Exxaro Resources Limited (EXX) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to Exxaro's results presentation for the year 2022. My name is Mzila Mthenjane, and I'm Executive Head for Stakeholder Affairs at Exxaro. And before we start, just a safety briefing, what we did this morning was to save our guests from the 15-, 20-minute induction that usually you'll be subjected to when you visit Connection. I think it will be important that I share with you our safety briefing. So firstly, we don't have an emergency drill planned for today. So if the alarm is activated, we do need you to react, but please do stay calm. We do have safety marshals who will assist you with evacuating the building and accompany you to a designated assembly point outside of this building where a roll call will then also be conducted. We will remain at this assembly point until further instructions are issued to reenter the building. Also note that we have medical personnel on site. Should you require any medical assistance, please do let us know. And for those who are here with me as well, our Bluefin facilities, you will leave through the door at the back of this auditorium, turn to your right and then Bluefin facilities will be along the passage on your first left. This is also a very important announcement to make that we do not envisage any load shedding. However, should we experience power outage, do not dissipate, as we have generators on site, which will kick in within 3 minutes, where we'll then get back to emergency lights, plugs, and then the ever-important, WiFi. So if we can then start off, also to extend a welcome to some of our Board members who are seen here today. Pensioners Club, always an important cohort to acknowledge, and all our other guests. And so maybe if I can just provide a preamble. And as I was going through preparation for these results, I was thinking that if they were presented as a streaming documentary by a Hollywood producer, the title of the documentary would probably be something like Confessions of a Price-Taker. And this would be a documentary infused with drama and exaggeration of regional wars, unrest and strikes, derailments, electricity rationing, and certainly, no doubt, a dose of climate activism. It will be an accurate description and a title no doubt, but definitely not the complete description and reflection of the true story of the great efforts of the people of Exxaro, who generated the coal tonnages and the gigawatts of renewable energy to be able to take advantage of the favorable prices that we experienced during 2022. But I do have here with me the team to narrate the undramatized real-life performance and results of the business. And in the order that the presentation will be delivered is that, firstly, Dr. Nombasa Tsengwa, our CEO, will take us through the macro context and performance highlights, and she will come back later to present a strategic outlook to close off the presentation. She will be followed by Kgabi Masia, our MD for Minerals, who will present the coal operations performance. And then Riaan will give a layout of the price effects on that production and operational performance. I'll then come back and facilitate a Q&A session when Nombasa has concluded. So if I can hand over to you, Nombasa.

