Exxaro Resources Limited (EXX) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to Exxaro Resources Limited FD's preclose presentation. [Operator Instructions] Please note that this event is being recorded. I'd now like to hand the conference over to Mr. Mzila Mthenjane.

Thank you very much, and thank you for that introduction and those guidelines. Good afternoon, ladies and gentlemen. And welcome to Exxaro's FD's preclose, looking at the operational performance to date for the first half of 2022. I am joined here by the management team, led by our CEO Designate, Dr. Nombasa Tsengwa as well as FD, Riaan Koppeschaar. And accompanied by MD for Minerals, Mr. Kgabi Masia. I must give an apology for our MD for Energy, Roland Tatnall, but in his place, we've got [ Leon Groenewald ]. We have various other members of the Coal, Energy and Finance team that will be contributing to the discussion this afternoon. So without further ado, let me hand over to Riaan, who will guide us through the note that he has prepared and you would have seen the same announcement that came out earlier in this regard. We'll then provide for an opportunity for questions and answers. Riaan, if I can hand over to you.

Thanks, Mzila. Good afternoon, ladies and gentlemen. It's a pleasure to engage with you again. As in the past, I will give you a brief overview of the expected results where after the Coal team will give you some insight into the production, the sales, the CapEx and also the market outlook. So if we look at the first page of my report, I will start off with safety and health. And we continue to perform very well on this front with almost 90% of our workforce and contractors now being vaccinated. Also on the safety front, we have now been 63 months without a fatality and the lost time injury frequency rate is sitting at a very low, 0.05. So that is a big focus area where we continuously work on. High level, if we look at coal production and sales, the coal production is expected to increase by 1% and sales volumes to decrease by 3% and we continue to have challenges on the logistical front, which the Coal team will unpack later on. Then if we look at the Energy side, the performance of synergy for the first 6 months has been impacted by poor wind conditions. So the expected generation is lower than what we previously guided. But luckily, the second half of the year is normally a better wind generation. Also, I'm very pleased to report that we've now received the Nersa registration for the Lephalale Solar Project, so we can now push ahead also with that project. And then lastly, perhaps from my side is we continue to make progress on the disposal of Leeuwpan. I think the progress has been a bit slower than what we hoped for. That process was also hampered a bit by the logistical challenges that we experienced, but we're still hopeful to conclude the transaction in the second half of the year. So I think those were the high-level overview that I wanted to give. So with that, I'll hand over to Kgabi and the Coal team to take you through some of the detailed numbers.

All right. Thanks, Riaan. Kgabi, over to you.

