Impala Platinum Holdings Limited (IMP) Earnings Call Transcript & Summary

Firstly, let me welcome everybody here. It's such a pleasure to finally have everybody and the whole team in a live presentation, in a live discussion again. Also very welcome to people joining us today on the webcast and on the conference call. There'll obviously be an opportunity to ask questions later in the room. And we'll also give an opportunity for people on the webcast and on the line. But before I start, it's customary in our organization to start all of these engagements with a value moment. It can be safety, health, mental health. I was reflecting on it this morning and I thought, with the world where we are in South Africa and economic hardship, we are really, really privileged as a country to have the resources we do, to be able to mine them during these difficult economic times, to try and substitute what is happening out there through the taxes that corporates like us are able to pay. And also for a company like us, while prices remain so supportive to also be able to do our little bit around our operations. So the feedback I would like to leave with you, it might be going well with PGM mining, and prices are very supportive. And hopefully our shareholders are very happy with their returns. But it's quite tough out there. And I think it's important to also just reflect what companies like us are doing around this. So I'm going to introduce a short little video just as an introduction, as a values moment on what we are doing around some of our operations. Then after that, I'll hand over to Nico who would open the Q&A, just reflecting on the year past. And obviously then there will be an opportunity for questions. So without further ado, let's get it going. [Presentation]