Thank you, Mzila. So in my normal informal sense, this morning, I thought to tell a joke, and I would have done this in the form of showing a slide, but Mzila told me that it's not done here. But what it would have done, it would have shown you a picture of how you or probably people look when they are waiting for results. So please just check yourself, fix yourself and please look normal. Good morning, ladies and gentlemen. It is indeed a special day in our corporate calendar and exciting to see all of you in attendance today, including those who are joining us online. A special welcome to our Chairman, who's supposed to be here. I've not seen the Chair, but the Chair was supposed to attend, and our fellow Board members in attendance as well, and also, as Mzila said, the members of the infamous Pensioners Club. My team and I are happy to share with you our 2022 annual results, a year of 2 distinct halfs. The first half started with strong thermal coal prices. Going as high as $448 a tonne, followed by a second half where prices receded to as low as $127. With these attractive prices and our high-quality product mix, you can imagine how attractive the European market was and the demand thereof. However, the persistent logistical factor to evacuate our port RBCT continued to limit our ability to maximize supply to these markets. Despite all these challenges, the team has demonstrated resilience and delivered the best results possible under these tough circumstances. So if we just look at the macroeconomic environment, the sad tragedy of the Russia-Ukraine conflict sent global markets into turmoil and really surfaced the European energy insecurity which, amongst others, broadened South African seaborne thermal trade, as international sanctions for Russian coal came into effect in the third quarter. As a result, RBCT coal exports to Europe increased from 2.3 million tonnes in financial year 2021, to a whopping 14.3 million tonnes in the financial year '22. In addition, the renewed COVID-19 lockdowns in China were amongst a series of economic shocks that disrupted supply chains, fueled further inflation, increased energy costs, and slowed economic growth, which ended at 3% compared to the strong finish of 6% in the previous year. Commodity markets were mixed and volatile throughout the period under review. In respect of our portfolio of commodities, as you can see on the graph below, APIs for thermal coal prices averaged at $271 versus an average of $124 per tonne in the previous year. While the iron ore price averaged at $123 per tonne versus $160 per tonne in 2021. And you can see the drop. And we'll come back and show how this has impacted our equity income as Koppes will be talking to you. As we always indicate, our commodity portfolio is robust and self-reinforcing. Throughout the year, with the envisaged pressure on margins, as market prices started to decline and inflationary pressure emerged from fuel and the higher royalties, cost containment became a core focus to our team. And looking at our country and looking at what has really unfolded in the last year, ladies and gents, I'm sure you will agree with me that South Africa has become a different place to do business. Worsening logistics constraints and rising electricity supply shortage introduced new challenges to us. The changing increasingly difficult environment has demanded resilience and significant structural adjustments, which compels business to grow new skills of either being self-sufficient or relying on alternative means of doing business. This is all outside the norm of how we used to doing business in the country. As reported by the Minerals Council of South Africa, together with our South African peers, we continue to face losses of volume due to this real capacity as well as financial losses. Once we found alternative channels for our coal to reach markets through road tracks and alternative ports, these options were neither sufficient nor optimal to make for the loss in rail capacity. In addition, these alternative channels were at a higher cost, which we are able to withstand from the high export coal price, obviously, depending where the coal price stands. As a responsible corporate citizen, we recognized the detrimental impact of the increasing number of trucks on the road and what that does to the infrastructure, and the social impact of the infrastructure damage to the communities around them. We appreciate the collaborative efforts between the MCSA, the transit management and their Board, wherein we are all full participants. The worsening electricity supply shortage has compounding negative impact on business and particularly the SMLEs as well as other phases of our society. A direct impact is firstly to small businesses in our supply chain that are supported through our enterprise and supply development program. These small businesses are experiencing difficulties in deploying their services and fulfilling their financial obligation. Secondly, the welfare and the morale of our employees and their families has severely already affected. This is an unfortunate and evolving situation for all of us in South Africa. Due to this complexity, we do not, by any means, suggest that solutions will be simple. However, it is quite encouraging for us to witness some of the actions that the government and the SOEs have taken. Transnet's decision, for instance, to concession Johannesburg to Deven freight line, and the National Treasury's requirement for Eskom to do the same for some of its power stations. We really expect to see a little bit more as well from our government in this line of commitment. Looking at ESG, which is an integral part of our value system and is evident in the improvement of our FTSE Russell ESG score from 3.8 to 4 out of 5, driven, amongst other things, our intentions and efforts to decarbonize our operations. Our support to Africa's tourism through environmental stewardship and biodiversity conservation saw us donating a further 7 black rhinos and 20 white rhinos to Mozambique's Zinave National Park, an enabling initiative which created 90 direct jobs and numerous potential indirect tourism business opportunities in the region. We believe, responsible mining of coal includes active decarbonization of current mining activities, and obviously, activities along the value chain. So firstly, the ECC divestment has reduced our scope 2 emissions by 19%. And next in line, which is of significance, is going to be reduction after we introduce our LSP project at Grootegeluk. And we will talk a little bit about this later. And we are very proud to mention that we have reduced the number of trucks at GG. That will also contribute to the reduction of our CO2 emissions. Our decarbonization plans remain very firm, still in place, as you can see in one of the backup slides. On the safety front, the 15th of August was a very sad day in our life. That is when we regrettably lost the life of our colleague, Mr. Mathews Moanalo, at our Belfast Mine after a 5 years and 5 months fatality-free period. We have learnt a lot from this unfortunate event. Once again, we send our was sincere condolences to his family, friends and colleagues. Notwithstanding this setback, we continue to close and choose safety at our workplace. We continue to ask our employees to always choose safety first, as we call it, #Khetha Ukuphepha, and it worked. It is always safety and all the way home. And this initiative, for many years, has been built on 5 solid safety keys that have underpinned our zero harm effect over the last decade. So I really owe thanks to Mongezi Veti, who is our Executive Head of Safety and Sustainability; to Kgabi Masia and his teams for leading the safety reenergizing efforts across the group. On the social impact front, we want to make a significant difference in the communities where we operate and in society at large. We have communicated and committed also significant resources of about ZAR 6.4 billion in the last 5 years in 2021. Now in 2022, our direct social expenditure of ZAR 1.6 billion, which covered broad areas of need such as local procurement of about ZAR 1 billion, infrastructure enterprises and supplier development, and social welfare initiatives. Being a small business like [ Wiklamo ], a construction and brick company based in Lephalale, which was founded in 2010 by 3 young graduates from Grootegeluk within the skills development initiative, which then grew from really 3 employees to 20 employees. And really, this is very gratifying to see. Because this is just one example for many cases that show that, indeed, we're making a difference in the communities where we operate. Now coming to operations. The teams were able to respond with resilience and tenacity to the macro challenges presented. And I've mentioned this, how proud we are to have seen such a performance. If we look at the coal business, they delivered 1.4% production increase. We are very proud of this achievement. And we once again commend the team for this performance despite the logistics constraints on our export sales, which reduced by 32%. We achieved a record average realized price of 93%, against the API4 index. And this is an increase of 16% compared to financial year of 2021. This sterling performance was enabled by our robust and diverse coal portfolio on the back of our early value strategy. So it's not just about price what we're talking about here. And our market to resource optimization initiatives also have really come to the party. Our cost performance as well was 1.1% below the mining inflation of 13.8%, which is an admirable performance by the coal team. Given the prevailing global inflationary pressures and rising distribution costs, really thanks to Mellis really working with those field managers across the BUs to make sure that we really manage the cost to the extent that we can. But if we exclude the royalties, our cost increase amounted to 7.3%. The performance of the energy business is also within the seasonal trend range. The wind energy delivered decreased by an average of 7% compared to the financial year '21. Whilst we have low wind sector, the team has maintained the availability of the turbines at 98%, which is even above the 97% contracted levels. So really great results don't drive themselves, but the great people of Exxaro did. As I have already mentioned, despite operating in a high inflationary environment, cost containment and high prices save the day. Having said this, ladies and gentlemen, it's not nearly higher price, and I want to repeat this because I want people to understand, that our 93%, which is a record average price realization against API4, is a huge feat, which is attributable to the growth of our RB1 element in our product mix, with the innovative means that Sakkie and his team continue to apply on the logistics change to RBCT. As you can see, strong prices on the back of our strength of people, and then the product mix should continue to create shareholder value. So the first one is the EBITDA, which increased by 78% from the previous year, a record EBITDA for us. We delivered headline earnings for the period of ZAR 60.16 per share, which is 28% higher than 2021. This performance includes a contribution from SIOC and also from Mafube JV equity interest, achieved despite our adjusted equity income being down 26%, largely due to SIOC and the decline in iron ore prices. We achieved an annualized return on capital employed of 47%. This achievement is attributable to our efforts on critical areas of performance being efficient capital deployment and really good cost management. Given this performance and considering the unfolding uncertainty ahead of us, and obviously, our growth aspirations, it is my pleasure to announce the dividend, as declared by our Board, of ZAR 11.36 per share. And this is really based on our dividend policy which Koppes will really unpack a little bit later. After that, I'm not sure whether it's great news or not, let me run off the stage and give over to Kgabi.

