbabwe. And that part of that is having local shareholders to the exchange listing and having meaningful relationships with banks in that we borrow money off them. So that everyone that's got some sort of skin in the game and some participation in the future growth. But the availability of debt funding in Zim is pretty limited and it's very short term. I don't see any further questions. We're just on the hour. That's not me does not mean trying to cut this off in the hour, but genuinely, I've got no further to consider -- no further questions. Just give it a minute. Okay. So no further questions. Thank you all for your participation. at the end of March, so you've been looking for Q1 results coming out in mid-May. But I think to characterize the way we see 2023, after a fairly exciting time in 2022, we would hope to see 2023 as a period of stabilization and consolidation, which may sound quite boring, but actually is not a bad thing to do in this environment. So with that, I thank you all very much for your attendance.