Thank you, Johan. Absolutely inspirational. I'd like to thank all the teams that are working on all of these, this wonderful work. I recently had occasion to go to the eastern limb to see all the good work that they're doing there. And it's, as Johan said, the privilege that we have to have access to resources in order to make this contribution to the community is just very humbling. So from my side, welcome, pleasure to see some faces that we haven't seen for a long time. We are being represented by a group of villains on this side. Most of the heroes are sitting inside the crowd and they will assist me in navigating through today's presentation. So, I mean, I'm just -- I'm not going to talk a lot. We're going to try and leave as much time for Q&A as we can. So just a little bit about the macro environment. We have gone through growing uncertainty with regards to what's happening in the world with the macro economy. The growth rates have been downgraded. We see the IMF downgraded the forecast for next year from 3.2% to 2.9%. Of course, it flows out of the whole COVID supply chain issues, Ukraine tension that's impacting on the European economy. And with that this massive global inflation that has impacted, looks at our cost increases, 17%, but I mean, it's uniform across the industry, so that's a big concern. And so because of this global uncertainty, there is a growing negative perception about the PGM markets. But I think our view is a little bit different. I mean, the prices softened somewhat in 2022, but it's only reduced -- I mean, our basket price only reduced by 4%. And when I look at the number of years ahead, there are a lot of positive forces, and they are listed on the slide, that we believe will continue to support the PGM prices. We think that platinum has probably gone, has gone to its lowest. It was $858 when I checked it yesterday. Lots of excess inventory. But we have seen an increase in purchasing from our customers. We think palladium is going to be stronger for longer. And I suppose we are fairly neutral on rhodium. So we believe that there's going to be a very supportive market. I mean, even if I look at the last year, our costs have gone up by 17%, and we've invested quite heavily. But we were still able to provide a dividend according to a 9% yield, ZAR 15.75. And in fact, when I thought about it, if I look at the dividend last year and this year, it is double what our market cap was in 2017. And so I think we are -- we see a continuation of strong times for the company. And when I look across all the assets, I'm actually running a bit ahead because I'm not following the presentation. But when I look at all of the assets across the group, we could argue that in Impala's case and Impala Canada, I mean Impala production reduced by 9%, in Canada by 4% this year. And I suppose that didn't meet our expectation. But when I look at what the causes were, none of it is structural. I mean at Lac des Iles we increased [ phastings ] 2 kilometers over the last few years. So structurally, the businesses are positioned to do well. [ Ektum 's ] operation in Canada, we've invested quite heavily in upgrading the infrastructure. We're busy with the mill decoupling project. And so I -- there have been some parts that have been sticky. We had some labor issues at Rustenburg. And I think very disappointingly we had 7 fatalities during the year. And with fatalities you have safety stoppages. And so to the extent that we can get back to the continual improvements in safety performance, if we can resolve our relationships with our labor and resolve the tension that means, of course, trying to invade a new territory, there's nothing that prevents this company from not having a significantly improved production year in the year ahead. So when I look at Implats in this, all of this, this context, we are a company that came into the year and came out of the year with a very strong balance sheet. We produced ZAR 28.8 billion free cash flow. We ended with a net and gross cash of ZAR 26.5 billion because we are debt-free. And with our facilities which is ZAR 6 billion facility combined with $125 million facility, we've got headroom of ZAR 34.5 billion. And so from a financial position it gives the company great leverage to strengthen its long-term competitive position and at the same time continue to reward shareholders. So if you look at the company, we've got so many projects, from upgrading infrastructure to 2 key life extension projects, one at Marula, one at Mimosa. In fact, our reserves, notwithstanding the year's depletion, have increased by 2 million ounces because of these life extension projects. On top of that, we've got expansion projects at some of our based assets, the Merensky project at 2 Rivers, and then we've got Zimplats expansion project. And on top of that, many of these projects are associated with additional concentrating capacity. We are doing a new smelter in Zimplats. And we are also doing the debottleneck of our BMR, the base metal refinery in Springs. And the last big block in this journey is the base metal refinery in Zimplats. We are currently doing a feasibility study or actually we've done it, finished. We just need to go through an evaluation of that and present it to the Board. And I'm quite confident that the roughly $190 million required for that project will show material financial returns and will be approved. And that will be really the last big block in our journey. And then I've spoken to -- before I get to the shareholder returns. So I've spoken about some of the things that we are doing internally. And in addition to that, as you are all aware, we are pursuing a transaction to acquire control of RBPlat. We maintain the value proposition given the contiguous nature and the strategic importance for all stakeholders in the Rustenburg area and for the Limpopo province in general. We do have unanimous support from all stakeholders. And I include the RBPlat's management, the employees, the communities. It has been echoed by the successful conclusion with a framework agreement with the Department of Trade, Industry and Competition that happened most recently. However, it is a contested process, as you are aware. And in a contested process in South Africa, there are many legal recourses. We are going through that process. We are awaiting the outcome of a competition appeal court judgment with respects to the rights of the intervening company. And then the tribunal will then arrange the follow-on process to conclusion in accordance with that. We believe that we are getting to the closing end of that, and expect a conclusion in this process within the next number of weeks. So that's what we're doing from an acquisitive point of view. And then, as I said, on top of all of that, we were able to distribute ZAR 15.75, which amounts to ZAR 13.9 million for the year. And that's announced to 47% of our fee free cash flow, which is far in excess of the 30% contained in our policy. From an ESG point of view, firstly, from an environmental point of view, I'm not going to go through all of it, but most of the metrics that we track, water recycling for the first time went above 50% this year. Energy efficiency, improved. And I'm very proud to say that full of ninth year in a row, we had no material environmental impact incident in -- across our business. And then from a carbon reduction footprint, I think that it's useful to just stop at that. Our ambition is to reduce our carbon footprint by 30% by 2030 and to be carbon neutral by 2050. Most of our carbon is generated by consumption of carbon-fueled energy. And so we have predicted that our -- or forecasted that our energy