Thank you, Nombasa. We have experienced a very exciting and challenging period during my first year. I mean, I can't believe it's been a year with Exxaro, it feels like 10 years. As mentioned by Dr. Nombasa, we cannot celebrate any performance without being reminded of the sad loss of our employees, Mr. Mathews Moanalo, at our Belfast operations on the 15th of August 2022. Our thoughts and prayers remain with the family. I'm proud to be associated with this Minerals team, who has demonstrated resilience and adapted to positively respond to the significant challenges the business faced in 2022. We managed to achieve the following remarkable results. Good performance in all areas on our safety, health, environmental and community scorecard. We achieved great operational performance, and we were able to improve on our production volume irrespective of our logistical challenges. Our cost remains well contained, irrespective of increased inflationary pressure. We are creating value by ensuring we invest in relevant projects to successfully sustain our operations. I will now go through the details of our performance. We drive for a safe, sustainable future with a very specific focus on our safety, health, environmental and social impact. Regrettably, the mining industry recorded 49 fatalities in 2022, one of whom was our very own, Mr. Mathews Moanalo, who has fatally injured at our Belfast operations. Following this incident, investigations were concluded, learnings shared, and leadership interventions focusing on the management of high-risk activities increased at all sites. As at 30th December 2022, we recorded 6 lost time injuries across our operations. This resulted in an 88% decrease from 2021 in our lost time injury frequency rate, which decreased from 0.08 to 0.05 against a target of 0.06. We congratulate our operations on this remarkable improvement. On the health side, we have recorded 23 occupational disease resulting in an operational health incident frequency rate of 0.16, which is 11% lower than the set target of 0.18. On the environmental front, we maintained our 2021 performance on land [indiscernible], carbon intensity, and water intensity. On carbon intensity, we established a multidisciplinary testing at all our operations to optimize energy efficiency, and we are confident that the activities of these teams will result in a positive performance. A good performance on water intensity as we remain below the target level of 180 liters per tonne of run-of-mine. We had a remarkable performance on our Level 1 incidents with a decrease from 43 incidents in 2021 to only 9 in 2022, resulting in a 79% improvement. We maintained our performance with 0 Level 2, 0 Level 3 incidents, which remains in line with our internal targets. On the social front, as Dr. Nombasa has mentioned, we spent ZAR 1.6 billion on our local communities in 2022, an increase of 14% compared to 2021, with a spend of ZAR 1.4 billion. This spend was delivered through several mechanisms, namely community development at ZAR 179 million, skills development at ZAR 123 million, enterprise and supplier development at ZAR 220 million, local procurement at ZAR 1.1 billion, and the mineral succession program at ZAR 2.4 million. Our operational resilience resulted in an improvement of 1.4% in production with an improvement at most of operations with GG6 project contributing as a major factor. This was achieved despite the divestment of Exxaro Coal Central Complex, which we call ECC, in 2021, the impact of the unfortunate fatality at Belfast and immense logistical challenges. Unfortunately, our sales decreased by 1.6%, which the bulk of the reduction due to the ECC divestment, exaggerated by our logistical challenges. We created [indiscernible] for increasing our domestic sales by 5%. The team did very well under the leadership of Sakkie. We used the opportunity to sell our export product in the local market, enabling production at our operations. The severe impact of the logistical challenges on our export sales is evident on the bar graph on the bottom left, where our sales decreased from 12.2 million tonnes in 2020, to 5.2 million tonnes in 2022, resulting in a 52% decrease over this period. In 2023, we forecast production to increase by 3.2% and sales by 5.7%, mainly due to the following: an increase at GG or Grootegeluk of 1% with the ramp-up of GG6 improving product quality. A 21% increase in Mpumalanga production, driven by market demand and the utilization of alternative logistical channels at Leeuwpan and Belfast to supplement our export sales. Matla decreased by 6.5%, impacted by resource availability and production challenges due to the Mine 1 funding delays. The decline in the API4 index thus posed a challenge in selling our products through alternative ports, as this comes at an additional cost, We, however, continue to pursue this option while optimizing value. Looking at the right-hand corner, you will note the following regarding our market. Our proportion of sales into the important Indian market has reduced on the back of lower Indian demand for South African coal during the time of high coal prices. Demand from China was also a bit lower, but general demand from Pacific customers remained strong. Our high-quality product portfolio resulting from our Early Value Strategy continues to support our market positioning. We saw strong demand for our diversified suite of products, and Exxaro was very successful in placing significant volume into Europe, increasing from 3% to 46%. That is a real improvement. Moving to our product mix at the bottom left, we continue to benefit from and improve on the quality of our export sales product mix with RB1 increasing from 31% to 58%. We expect this trend to continue improving as indicated. Looking at the bottom right-hand corner, it is evident that 2022 was a year of record high coal prices on the back of market tightness as well as high oil and gas prices, supported by security concerns most notably in Europe. Our robust and diverse product portfolio, coupled with market to resource optimization initiatives enabled us to increase the price realization by 16%. As Dr. Nombasa has mentioned, I mean, this is a record. We've achieved 93% of the index across total export volumes. We continue to focus on finding solutions across numerous domestic and export channels amidst the challenges on rail logistics. We managed to come in at 1.1% below the mining inflation of 13.8% despite major inflation increases impacting our production cost. Please note that the mining inflation indicator we use to measure ourselves against excludes royalties. If we also exclude the royalties, our inflation increase will be 7.3% against the inflation of 13.8%. We will, however, continue with the stretched targets we've set ourselves to ensure our cost competitiveness. We continue to benefit from our digital and operational excellence programs. This is driven by Tony in my team. Insights from advanced analytics enabled the necessary focus on cost, assisting to avoid inflation impact of ZAR 179 million, which is about 1.1% of our cost. As shown in the blue shaded block, we successfully managed our production cost at 0.6% below the 2021 base with the major contributors as follows: optimizing contractors by reducing our cost with 37%, which is a combination of the following: our strategic decision to divest from ECC, improving our strip ratio at Grootegeluk and Belfast. This saving was offset by major pressures driven by an increase in fuel of 49%, countering the inflation impact of 60.7% through mining efficiencies. Maintenance of our mining equipment and hiring equipment at Leeuwpan resulted in an increase of 8%, and an increased blasting cost of 39%, impacted by higher ammonia prices due to global shutdowns of ammonia plants. Cost management remains an imperative as inflationary pressure increases globally and in South Africa, and we remain with our guidance of continuing to beat inflation. Riaan will further unpack the other cost increases. Our total capital spend is 5% below our guidance provided in 2022. Expansion capital consisting of the GG6 project remains within the original guidance of ZAR 5.3 billion and ramped up in 2022. The project is concluded with minor cash flow still in 2023. Our sustaining CapEx, we aim to maximize value, improve efficiency of our capital process, thus promoting a responsible capital spend approach. We have seen some of this benefit in 2022, and this can be attributed to our positive approach in embracing the start of our capital journey. The capital journey project is being run by Mellis and [indiscernible] to ensure that there's a discipline in terms of how we deploy capital. Our sustaining capital was 4% lower than the previous guidance, mainly due to timing and optimization in our various projects. We will sustain our business at an average of between ZAR 2 billion to ZAR 2.5 billion per year in real terms as previously advised, executing our capital improvement journey and maintaining our commitment to executing our Early Value Strategy. I'd like to thank the Mineral Operations team, supported by our colleagues here at the Connection for their commendable loyalty and good performance, which highlights that we have the right caliber talent. I know [indiscernible] is passionate about talent in Exxaro, but there's a good talent in Exxaro and I have experienced it, and hence the results we're talking about, and that no challenge is too big to handle. I now hand over to Riaan.