Okay. Thank you, Riaan. And good afternoon, everyone. I'm looking forward to the engagement. This is my first conversation after joining Exxaro. I am now 100 days. So, yes, I mean I'm looking forward to the conversation. I don't really touch all on safety, but I know I'm going to talk about operational performance. But I mean, good safety performance gives you margin so that you can focus on operational efficiencies. I think for me, I mean, that is our experience. That I mean, the [indiscernible] have had a very remarkable safety journey. I mean the NCI, which Riaan has touched on, I mean, Riaan was at benchmark levels. So I'll then move on to the operations, but I'll give more insights on the operational performance, looking on table 1. I'll start on a high level and then go into its operation by operational level in terms of any major shifts in that context. On the production front, [indiscernible] thermal coal, the production is expected to increase by 1%, mainly due to the ramp up at GG6. We also looked at finding alternative distribution channels for Mafube and Belfast that also contributed to the increase in production. The gains were somehow offset by the sale of [ GGC ] in September of 2021. Our metallurgical coal production is expected to increase by 6% due to increased yields and also improving bottlenecks at GG1 and GGC ramp-up. If 1 goes to the operation by operation, there has been an overall performance improvement comparing to the previous half year. At GG6, there has been a 5% improvement -- expected improvement due to the GGC ramp-up. At Belfast, 19% improvement due to higher RB2 volumes, which we [indiscernible] with volumes to compensate for the lower export. At Mafube, 81% improvement due to reinstatement of production following the sudden shocks which were taken in 2021 when we experienced full stockpiles due to the rain impact. And at DuPont, also there was an improvement of 7%, that is linked to the higher power station coal demand in line with the federal demand. And ECC, that production [ took up ] the field, there was a significant reduction, but that was covered by the improvement in their operation. Matla is expected a 5% reduction, the main reason there is the difficult or unfavorable geological conditions at the short-haul mine 2, but we're expecting improvement in mine 2 and [indiscernible] in the later part of the year. So that's, in a nutshell, covers the production part of the conversation. Then -- I'll then move into the sales side. On the sales side, starting with Eskom, we've seen reduction in units -- downtime -- reduction. So that has given an improvement in terms of the sales. And we've seen an expected increase of about 2% in that regard. And on the domestic front, the expected increase of 8% is mainly driven by a higher uptake from [ AMSA ] [indiscernible] and other new local clients. We've seen an increase in the local demand where we've directed some of our export products to the domestic market and also the higher demand from Sasol, especially linked to the DuPont operation. On the metallurgical coal fields, we expected a decrease of about 2%. And the main impact there for [ AMSA ] is the rate performance. We've looked at alternative for our own transport to -- mechanism to move the material to [ AMSA ]. The export sales volume is expected to reduce by 27%, mainly due to rate challenges impacting most of our operations. The TFR has declared 50 million tons allocation. We expect that number presence, which we will touch later. I'll ask the team to elaborate on that. But the main impact [indiscernible] there's been 50% reduction in the number of trains per week going into that operation. So it reduced from 4 to 2 trains and then at Belfast, we've reduced from 6 to 4 trains. However, GG, we've seen an improvement of trains from 5 to 6 and that used to be flowing through when we touch the same number. How we've responded to June takeoff on the rate challenges. I only focus on improving our domestic sales, diverting export products to domestic. We've deployed use of old transports. We're also moving coal from GG to [ Bogota ] signing and where we [indiscernible]. We continue to export through our logistics channels, including the Richards Bay MPT or even Maputo port outside to the Richards Bay Coal Terminal port. We've also done our first shipment from the Richards Bay MPT. This then shows that our effort in terms of forecasting on moving -- getting our coal to market in that regard. If I move to the capital in terms of the critical performance, we went down on expansion projects. Our last big project was GG6 and also, I'll also touch that our spending on sustaining capital remains between ZAR 2 billion to ZAR 2.5 billion a year. The expected reduction on sustaining capital of the 7% is mainly due to timing in [ waiting ] at the field project at GG. We also look at our equipment strategy on [indiscernible]. At DuPont, we've considered they optimizing improvement projects. Hence, you see the reduction in the sustaining capital. On the expansion projects, the main contributor is GG6. The project is now in full ramp-up and then we started realizing the production from GG6. The GG6 expansion cost remains unchanged at ZAR 5.3 billion. On Matla, in terms of the projects, they have been delayed in terms of the funds for mine 1 relocation. However, we've received approval for the Northwest asset project from Eskom. And the Moranbah South, they had coking coal project. Pre-feasibility is [ alone going ] to be completed in the first quarter of 2025.

Okay. No. Thank you very much, Kgabi. I don't know if there's anything specific on the Energy side, Riaan, that you want to add? Or you...

No. I think it's been said. I think maybe to give the market some assurance. So when conditions hasn't been great in half 1, speaking to our colleagues in the wind industry that seems to be a prevailing trend that we are in a lower cycle of the wind, also speaking to colleagues is that the long-term estimates do remain intact. So we don't have such a views on that. And then on the controllable element scheme, the availabilities at the site, so we are satisfied with those. We're managing them well. And we are also meeting all of our financial obligations. So suffice to say there is no cause to consider this.

Okay. No. Great. Thank you very much for that input. And I think what remains in the document, which is pretty self-explanatory on portfolio optimization and sustainable development requires no further elaboration and to the extent that there are any questions on that, we'll be here to receive those. So then Riaan, with that, if I can hand back to you.

Mzila, I think market outlook was the next one?

Yes, I'll ask them to question that.

Maybe just introduce yourself. I think you're joining us for the first time.