Thanks, Kgabi. Good morning, ladies and gentlemen. It's a pleasure presenting our financial results for the year ending 31 December 2022. As usual, the results will be compared to the full year ending 31 December 2021. The IFRS results are adjusted with noncore items to make them more comparable. And from 2021 onwards, the IFRS results were only adjusted with headline earnings adjustments and further details are included in the backup slides. So on the first slide, the high-level overview of the group results highlights the difference between our own managed operations depicted on the top left and the right graph and income from our equity-accounted investments on the bottom left graph. We are proud to report double-digit growth in our earnings despite the reduction in equity income. Revenue and EBITDA will be unpacked later on in the slides. The contribution from our non-managed operations showed a significant decrease with equity income being 26% lower, mainly as a result of the performance of our investment in SIOC. This translated into headline earnings per share of ZAR 60.16, an improvement of 28%. On the next slide, you will see our financial scorecard, again, highlighting the double-digit growth in EBITDA, headline earnings cash generated from the operations, and also our cash balances. If we look at EBITDA, the coal EBITDA increased 78% to ZAR 19 billion, whilst the energy EBITDA was 9% lower due to lower energy generation, which I will unpack later on. Looking at the equity income, the decrease in equity income from SIOC was mainly driven by lower iron ore prices combined with lower volumes as Sishen also experienced logistical challenges. Cost in 2022 was also higher, but partially offset by the impact of the weaker rand-dollar exchange rate. Mafube, our 50% joint venture with Thungela, recorded an equity accounted profit of ZAR 1.9 billion as a result of higher coal prices combined with higher volumes sold. We also had higher equity income from Black Mountain, mainly due to higher sales volumes at higher prices for zinc, lead and copper. So as a result of this, the headline earnings increased 26% to ZAR 14.6 billion. The cash generated from operations increased to ZAR 18.9 billion, resulting in a positive net cash balance at the end of December of ZAR 5.2 billion. If we look at the EBITDA, firstly, the price bar. Our exports were at the higher benchmark API4 price and that resulted in an average price per tonne achieved of $251 per tonne, 161% higher compared to 2021. And as pointed out, only a 7.5% discount to the API4 benchmark price due to the good quality and mix of our product and sales. Due to the logistical challenges, we also sold more coal, originally destined for the export market, in the domestic markets, but at higher prices. When we look at volumes, the domestic sales volumes increased in line with higher customer demand and to mitigate the impact on logistical challenges, we also sold more coal domestically. Inflation. As Kgabi pointed out, inflation is currently running at very high levels. And we are experiencing inflationary pressure with our diesel cost increasing 60%. So our total diesel bill has gone from ZAR 1.1 billion to almost ZAR 2 billion during the past year. Electricity cost increasing just over 11%, and the rest of our cost at PPI of 14.5%. Despite all of these challenges, we were also able to contain our cost, and we are very proud of that. So looking at the cost bucket, the buy-in from Mafube is reflected here, and we bought in 643,000 tonnes of additional coal from Mafube. But due to the higher coal prices, we paid just more than ZAR 1,055 a tonne for these additional volumes. The royalties also increased, ZAR 786 million, in line with the higher revenue. But with us now also having lower CapEx to offset against the revenue. The higher selling and distribution cost was incurred due to additional road transport, demurrage and wharfage cost to mitigate the impact of logistical challenges. This was far beneath the ZAR 15 million. And higher transport cost was also incurred for selling coal in the domestic market. This was ZAR 111 million. The net positive ForEx variance is due to the impact of the weakening of the rand-dollar exchange rate on realized and unrealized ForEx differences on foreign debtors and cash balances. Included in the other negative variances under other is FECs amounting to ZAR 158 million, and funds in the environmental trust fund of ZAR 122 million, and we also had a higher community spend of ZAR 137 million. ECC is also stripped out for comparability purposes. On this slide, we split out the revenue and EBITDA between the Waterberg and Mpumalanga operations. So it's evident from this slide that we are starting to reap the benefits of the ZAR 17 billion we spent on our coal growth projects over the last couple of years. We are pleased to report a significant increase in EBITDA at both Waterberg and Mpumalanga commercial operations. The increase in EBITDA at Waterberg of ZAR 4.6 billion is attributable to an increase in the revenue of ZAR 6.8 billion, with a corresponding increase in the royalties expense of ZAR 567 million at Waterberg, and also inflationary impact, as discussed earlier of ZAR 1.1 billion. And we also incurred higher distribution costs due to a portion of our export sales being evacuated via road, that was ZAR 285 million, as well as an increase in domestic transport cost in line of higher domestic sales volumes of ZAR 111 million. Production cost was only ZAR 125 million higher, in line with the higher production volumes. The Mpumalanga increase in EBITDA is due to higher revenue from the Mpumalanga mines of ZAR 6.4 billion, offset by higher buy-ins from Mafube at higher prices of ZAR 2.6 billion as well as the inflationary pressures mentioned of ZAR 637 million. This all translated into a very healthy EBITDA margin of 42% for the coal business. On the Cennergi slide. So the second half of the year, the Cennergi energy generation was 364 gigawatt hours, a bit lower than our previous guidance due to the lower wind conditions, which were also recorded at other wind farms in South Africa and across Europe. In South Africa, many wind farms have experienced the lowest wind conditions over the past 12 months. Our normalized EBITDA at the operation is still very consistent, sitting at 80%, showing the predictability of the earnings and cash flow underpinned through the long-term offtake agreements. The project finance debt of ZAR 4.6 billion will mature over time and be fully settled by 2031. There's no recourse to the Exxaro balance sheet. It's hedged through interest rate swaps at an effective rate of 12.3% and hedge accounting is applied and therefore have limited volatility on the income statement. If we look at our capital allocation framework, we can see here that the framework has rewarded shareholders handsomely over the past 5 years. So we've generated cash of ZAR 78 billion, which we deployed in sustaining capital of ZAR 10.6 billion. And in terms of the dividend policy, we paid ZAR 34 billion to shareholders as ordinary dividend. You will also see that the final dividend for this year, as set out on Slide 25, it's the first time that the coal dividend actually exceeds the SIOC dividend. So I think the pensioners will not be very happy with that. But we are very happy. We deployed more than ZAR 9 billion in our coal growth projects, which also included Belfast and the GG6 expansion projects. So on the energy side, we acquired total 50% interest in Cennergi in 2020 for ZAR 1.7 billion. And over the past 5 years, we paid more than ZAR 11 billion special distributions to shareholders, mainly from the proceeds of the disposal of Tronox. This leaves us in a healthy cash position with a strong balance sheet to implement our growth strategy with our return on capital employed well above our target rate of 20%. We then come to the cash generation and capital allocation. So in employing the capital allocation framework, we always aim for net-debt-to-EBITDA ratio of below 1.5x. For 2021, the cash inflows totaled ZAR 21 billion, comprising of ZAR 15 billion from our own operations and dividends of ZAR 6 billion, mainly from our investment in Sishen. In terms of the framework, we then use this to pay financing cost of ZAR 332 million, sustain our operations and support functions with capital of ZAR 1.4 billion, and we paid a dividend of ZAR 9.7 billion, consisting of a pass-through of the SIOC dividend of ZAR 5.2 billion and ZAR 4.5 billion from our own managed operations. We also expanded our coal operations with further CapEx of ZAR 251 million, which is mainly the GG6 project. Included in the other bucket of ZAR 791 million are shares acquired to settle vested share-based payment schemes of ZAR 441 million. So excluding the Cennergi, net debt of ZAR 4.4 billion, this resulted for the rest of the Exxaro group in a net cash position of ZAR 9.7 billion. We shared the economic value generated with all our stakeholders, including employees, with ZAR 4.4 billion. And as you can see there, we contributed ZAR 8.9 billion through taxes and royalties to the state coffers during the year. ZAR 9 billion was shared to shareholders and a further ZAR 181 million with our local communities. As pointed out on the capital expenditure, we've now successfully completed all the coal growth projects. And we are guiding for sustaining capital in the coal business of between ZAR 2 billion and ZAR 2.5 billion per annum in real terms going forward from 2023. So on the energy side, we're very excited. The energy capital of ZAR 1.5 billion is for the implementation of the Lephalale Solar Project, of which we are aiming to start construction in the second quarter of this year with construction period of 19 months. Looking at the dividend, so the Board has resolved to pay a final dividend of ZAR 11.36 at an overall group cover ratio of 2.02 This is a pass-through of the SIOC dividend and the cover of 2.5x on Exxaro's adjusted group earnings. So taking into account the uncertainties associated especially with the logistical challenges as well as our growth prospects in minerals and energy, the Board has not considered a special dividend at this point in time. So with that, also, thanks to all the people that made the results possible, the finance team for the hard work, the people at the operations, the people at the corporate office, the efforts are appreciated, and without our teamwork, this would not have been possible. Thanks very much.

Thank you, Koppes. Our strategy spells out that our future is beyond coal. However, the coal business is the current goose that lays the golden egg for ourselves, for all our stakeholders, especially in South Africa. Over the last 8 years, we have optimized the coal portfolio, which we've shared with you, but let's summarize this. By divesting noncore assets, rejigging the remaining key operations to deliver early value, to avoid stranded high-quality coal reserves, and implementing a sophisticated scale, we acquired of market to resource flexibility, and we have also digitalized our operations to further improve efficiencies and productivity. We have enough coal resources to meet demand into the foreseeable future, and we will sustain the business at an average of ZAR 2.5 billion per annum. I can confidently share with you today that based on our 2022 cash generation, our recently constructed and digitally connected mine, Belfast, has already paid for itself, 3 years ahead of projected schedule. That's great news. Therefore, it is our strategic choice to optimize value from the coal business, to continue to create this value and generate returns to shareholders, and at the same time fuel the growth of our business to diversified minerals and a significant renewable energy business for a robust just transition. In the following slide in your booklet, I outlined the key efforts that we would really put and prioritize in sustaining the core business in this year. Nothing is new there, but you can read at your leisure. So from a strategic point of view, we're really committed to grow into a diversified global minerals business. And a common theme amongst the 3 priority minerals that we chose, copper, bauxite and manganese, is the expectation of insufficient supply in the long term relative to demand. So we believe in the long-term fundamentals of these minerals. The world needs significant investments in these minerals to support the energy transition and future economic growth. The long-term fundamentals, as I've said, really remain attractive. So therefore, for any business to grow, we've got to pursue acquisitions. And that's what we're doing, looking and within these minerals, always taking cognizance of the investment criteria, and capital allocation requirements to balance risk and returns, and these were also shared with yourselves. In the past year, we have built an active pipeline of possible acquisition opportunities, where we pursued and evaluated a total of 12 potential opportunities, 5 in manganese, 5 in copper, and the other balance, which is 2 in bauxite. Misalignment with our investment criteria and high premiums have been key to the decision we took not to proceed with some of these opportunities. So across the industry, M&A activity in bauxite and manganese has been relatively muted in comparison with copper, although some moderate activity was observed in manganese. We've got the minerals team here. They've been looking at this at least for 1.5 years. They've got the experience of being out there in the market and well prepared to share the experiences that they have. So there is really market competition for future focused minerals. It is intense. And sellers have very high valuation expectations of these assets. And we have really exercised restraints and discipline to ensure that we create share value in growing and diversifying your business. As we said before, we won't buy these for the sake of buying. We are in pursuit of deals that are right, good fit at the right price. Likewise, on the energy business, we have been building a pipeline of opportunities, including the Lephalale Solar Project, which our Board has already approved. We expect to reach financial close at the end of this month with construction expected to commence in the second quarter of this year at a cost of between ZAR 1.52 billion and ZAR 1.56 billion, which will add 68 megawatts to our portfolio. Our partnership with Enertrag aims to develop wind and solar solutions for the mining industry in Mpumalanga. The first preferred site is materially permitted and we are not focusing our tension on commercial and technical work streams. The partnership with Enertrag has a potential pipeline of 700 megawatts. Furthermore, we are in discussion with various parties to acquire near-permitted sites to further boost our entry into the market. The potential pipeline has a range of 370 megawatts to 975 megawatts. We are quite mindful of South Africa's grid constraints, which really remain a challenge in our energy strategy and other people's strategy for that matter in the country. There are around 9 gigawatts of renewable energy projects under development in South Africa, of which the mining sector accounts for 6.5 gigawatts. Closing the electricity game acquires concerted efforts from citizens at large, but also more from the likes of our business to make meaningful investments. In past 12 months, we have pursued 8 wind and solar acquisitive growth opportunities. One opportunity was taken through the formal government processes of this organization, but went no further due to strategic reasons and very tight time lines. Six opportunities were internally reviewed and abandoned due to not meeting our investment criteria, while a remaining opportunity is still in due diligence process review. In August, we presented our revised capital allocation model that facilitates coherent robust, but fair decision-making between competing investments internally, and this ensures alignment with our strategic intent. We really remain committed in growing your business. However, as said earlier, we will not acquire opportunities at all costs. We will do so in a disciplined manner, guided by this robust capital allocation model that we shared with you. Last but not least, I am also pleased to announce the appointment of Mr. [ Leon ] [indiscernible] as the MD of Minerals. Can you stand up so that everyone sees you, sir. So Leon is a long serving seasoned leader at Exxaro, having served across various divisions in the company over the last 25 years with a proven record in business turnaround capabilities and prudent capital optimization. [ Leon ] was the shareholder representative when the business was still a JV with Tata Power, and he later delivered the 50% of Tata stake to Exxaro, and subsequently led the consolidation of the business to its current form. Now turning to the macro outlook constraints that challenged our business as I've touched on a little bit earlier. So Europe is still challenged to provide energy security, although 2023 has started with further moderation in thermal coal prices. European demand for South Africa's high-CV coal is set to remain as Europe's drive to diversify supply from Russia will continue to be sustained. Demand from key markets is expected to remain strong. China's seaborne thermal imports are expected to increase to 235 million tonnes in 2023 compared to 208 million tonnes in 2022. And India's thermal coal demand is also expected to remain robust. Sadly, the South African thermal coal export volumes for 2023 are expected to remain constrained as logistical challenges persist. The reopening of China after 3 years of Zero COVID policies is anticipated to support commodity markets such as iron ore. South Africa's ongoing electricity supply shortage is estimated to shave off some economic growth from 2023. This crisis gives impetus to private and business investments in renewable energy capacity in partnership with government. To this end, Exxaro is well-positioned to grow our renewable energy business and contribute to solving the national electricity shortage. So in conclusion, ladies and gents, our key message to you is as follows: Our strategy is to grow the business and impact positively in society remains intact. We keep on repeating ourselves because we really want you to understand really the value that underlines the core business is really sitting in the work that we've done in the last 8 decades in making sure that we've got key strategies that extract this value. One of them being the Early Value Strategy of the coal business, which will continue to deliver this value, obviously, coupled with other aspects of our strategies. We will also capture opportunities presented to our renewable energy business. We are creating this business for both decarbonization of our business and also to power possibilities in Africa and beyond, while growing additional generation capacity. We acknowledge the market competition for high-demand minerals. Commodity and asset prices remain elevated with market anticipating future demand growth in a high inflationary environment. Our approach to allocating capital is prudent with due consideration for balancing risk return and the need to transition to carbon-neutral future. I would like to thank all of our employees and the executive team for delivering such sterling set of results despite times of deep uncertainty, both in personal lives and in business, due to these logistical challenges, inflationary pressures, load shedding, and any other disruptions that we feel in our economy. As Nelson Mandela said, a winner is a dreamer who never gives up. Thanks to our Board for always challenging us. Our Chairman is sitting there at the back, by the way. He is looking at me straight in the eye. And thank you, Chairman, for always leading these very challenging, robust discussions when we talk about capital and our ports in terms of the investments and potential opportunities. We also appreciate the conversation with [indiscernible]. And we believe that these conversations really are quite healthy and they do support our plans to grow this business. We have been listening very carefully to you as the investor community, as our stakeholders and employees, and we know that there is a better place to be tomorrow than where we are today. Thank you very much. I give over to Mzila.