Sure. Thank you, Mzila. Good morning, everyone on the call. This is Samantha Maharaj, market [indiscernible] optimization lead. So looking at our market outlook for the second half of the year, we've obviously seen very strong pricing in the first half of the year going into 2022. Given the high energy context, prices were in the thermal coal market already at a substantially higher level than what we normally see it. And then, of course, we had, in March, the Russian Ukrainian conflict, which really elevated those prices to record numbers. We have seen that there's been significant demand recovery as well as we find that a lot of our -- as the world opens up given all of the lockdown restrictions and supply has troubled to keep up with the demand increase. So going into the second half of 2022, we anticipate or expect that prices will remain robust given that the embargo on Russian coal by the European Union has already been announced as well as the fact that it is -- in terms of the gas market, which would be the alternative energy supply that there is also constraints in this market that we do expect them to see prices and demand to remain robust going into the second half of the year.

Thank you, Sam. I suppose anything on TFR, you'll just wait for specific questions. Do you want to comment on that?

Yes.

Kgabi will comment on TFR.

On TFR, as an industry, maybe if I start there, we've been engaging with TFR, the Minerals Council. I mean we have a platform, which I think is well established now where the industry is within TFR, I mean the last time we've reported to us, especially on the security-related issues, the coal industry has now -- as you said, TFR, in terms of addressing the security issues. If one [indiscernible] because we're the only coal player moving coal from Lephalale. We've also [indiscernible] with TFR in the coal industry to address the security issues in that regard. TFR remains challenged in terms of the availability of theft and vandalism but the forecast for the industry and for TFR is to ensure that we are on addressing the issues. The reengagement in terms of what needs to happen in terms of the locos availability and the contract with the Chinese, it remains a challenge. However, they have improved their maintenance program that we've seen, that is the focus for now. And for us, when we're engaging with them about how do we jointly collaborate to ensure that at least we improve maintenance of what is available now and also to help them in terms of rebuilding some of what they can execute on their end.

Thank you very much for that. I guess there will be more questions from the audience later. Riaan, any other contributions on your side before we move over to Q&A.

No, Mzila. I think let's move over to Q&A.

All right. Thank you very much. So then perhaps maybe the operator can just remind us of procedures of how our audience can post questions.

Thank you very much, sir. Ladies and gentlemen, at this time, you can also ask a question. [Operator Instructions] The first question comes from Brian Morgan of RMB Morgan Stanley.

Just a question on export volumes, of course, this is going to come. The 6.2 million ton guidance for this year, we did 2.5 in the first half. So obviously, there's a big ramp in the second half. Can you give us a bit of color about why you have confidence to think that you're going to see a big half-on-half improvement in performance? And then, has there been any movement on -- you spoke a little bit about it, that's on the spares availability from the Chinese. Has there been any movement? Has cabinet been involved? Has there been any improvement in the politics at all?

Yes. There, Chinese -- if I start with [indiscernible] who remains a challenge. There has been engagement in that front in our last conversation with the Minerals Council. We were given the feedback from the CEO of TFR that, that engagement is happening at cabinet level. So we still have to see a progress in that regard.

Maybe [indiscernible] as well. Can I add in just on that one?

No issue.

To say that, look, maybe the market may have picked up that -- the stock, especially from [indiscernible] around change of policy to look into private participation on the rail, even though the details of that has not been fully fleshed out, but there is a very interesting -- interest or, let me say, a pronouncement from the government in terms of how the sharing on the rail by the private sector. And they're calling this private participation, which is unique from what we've seen in the definitions of the normal PPP, but this is a conversation that we're looking at, and we are looking forward to the white paper that is awaited.

Thank you very much for that. And then on the volumes?

In terms of offshore volumes and our expectations for the second half of the year, we definitely expect that the export market will be there. It is really dependent on our ability to get product to the port, and we are optimistic that a lot of the initiatives that are in place will result in a better performance in the second half of the year.

Sorry, can you give us any specifics on that because it's quite a big increase in run rate from the first half to the second half? Could you just give us any specifics on how you have that confidence?

Tiyani will introduce himself and he'll add to that response.