Thank you very much, CEO, Nombasa, as well as to Kgabi and Riaan for your presentations. When I look at the list of questions here, it's not a long list, which suggests that perhaps you preempted some of the questions and have responded to them with your presentation. But I do have 4 questions, 2 from IDC, from Tshilidzi Rabada, as well as Nkateko and [ Jennifer Malin ]. I will maybe start and group Tshilidzi's questions together. And the first one asked about -- he has worded the question as follows: What has been the quantitative impact of the said logistics and electricity challenges on volumes and revenue? And I think in ways implied the cumulative sum of both logistics and electricity challenges. And how much is the business receiving from the logistics service providers versus contracted levels. And I think that question perhaps suggests the performance of those contractors in terms of what we've contracted with them and what they're actually achieving. And then his second part of the question, just wanted a little bit more color on the acquisition pipeline for the 3 commodities, specifically in terms of what do we mean by a good fit in considering some of these acquisitions. Maybe you want to start?

Let me just ask the team -- I mean, the team is prepared. The team is here. So maybe, Sakkie, you can start with the logistics question. The subsequent one, Marius, you're going to lead us, and then the team with you can fill in. Go for it.

Thank you very much for the question. Yes. So on logistics, the level of performance you can calculate as we are contracted with Transnet to move 7.8 million tonnes per annum to RBCT. And last year, we exported a total of 5.2 million tonnes, of which 0.5 million tonnes was trucked to the ports. So on rail, we actually only did 4.7 million tonnes out of the 7.8 million tonnes that we contracted for.

Okay. And then the cumulative impact of logistics and electricity combined on volumes and revenue?

Yes, it's difficult to -- and I think I must rather give to my finance colleagues on that side. But on the electricity side, we, to an extent, are shielded because our mines are not load shedded, because we supply the vehicle that Eskom requires. But on the logistics side, you can appreciate in the numbers that I've shared with you, the impact on us. And if you look at the price levels that we've seen, you can calculate that impact on us as a business.

And I think it's a number that we disclosed. We have disclosed it last year and also industry-wide in terms of the coal industry what that impact is. Okay. And then the last question around what we mean by good fit. Maybe you want to...

As he's standing up, please do come and talk to us. We always argue as to how much of this we share with the market, of what we're looking at. It's for exactly this reason that you say, I've looked at so much. You go and you say, I didn't look at it, I didn't acquire, then you're in trouble. So you've got to share.

Sure. Nombasa, thank you very much. I think in terms of what is a good fit from an M&A perspective, we have, during our sort of Market Day last year, provided a very clear guidance on what we measure from an investment criteria perspective. I think what we have seen in terms of the number of opportunities that we have evaluated, and I think Nombasa also shared with you the specifics around what we looked at. Is that market competition specifically around the copper assets continue to pressure the sort of market in terms of where transactions are taking place from a pricing perspective. I mean if we measure that against our own investment criteria, it makes it very difficult for us to deliver the sort of returns that our shareholders are expecting and that we have promised. We continue to examine and look at opportunities on a very regular basis. I think what we have also indicated is that the market particularly around copper assets are more active than what we are seeing in the manganese and the bauxite space. However, that in itself creates opportunities in these commodities where the competition is slightly less. We will continue to comply with our investment criteria. And that to us -- ultimately, if we are able to conclude a transaction that fits within our investment criteria and comply with what our own requirements are, that would be a good fit for us. And we believe that, that will deliver shareholder value in terms of growing our business.

Thanks, Marius. If I can then move on to Nkateko Mathonsi's question from Investec. What is the risk on your higher FY '23 production and sales outlook if the Eskom electricity availability factor does not improve from current low levels? I think the suggestion that extent to which that has a backward impact on our production.

We haven't -- we don't...

Sorry, do you want me to repeat?

No. But we said there's no impact from load shedding. Remember that. And we have not seen necessarily any curtailment of any offtake from any of the mines that supply Eskom due to what is going on, on load shedding.

So we remain confident...

So we remain confident.

And then the question from [ Jenny ] around export performance, I think, was responded to by Sakkie as a result of the question from Tshilidzi where he was asking about the cause of the reduction in exports. [ Jenny ], if you can hear me, if your question hasn't been answered, maybe you can pose the question again, but I think to a large extent, we responded to your questions. And then the next question came through from [ Tabo ] from Capital One Partners wanting to know, since January 2023, what has been Transnet's coal delivery run rate. I think Sakkie will take that.

Give us another question.

Those are the questions so far. There is no another one.

Thank you very much. Yes, January and February, unfortunately, was not a good start to the year. For year-to-date, we're actually performing below where we were last year. I don't have that exact number in my head, but I would think it's probably in the 40 million tonne per annum level and not close to 50 million tonne, where we were last year.

Okay. Let me come to the floor here. I see a question from Tim as well as Brian. Tim?

It's Tim Clark from SBG Securities. First of all, just hearty congratulations on the cost performance. I thought it was really very good, and we've seen some pretty tough cost performance through this reporting season. Many of the companies out there are still talking to sort of lag costs coming through despite energy costs turning around. I wonder if you could comment on your outlook for costs and whether you think you can kind of retain this very strong cost performance, whether there's more benefit to come? My second question is just on M&A versus buybacks. Your stock is at quite big discounts to other stocks in the market. And I just wonder if you -- at this stage, I mean, if I look at your balance sheet, I've got [ Dr. Con ] in front of me here. And with the dividend potential that, that strong net cash balance leaves you or a buyback. I just wondered if you didn't consider better pensioner returns. And then lastly, just on trucking, what's the break-even level. I see that you've got quite a big domestic forecast volume, which I assume is going to be trucked, right? But at some point in time, I assume that it's not economic to truck. And so what's that point? What's that breakeven point in your mind right now?

Okay. I think we'll start with the cost and what your outlook is.

Tim, thanks for the question. The cost performance guidelines that we gave you is still intact. We did indicate at half year last year that the cost pressures are increasing. And you saw that we were sitting at about 4.7% where mining inflation was over 11 at the time. So we did see more cost coming through in the later part of the year, but Riaan unpacked some of those. The rehab number, which was water treatment mainly at Belfast, and then some of the estimated credit losses, et cetera, so some of those one-offs that were in there. So the second half rand per tonne was higher. But year-on-year, we're still comfortable that we'll stay within mining inflation. And with that 1% differential that we see, we still guide that going forward.

We mentioned that it would come to a more average levels on stripping ratios. And if we see anything like that, because we know it always has a significant impact, we'll always announce it ahead of time.

And then the questions around returns to shareholders, comparting M&A versus buyback, which is the better?

That is always something we do in our calculations, to consider the return on a buyback versus the return on M&A. And that is also one of the reasons why we haven't done anything at this stage. So all of that are in the pot. And then also in the current environment, as I pointed out something like a special dividend and also the possible further buyback was not considered due to the uncertainties that we just mentioned around DFR, et cetera, and also the growth aspirations for the group. But all of those items are always considered when we look at growth and dividends versus buybacks.

Okay. And then the other question was around where we see the breakeven price being for trucking. This has been quite a common question as well.

Yes. Tim, thanks for the question. You will have seen in the media in the past week or so, there were mention made of about $110, I think where some people indicated that all of the trucking will stop because it's not going to be economical. We agree. We definitely will stop at that levels. But this is not where it becomes uneconomical. There's already, I would think, at $130, $140 level, quite a material chunk of even Mpumalanga coal that cannot be trucked to ports economically. So we're in that space where I think a big chunk of Mpumalanga coal is not making money on a trucking option. And we've just in the past week witnessed a very big increase in cost passed through by Transnet port terminals, which will make that situation even worse for the rest of the year for people wanting to export through alternative ports.

Thank you very much. Brian?

Just a couple of questions from my side. Firstly, to Sakkie, are you seeing any sign of your sponge iron customers in India coming back at these sorts of coal prices? And if so, what sort of volumes do you think could come back into the market on the demand side? And then perhaps just carrying on with the M&A question, a few questions there. Could you give us an idea of what sort of implied long-term copper, manganese, and bauxite prices are being shown in these deals? And then another question was, of the 12 deals that you looked at, how many are still open? Have you closed them all out? Or do you have some left? And then perhaps if you could just share with us the location of the bauxite mines that you were looking at, if you don't mind?

You're pushing it though. You're pushing it. Okay. Where is Marius, just to... Okay, Sakkie.

Brian, thanks for the question. On the Indian market, India actually had a very good year last year in terms of total imports into the Indian market, higher than in 2021. The appetite for South African coal was just not there. Two factors, the very cheap Russian coal that was available and that India really climbed into. And the second one was the overall high levels of coal price, where you normally see Indian buyers withdraw from the market if the coal price goes a bit up. So it's not that the Indian market demand, there's anything wrong with it. It was an economics question. We definitely see India back in the market for South African coal. And we do see that demand in the market. So there are some questions about the sponge iron industry in India, but it's not a coal demand issue, it's more where does that industry fits in the economics of the steel industry globally. But generally, we still see good demand.

So thank you very much. [ Mafwana ], pricing. Sorry, prices.

[ Mafwana ] is our Manager for Business Development.

Yes, with the Minerals team.

Brian, thanks for that question. Starting with the prices, our manganese long-term price remains the same at $4 per dmtu on FOB basis from PE.

And I think you should say whether it's or real or number.

Yes, quantify.

So that said, all the prices are going to be on a real time basis that I will mention. So that remains the same. On copper, in the past, we were around $7,500 per tonne. That has lifted slightly to $7,800 per tonne. The reason for that is this positive sentiment in the long term in terms of the demand for copper driven by the energy transition, so it is at that level. Bauxite also remains the same around $45 per tonne. And so that's at the level where these things make sense for us. In terms of the trough and the question of how much remains, I can't give you a number, but I can tell you that a significant number is still at play. So they're still ongoing. And as you can understand, these things have a long gestation period. So they are at different stages of progress for reasons, you will understand, we cannot share too much. The same with the bauxite question, I think maybe something worth saying there is that the reason you see fewer numbers there is not really because of anything from our side, it's just the nature of what's happening in the market. Bauxite assets are tightly held. They tend to be vertically integrated as well. And for that reason, they don't exchange hands as what you see with the other commodities. Thank you.

Thank you very much, [ Mafwana ]. Do we have any questions from Chorus Call?

Yes, we do. Our first question is from Shilan Modi from HSBC.

Congrats on a solid set of results in a difficult trading environment. A couple of questions from my side. First question, in that 40 million tonnes that Sakkie -- the run rate for Transnet -- that 40 million tonne run rate that Sakkie mentioned, how much of the decline from to 50 to 40 is actually driven by the elevated levels of load shedding versus other issues? Then, in terms of your acquisition strategy, does it make more sense -- in terms of like returns, does it make more sense to pursue other minerals or to actually invest in, say, electrical capacity in South Africa. And here, I'm making mention not just of renewables, but actually, like could you participate in one of the concessions at a power station? I'll pause there. I might have 1 or 2 after that.

Okay. Thanks for that, Shilan.

Thank you very much, Shilan. And maybe just on the question on the minerals. Every year, we evaluate our position on the choices we've made in terms of the fundamentals of each one of those minerals. And as we've reiterated today that we still remain quite confident on the fundamentals of the 3 commodities. The work that we do expands or leads us into something else. That one will lead to the work, as I said, to the reviews that we always do. Including the opportunities that you mentioned of power station operations, that's something that we look at all opportunities, especially in our adjacencies, value chain, et cetera. And if there's an opportunity, something that we will put on the table and discuss with the Board, but at this point in time, that has not come up from the teams. And if anything comes up, Shilan, we will share it with you, or any changes to the choices that we've made. One thing we're very clear about, we kept on mentioning this that when we realized that we had to rotate towards the cleaner minerals, we had to have a focus, because we can't look at everything. So the 3 we chose was our initial focus, and we believe that it still is quite an important work that needs to be concluded before we can start looking elsewhere.

Okay. And then the -- I think it was back to Sakkie in terms of the TFR run rate, the drop from 50 to 40, whether it was due to load shedding or other reasons for that?

Yes. Shilan, I must firstly confess I'm not 100% sure about the impact of load shedding of Transnet, but I've never heard that to be a major driver of rail performance. So to my knowledge, the drop that we've seen in January, February is more than anything a continuation of the same factors that we've seen in 2022 rather than a load shedding as a reason.

Any other questions? Do you want to come back, Shilan?

Yes, please. So if I compare the guidance you guys provided to the market 12 months ago to the guidance you provided today, so if I'm just looking at FY '23, FY '24, your export sales guidance is about 2 million tonnes lower per year; your volumes are slightly higher, and I think that's just because of Leeuwpan, that's total volume. But your CapEx is also quite substantially higher. So now you're guiding to about ZAR 4 billion per annum, whereas last year I think it was about ZAR 1.5 billion to ZAR 2 billion. So maybe can you just talk to us about how you're thinking about cash generation for the next year? And therefore, how does that translate into what you're thinking about dividend payout for the next year?