Yes. My name is Tiyani Hlabangwane, I'm the Manager, Logistics in Exxaro. I think there's some level of confidence we're having as the [ MDA ] is specified with the collaboration we have with TFR and understanding that we are going now into TFR shots. I think the maintenance program that has been put in place [indiscernible] some level of confidence on the reduction of the challenges that TFR currently has in the rail network. So we're expecting some better execution to come in the second half of the year. So that's one point that we are also looking at. And also, as an example, I think the collaboration that has been demonstrated with Transnet and the coal industry it is bearing fruit. If I might give one specific example with the current incident that we had in one of the substations. Within a week, I think the industry together with Transnet was able to find a solution. And then those are the [indiscernible] lower heading fruits that we're looking for, which I think come to quarter 2, I mean, quarter -- second half of the year, that will be coming to play. Also, there are programs that TFR has previously presented to us, and most of them are going to come into fruition, to come in the second half of the year, which I think we're starting to see some results in some pockets. So I think there is some confidence that we're having [indiscernible] better performance in the second half of the year.

Okay. Great. And maybe I should have mentioned upfront that Sakkie is away, on leave and Sam and Tiyani who are part of the team in his place at the moment. Brian, are you happy with that?

The next question comes from Shilan Modi of HSBC.

Just following on from Brian's questions. Out of the 2.6 million tons that you export, how much of that is railed and how much is trucked -- like are you trucking? What I'm trying to understand is the impact to your margins from if you are trucking?

Right. Maybe the 2.5 that we're speaking that you see on the -- under that, those are pure RBCT volumes that we are. I think the example that the MDA has made is 65,000 of that [indiscernible] sector that was done through Richards Bay MTP, but I think to the lineups of all the other plans to go through other ports, there's much more volumes that is going to come out a bit. So majority obviously sits with RBCT in terms of how we can export, so they're road hauling but MD spoke about is, we're currently road hauling coal from [indiscernible] to Mpumalanga, which still goes into RBCT via trains, but we are going to be road hauling some to Maputo and some to Richards Bay MPT.

Okay. And then if you can, I think, 6 months ago when we had a discussion you're indicating that certain parts of the rail were operating better than other parts. Can you give us an idea of where the -- where you're being impacted? So is it the line between Richards Bay and Mpumalanga? Or is it going up to the Limpopo Province? Like which parts are impacted more? And how does this restrict you? So what I'm trying to figure out is, is [indiscernible] more restricted or is Belfast more restricted?

I think the restriction only has come to [indiscernible] specifically or security incidences. We've seen improvement with the appointment of the security surveillance service providers that the industry has appointed. So that front, we are silly. I think the restriction is more on the [ Mpumalanga ] site with regards to other non-security-related matters, it could be locomotive issues, it could be infrastructure issues. But the increased performance that we are seeing is coming from [ Prodeco ], which obviously, in that case, the MDA has specified that if collaboration with the Minerals Council and also with the chrome industry to reduce [indiscernible]. So we're starting to see some fruits there. So Mpumalanga is more impacted, but [ Prodeco ] compared to last year.

Okay. And then just in terms of the new wind turbine -- I think it's wind turbine that you set up in Lephalale. Can you just give us some idea of the impact that will have to earnings for synergy?

Yes, it's a bit early days, but I'll give you a sense of what we can say. So it is a solar PV park of approximately 70 megawatts behind the meter. The incentives is or the savings that we forecast is about a 12% saving on cost [indiscernible] with Scope 2 reduction of about 36%. And our earnings probably gather between, say, EBITDA, if you back solve this between, say, ZAR 140 million and ZAR 160 million.

Okay. And then last question from me. Given the volatility we're seeing in markets and the uncertainty we have on, like, for example, the rail situation in South Africa, what are you thinking around the dividend? Like in terms of your -- in terms of your payout? Are you still going to stick to roughly the midpoint of your 2.5x to 3.5x cover on the coal business? Or do you think you'll be a bit more conservative this time around?

Shilan, I think it's probably still premature. That is a decision that our Board will need to take in August. But as you pointed out, there's no intention for us to deviate from the policy at this point in time, but the Board will decide on that ultimately.

The next question comes from Patrick Mann of Bank of America.

I'm just kind of doing some dangerous math here, right? So Transnet is leaving about 20 million tons if you said the run rate in ZAR 55 million to ZAR 60 million, it should be being an extra 20 million tons [indiscernible] ZAR 250 million. I mean we're leaving $4 billion to $5 billion in revenue on the table, right? And I mean how much can the loco cost, right, so I mean, at what point does it not make sense as an industry, can you not donate locos if there's an issue around private locos on sort of a national -- on public sector stuff? Or I see Transnet starting to say they're going to launch another procurement cycle now in July. I mean what have you guys heard from that? It just seems absolutely crazy that we're waiting for a white paper on possibly starting a conversation about maybe locomotives being allowed on the railway when we're as a country leaving so much money on the table. It must pay itself off very, very quickly. So just your thoughts more on that, like why can't -- why is there not a more comprehensive or more urgency in addressing the issue?

Yes, maybe let me start. I think that you -- I just got, I mean the white paper [indiscernible] time but I would say that there's been very robust conversation. I mean if I look at how the Transnet [indiscernible] leaving the Minister regarding to talk about this. Yes, it is a challenge [indiscernible] probably use your own locos [indiscernible] quite a complex situation, which they are facing [indiscernible] issues really coming from so that is -- probably that is going to throw us down to say how do we sort out the governments around that. There have been proposal about the [ system ] becomes an equitable [ system ]. You need to get it performing [indiscernible] so that remains a challenge. I'm not sure if I know but I'd like to add something there, but how...

Yes. is it a crazy idea to just say the industry, while we're waiting to talk about private participation, we donate the locomotives? I mean how much could it cost? Does it make it completely -- I mean is that -- why is that not a possible solution here?

Yes. It is [indiscernible] to really struggle just if you don't collaborate with [indiscernible] all our competitors there come up with that [indiscernible] idea. We also think in this [indiscernible] I think it's all about [indiscernible] of doing it.

I think you've covered everything, Kgabi. Unfortunately, every policy change, I mean, we're all frustrated, I think, as the industry. And for every policy change, and I think this thing that we're facing is going to be enabled by change of policy, whether we like it or not. And unfortunately, all governments go through this white paper, there's a clean paper, there's a white paper, and I'm surprised fully that we are at the white paper level given the noise we started making in 2020. So that is the process that is inevitable. But I think the question is what can we do as the industry in parallel to make sure that we alleviate the pressure and recognizing the fact that we know the skill space that is remaining at TFR is also a challenge to the extent [indiscernible] not always optimal. There are other challenges which they are facing that if you are going to be giving them your locos, you want to make sure that you are delivering those on a sustainable pace, and those are the things that we would need to look, but those options are on the table, absolutely. And that is urgent.

Okay. That's a good point, numbers about the -- it might be -- prove a short-term fix, but it needs to be more sustainable, yes. I suppose it's just frustration. And I can tell you like clients are frustrated as well that, for them, it seems like a no-brainer, it would be a very quick payback. So they're frustrated that government is not acting faster. So that's where the question comes from. Is there not a way to fast track this or to avoid the policy change or at least find an interim solution while we wait for the policies to change? But I hear your points, and I understand you're the most impacted and the most frustrated.

The next question comes from Nkateko Mathonsi of Investec Bank.

I hope you can hear me. I also have questions on the rail side of things. My first question is what was the rate performance in quarter 2 versus quarter 1. And I think it would just give us a bit of confidence in terms of the expected improvement in the second half? And then the second question, if you can give us a bit of an update on the force majeure that Transnet was raising in, I think, in April. And what was the business that was given to you for the force majeure by Eskom. And then the third question, if you can give us a little bit of guidance on the cost of actually using the road transport to move some of their volumes?

Sorry, Nkateko, the question on force majeure, was that in relation to Eskom or TFR? You mentioned Eskom in, in...

I mean TFR...