Marius, anything you want to say, maybe?

So firstly, on the CapEx side, I think the guidance is still exactly the same, ZAR 2 billion to ZAR 2.5 billion on coal. The additional ZAR 1.5 billion you're referring to is for the Lephalale Solar Project. So that CapEx will only be incurred over the next 2 years. Then that is out of the way. So the guidance is still exactly the same as we provided at the Capital Markets Day, ZAR 2 billion to ZAR 2.5 billion. And then, yes, for now, the dividend policy remains the same as we communicated to the market. And as we always pointed out, taking into account the operating environment, are there growth opportunities at that point in time, the Board may consider special distributions. But taking into account the current, where we stand, the Board has not considered a special distribution in the current climate.

And in fact, that's a question that just came through now from [indiscernible] in terms of why a special dividend was not considered given the high net cash balance. So I think if there's a question of the day today, it's certainly around the dividend. So I think you've spoken to that. And maybe whilst I have [indiscernible] questions, it's a more operational question around when we expect the higher ammonia cost to moderate?

We don't know. We will have to take that advice from the market. We don't know. Yes, we'll have to take the advice from the market, yes?

Shilan, any other questions from your side?

No. That was brilliant.

All right. Any other questions from Chorus Call?

We have another caller. The question is from Thabang Thlaku from SBG Securities.

I just have a couple of questions from my side. Number one, what are your stock levels looking like at your mines, particularly at GG. And number two, I mean, the 40 million tonne run rate is quite concerning. So I'm just wondering if this is going to have an impact on any of your operations. So some of the miners are talking about potentially either downsizing or putting some of the operations on planned maintenance because they can't get volumes out. Is this something that Exxaro is struggling with, and then I'll leave it there. Maybe I'll come back with an additional question after.

Okay.

Okay. Ron, how much are you keeping on the ground?

Ronaldt Mafoko will respond to that question. He's GM for our Grootegeluk.

Yes. Thanks very much for that question. The stock build is basically a function of the increased throughput that is as a result of the fully ramped up GG6. And Eskom still being at 25.2 million tonnes. We are maintaining sort of a healthy level on the seasonal and strategic stockpile. We try to cap that at about 2 million, and between 150,000 and 200,000 on the life side. In terms of the high-value stockpile, it really varies from period to period, but it is safe to say that we pick at around 0.5 million tonnes of stock between the strategic and the life. Thanks.

And some that you may be keeping for a shot. And any expectations of shots ahead?

Yes, the 2 million tonnes should come very handy in terms of shots.

Okay. Thank you very much. It will come handy.

Thank you. And then the question around the potential impact of the TFR run rate on operations, given that there are some companies that are potentially circling back.

But Sakkie, just on this one, I don't recall that we've made any adjustments on new scenarios that affect me, which we would have approved as far part of our forecast process. So if we need to, it will happen, but it has not happened.

Okay. Thabang, are you happy with that response?

Yes, I am. I must say, first I was cut off. So I didn't hear the first answer properly, but I'll get again in the sell side.

Yes.

Okay.

And then my follow-up questions. Could you please remind us the addendum number you're on with Eskom for the offtake at GG?

9, Thabang.

Addendum 9, thank you, Nombasa. And then with regards to that announcement we saw earlier in the year around Eskom paying Exxaro take-or-pay, I believe the number was ZAR 9 billion. Are you able to give us a little bit more color on that? And what's the sort of annual penalty they pay to you guys for not taking the full contracted volumes?

So I know we are constrained a little bit here by confidentiality, isn't it? So I'm looking at Mellis' face, Thabang. And the way it looks, it's -- maybe you can just talk about the different -- without the numbers, but just the different buckets.

Yes. Thanks, Thabang. Yes, the ZAR 9.7 billion for us is almost fading into history because it's something that was happening and was contracted and negotiated between ourselves and Eskom at the time of the ramp-up of Medupi. So that started in 2014, and there were amounts that Eskom paid us, no doubt. If you go back and scratch around in some of our historical results presentations, we actually put a table in there. And we indicated how much Eskom was paying us because of the take-or-pay. Take-or-pay is a bit of an all-encompassing term. It's not all take-or-pay. Take-or-pay is when you've got a certain ramp-up and you don't offtake against that ramp up, you get penalized because you have an obligation to offtake. There were other parts of the contract where -- you said -- and we told you we're on Addendum 9 now. There were other parts of the ZAR 9.7 billion, which related to negotiated new ramp-up curves. So you had an initial one when the project was approved. That then was the offtake agreement that you had. If you slipped against that, there would be take-or-pay. They were a couple of negotiations where that ramp-up curve was adjusted. So it was later, it was potentially flatter, and with a fully established year much later in the process. I mean, actually at the end of 2022, we're fully established now from the Medupi point of view. So we actually have very -- there are no penalties that Eskom are paying us currently. The last amount was in 2021. And that was the last tail end of all of this money that they've paid us as a result of the slippage. But there's been nothing over the last couple of years. And from the forecast that they've given us, they actually are very robust and bullish on the offtake that they're going to be seeing. So we don't see that as a big issue going forward. Hopefully, that wasn't too much or too little.

Are you able to share what the buckets are?

I can. So there was the take-or-pay amount, and it's roughly 1/3 between the 3 buckets. Take-or-pay is roughly 1/3 of that number. Then there's the shortfall income, which was against the changed ramp-up curve, and then call the premium income, which was then also built because of the pricing difference as well as the volume difference. And remember, the contracts are actually not tonnage contracts, they're energy contracts. So if you provide the energy in lower tonnage, because it's higher quality product you're producing, then that is taken into account in the way the bill gets charged.

And thank you very much for that question, Thabang, because it really helps to clarify this issue. But one more important thing is to share that in this year's burn plan -- or the burn plan for Eskom is very robust. It actually does not demonstrate that there is a problem with any offtake that Eskom is anticipating. So for us, it's really one of the highest burn years than we've seen before.

Thank you very much for that detailed response. Any other questions on the Chorus call before I come back to webcast, where I think we've exhausted all the questions.

There are no further callers on the line.

Okay. Any other questions from the floor? I think then that brings us to an end. Let me refresh one more time so that I'm not accused of excluding anyone. Okay. I think we've excluded all the questions, and thank you very much for the continued interest and the questions that have been posed, and to the team for the detailed responses. And what remains for me is to say thank you very much to everyone who's helped bring this session to where it is today. I think it's been a very successful presentation. And to the Team Exxaro for a wonderful performance, a safe performance, I think I should emphasize in terms of delivering the results. And now thank you and invite you for a small bite to eat and something to drink outside here. Thank you very much. And let me also remind the sell-side analysts that we will come together at 12:00. Thank you very much.