Okay. So on the first question, I mean, we did respond that we have a contract with Transnet. As far as we consent, I mean, our contract remains in full force. So that is our position. So that is what they stated, our position remains that we have a contract, the force majeure, if you [indiscernible] Transnet have to honor that if they didn't deliver, then there the contract needs to be respected and not how it [indiscernible] so for us, our position, there's no force majeure, their contract has been in full force.

Yes. I think the bigger concern for me with the force majeure was it appeared or it looked like Transnet did not want to guarantee any performance going forward. And that will be a concern for me looking into the second half of the year or looking into the next coming years. That I was asking, what was -- what do you believe is the reason for Transnet wanting to raise a force majeure?

So maybe the answer, Nkateko, on this one is that with this engagement now we have on this new addendum where we are really interrogating the risks of that 60 million tons and what it means in terms of the take or pay, whether -- there are a lot of ideas around whether the 60 million tons is seen as the lower level before the, for instance, the take or pay kicks in. One of the things that we deal in because exactly at that point where we need to understand the force majeure because remember, there were a lot of companies, SOEs who [indiscernible] during COVID. And for us to say to Transnet we lost those times as a result of COVID [indiscernible] as a result of the availability of locos, is subject to intense conversations, intense negotiations with them. And it's one of the issues that are not easy in this conversation, and we continue to engage them. And we think we're going to resolve and understand they having -- but I think we've got very strong data to point that what drove the times down during the COVID period. We think we do have that information very clearly what those specific drivers were.

Maybe my other question.

Okay. in attempting to respond to the other question, we do road but majority of our volumes, the rails to RBCT. So the cost of road, it depends, obviously, where we're coming from considering that our [indiscernible] which is on its own on the far north and then Mpumalanga on the [indiscernible] and Belfast. So we don't have one cost that one can cost, and it's something that is not an easy one to pick up because the fuel price changes every second week to third week. So right now, I can't really tell you the cost of what it is. It's something that really changes every now and then. So I won't be able to give absolute numbers, but I must say that their old cost is also picking up [indiscernible] what's happening in the economy now. So Exxaro is majority railing to RBCT, only a few of the volumes we are doing which is going to go through other ports, but [indiscernible] but our main coal is going through RBCT.

And then I think the quarter 2 rail performance if you can?

Yes. Look, talking about quarter 2. Quarter 2 was obviously a more challenging one as compared to quarter 1, but we've seen[indiscernible] we've seen an upside where there has been an improvement looking at -- we used to average around 4.5 train. Right now, we're doing at 6 train. So I think it's an appreciation that also has gone through Transnet on the performance of that. We have seen some downside on the Mpumalanga side where our average has dropped between 4% to 6% of how it had been performing. [indiscernible] to play in 1 month. So I think that was a huge impact. If you were to take that out of the equation, I think quarter 2 would have been better than quarter 1 in terms of how [indiscernible] so -- hence, my earlier comment that the confidence level of the [indiscernible] resolved that issues through the current maintenance chart, we expect better performance in the second half of the year. Any other questions?

Yes, there are more. And the next question comes from O'Neil Thiart of Optimum Investment Group.

Just any -- can you provide any color on cost performances on the mines? Have how they been performing since the previous reporting period?

I'll ask -- maybe two comments, but maybe I'll just open by saying we still aim to keep our costs below mining inflation and we just have to consider also our PPI, if you see the way it is, it's almost at about 12% and it's running away from the CPI. But merit can also add a rebound on that.

Yes. Thanks, Kgabi. I think we've demonstrated in the past how our costs are well under control, and we continue to manage our costs. We stay within mining inflation. What we've seen recently, obviously, with the diesel costs and the electricity costs that are picking up and just globally, our inflation has really ramped up, we've seen a bit of a delink between PPI and CPI. We've always said mining inflation in CPI plus 2 as a proxy. But now we're starting to see that PPI is actually starting to look into the double digits for 2022, that's the latest forecast. But we still remain within our guidance of staying within mining inflation. And obviously, we'll share a lot more information in August when we put our half year results out.

The next question comes from [indiscernible] SPG Securities.

Can you hear me?

Yes, we can, [ Tim ], carry on.

When can [indiscernible] couple of weeks ago, they sort of said that the June cash would likely to be similar to the May cash simply because although you have some nice receipts from high prices, you've also got royalty and tax payments. So if you could just talk on [indiscernible] as relevant to you. Clearly, you've got a bigger Eskom business, right? So perhaps it's a little bit limited to assume something like that? That's the first question. Second question, just on the domestic sales. My understanding in February when we spoke, was it -- or maybe it was March when we spoke, was that you sort of sold [indiscernible] to trade and they then took [indiscernible] trucking and getting it through to a port and get exporting the coal or selling it domestically. And your comment [indiscernible] to indicate that you're doing [indiscernible] and almost using an agent to sell the coal. And I wonder if you could give us a proportion or give us some kind of sense of how much of the coal you're actually trucking yourselves? And how much of the coal is actually being sold on [indiscernible] online. And for that coal, [indiscernible] there's some kind of indicator of some [indiscernible] sort of trucking cost, that's like indicated to be about again [indiscernible]? To ask just on the Lephalale PV plant. You said with ZAR 140 million to ZAR 150 million in EBITDA, that's fantastic. I just wonder if you could give us an idea of when that plant will be constructed and what kind of timing we should bring that EBITDA in [indiscernible].

Maybe you can start -- do you want to start with the domestic sales in terms of how that happens and...

Yes. So maybe what I want to highlight in terms of domestic and I will handle over to Sam. So if you look at that because of the way the price is sitting, the domestic price now is also -- has gone up. So that's also then provide opportunity for you to be able to export and also add some old [indiscernible] in that. So we're not operating from the -- where the way the domestic prices were sitting where it's sitting now. There's much more competition in terms of the [indiscernible]. Maybe I'll hand over to Sam.

Thanks, Kgabi. I 100% agree with that. I think in terms of the domestic sales, as you had alluded to, is some of those volumes that don't make it to the export is being placed in the domestic market with some of the traders who will be trucking it. But as Exxaro also explores some of the optionality, as Tiyani has alluded to, with developing our own avenues to evacuate the call, then we do follow a diversified market strategy linking to what the prices are and reviewing where is the best place to place our product. But we are adopting a diversified approach that some goes via the traders, some goes through the avenues that we are developing and then linking up to those international pricing to get the highest revenue for Exxaro.

And can you give us some indicator of how much trucking you're doing? Or is that just very early stage and up to now you've been selling to traders?

I think we'll be able to consolidate that for you guys in August. Is that okay?

The next question comes from...

Perhaps I can just -- in terms of the first question, [indiscernible] I think in June, obviously, we need to make tax payments, et cetera. So probably, I think you can use [indiscernible] as a proxy.

Tim, does that answer the question?

I'm assuming my line is up. Yes, that's good. And it's just the timing on Lephalale [ EBITDA ] for the PV plant.

So I'll start with the caveat, Tim. So what we [indiscernible] in the process we are engaging EPCs, where we will firm up on price and time. So what the study is currently that we have is that we should be in operation late 2024, but probably first full year 2025. But as soon as we firm up on that because there has been some changes regarding logistics and capacities from suppliers. So we don't want to give you a firm commitment until we -- until we've engaged fully with them. Thank you.

I think there was another question lined up?

The next question comes from David Fraser of Peregrine Capital.

Good afternoon, everyone. Nice to talk to you again. I'd just like to [indiscernible] Patrick's question around this Transnet issue. I mean not just the revenue, but I mean, there's probably ZAR 15 billion of the fiscus that's being lifted on the table at the moment. I'm quite shocked that you mentioned 3 derailments. I mean derailments has got nothing to do with locomotive availability, which we've been told is the single major problem. That's a management issue, that's a track issue. I just think the industry now needs to do more. Talk is cheap. We've had lots of talk with lots of people through various forums here. But quite frankly, if anything, we still on the downdraft here. I mean there are a lot of issues within Transnet I'm aware of. For example, the security has been taken over by Richards Bay Coal Terminal. There's only the night shift. Why isn't it being extended to the day shift. I believe Transnet schedules on a spreadsheet rather than scheduling software. I believe there's many instances of drivers not turning up for their shifts. There's locomotives that are continually stripped without because they've been left without security. And again, just a lack of skills within the organization. Now we consider these forums and talk and be somewhat comforted. But unfortunately, the numbers are the numbers, and the numbers are still declining. We are actually getting worse despite this talk. Quite frankly, I do think that the industry needs to step up. We potentially need to get somebody inside Transnet to actually give us the truth and actually give us some sort of attribution as to what these volume losses and how they effectively are coming from because certainly locomotives is only 1 of the issues, which is not solvable in the short term, but there are many other issues that are very solvable on management issues that we should be on top of and putting continued pressure on.

That's more of a statement than anything else.

No, I thank David and I think your frustration is duly felt and it's not the first time you shared your views with us. I don't know maybe Nombasa, you want to comment on that?

Look -- I mean, look, we share David's sentiment as well. And I think there are 2 sides always to a story. We have shared before some of the suggestions we've made in terms of what we could contribute and we are really not here in a blaming exercise. But indeed, the state does have its own challenges of accommodating some of the proposals that we made purely, as I said earlier, also from a policy point of view. And there are other issues, as I say, it is not really productive for us to be blaming one another. But we do also accept this agency and the frustration that the market is beginning to express and we want to encourage to also put up the volume so that it's not only us who hear that. And I can assure you, I sit in the Minerals Council. I said for the last 3 years in the call forum, and we're actually more emotionally engaged than David is at this stage. But we do appreciate the comment, and we are going to intensify it in [ better ], but I don't think it's in our space to be criticizing what is going on in the government at this point in time. It doesn't help us.

Just a follow-up, I've got a call with TFR's head tomorrow. It would be my fourth engagement with him. So I'm pushing as hard as I can as well.

Well, thank you, David. We appreciate that. Good luck.

Any other questions?

That was the final question. Can I hand over for closing comments.

I think we can if there are no other questions. I think if questions do come up, gentlemen, you do know my email address. You're welcome to [indiscernible] questions. I think then maybe I can hand over to Riaan for any closing comments and Nombasa if any others. Riaan?

Thanks, Mzila. Nothing else from my side. I also think a lot of the arrangements that the call being mentioned earlier, the [ FCA ] sales, et cetera, will only start kicking in the second half of the year. And not all of that arrangements were fully incorporated in the first half of the year. So hopefully, we will be able in the second half to have more of those arrangements contributing to the bottom line.

Okay. Thank you very much for that. Nombasa?

Thank you very much, Mzila. I think on my side, really want to, first, we thank really our own employees for continuing to work safely under these very difficult times because there is everything in their power to ramp up production. But as we know, the real issue is really posing challenges on stockpiles, lots of pressure. But we continue to keep our employees engaged. We continue to keep our employees motivated to go beyond just production and also look at other optional activities such as maintenance, making sure that they optimize their times on the mines. We also continue to drive our elevated strategy on the coal side and making sure that we don't lose the quality for RB1 because RB1 has got long legs. So those are the things that we're really concentrating on. And I think we will talk in August around how we are positioning this business to execute the strategy that we have shared with you last year in September at the Capital Markets Day, very excited with some of the conversations we're having internally on capital allocation and making sure that we optimize that. So we will have all of that conversation so that the market can see that as much as we operate. We also worry about the future. So thank you very much, and thanks to everyone, and we appreciate your contributions because they really keep us same and keep us thinking.

Thank you, very much, Nombasa. And I think what remains for me is to say so, today, being 30th of June marks, the exact mark over a 6-month period. And between 12:00 p.m. tonight and the 18th of August, when we deliver our interim results will be in a close period. So we'll not be engaging. And so we -- and we will communicate further details in as far as the delivery of those results is concerned on the 18th of August 2022. So thank you very much for the continued interest from both sell side and buy side and we look forward to possibly seeing you on the 18th of August. Thank you, cheers, and have a good day.

Thank you, Mzila. Everyone, cheers.

Thank you. Ladies and gentlemen, that concludes today's event. Thank you for joining us. You may now disconnect your lines.