consumption in 2030 will be around 710 megawatt. And to offset a third 1.1 million tons of carbon, we need to produce 520 megawatt of renewable energy. And so that is being divided, as indicated on the slide, into the different regions. The most of those, the most advanced of those projects is probably the one in Zimplats, which is now in execution. And that is the first phase which is 35 megawatt of ultimately 185 megawatts. And then the second project that is at a fairly advanced stage is Marula's solar power generation for 30 megawatts. And we will conclude the outcome of that study, which will then feed into -- start of execution in this year. I'm not going to go in detail through the results. It has been published. But just roughly, we find ounces -- or actually ounces in concentrate down 4%, refined ounces down 6%. And that was because of the rebuild of our number 4 furnace, but then we had some inventory that we sold. So that brought up the sales. So sales was 4% down. That combined with -- I'm probably going to be jumping to the next slide a little bit and I'll come back to this. Our revenue per ounce also declined by 4%. So if you look at 4% lower volumes, 4% lower revenue per ounce, we therefore had a 9% reduction in overall revenue at end of the year at ZAR 118.3 billion. Besides the increase in fatalities, the, you know, from a safety point of view, the increase in unit cost is probably the most disappointing feature of our year's results. And I know this is more or less in line with the industry, but it is a concern that our costs have gone up by 17% to 17364% (sic) [ ZAR 17,364 ]. We have we have explained the reasons that most of our operations is broadly associated with first year reduction in volumes ounces. And on top of that, the most important factors were global inflation, particularly when it comes to power chemicals, steel and a number of consumables. In addition to that, we have seen an increase in labor costs. In Canada, for example, massive skills shortage. And so in order to attract and retain skilled staff, because we are competing against forestry and industrial complexes next to lakes, and in our operation we've had to revise our remuneration, and we've had to spend a lot of money on recruitment. And that all contributed towards this significant increasing cost. Capital expenditure went up by 41%, but that's broadly in line with the projects that we announced early in the year. So I'm not going to go into detail about what contributed. If you want to ask questions, you're more than welcome to. I spoke about the top 3 lines up to the gross revenue. So in spite of the sense that the PGM market is weakening, we still produced an EBITDA margin of 45%, totaling for the year ZAR 53.4 billion. And as I said, ZAR 28.8 billion free cash flow. That was applied in accordance with what I expressed earlier. Meroonisha can talk more about the growth in net cash. And a big portion why -- a big reason for why it was elevated is because of cash required to support the financial guarantees for the RBPlat's transaction. But I will let the CFO explain if there are any questions on that. And then I spoke about some of the projects that are listed here. I think what is heartwarming for me is that most of the projects are going according to plan. We've got 1 or 2 small hiccups , but there's nothing that forces me to come back to the market and say that we've got a major disaster in our projects. Some of them are in the early stages. But for instance, at 2 Rivers, the Merensky project is going well. They've completed the box cut. They've got a number of cruise on the reef horizon, presumably earthworks for the plant. And well, the rest of the projects are listed there. Maybe just to end off with. If I look at the group guidance, it's more or less in line with our performance of this year. It appears as if you look at the group ounces, if you look at the range that we've given, you take the midpoint, that's not too dissimilar, but that's because of 2 specific points that I'll just highlight. Firstly, Marula. I mean that had an exceptionally strong performance during the last year. They increased their production by 12%. They produced 259,000 ounces, really strong year. So our guidance is 240,000 to 250,000. Well please take note, if they have another strong year, then it will probably end up at the top end of that guidance. And I don't put it past $1 billion to even go from stream to stream and go beyond that. We just felt we don't want to pressurize the asset by over-promising given the fact that they have had probably the best performance in the history of that asset. And then -- so that will affect the group ounces guided. And then lastly is the IRS third-party guidance, which you will see is lower than what was delivered last year. And that's -- the guidance is based on the contractual obligations that we have with third parties. And we've had 1 or 2 of our customers exit, and so we've adjusted the ounces. So if you look at all the other operations, we're not expecting any turmoil. And most of the production guidance is either in line or better. And then the group unit cost, we are guiding to take the midpoint is around 7.5% up from this year, which you could criticize and say after 17% why would you go there? The fact of the matter is that we do expect a continuation of global inflation. We do think it's going to impact our operations and our projects. And we do think that it would naïve for us to stand here and promise that we've got all the answers in terms of how to mitigate it. We do have very specific strategies to manage costs. And I do think that it will pay, but we thought it prudent to provide a guidance which is based at around 7.5% increase in unit costs. And then the capital project -- capital investment program, which Gerhard will -- can elaborate on later, suggest that there's going to be another 2 years of high capital investment before it starts declining to, I think, around ZAR 8 billion in the long-term years. And that's really the discussion. Johan, I'm happy to hand over to a Q&A session. Thank you.

So for the process today, I'm going to first allow questions in the room. There is a couple of microphones around, so you can just raise your hand and the ladies will provide you with a microphone. And then you can just please state your name and question to the team, and then we will respond. For people on the webcast, you are welcome to punch in your questions. We will receive that. I will read it to the team a little bit later once we've gone through the room. And equally for people on the conference call, we'll also just queue the administrator on the conference call. You can just let them know when we highlight that opportunity. And there will also be an opportunity to ask questions directly over the telephone line. So without further ado, let's start in the room. Who's got the microphone? Adrian?

Adrian Hammond, SBG Securities. Nico, I'd just like to -- I have 2 questions for you. Firstly, on refining capacity. So you've lost some contracts for third parties. That obviously opens up some spare capacity that you hadn't planned for. So what's your thinking about that? And how does that change flexibility for you in the future? And you mentioned Zimplats is going to increase capacity, smelter capacity by 600,000 ounces. So how do you plan to fill that? I have a follow-up as well.

Okay. So if you want to pause there. Gerhard, this is directly in your area, if you wouldn't mind. Thank you.

Yes. I think we need to just keep in mind some of our own growth plans. So we've already announced the Merensky at 2 Rivers, which is 180,000 ounces. All of those ounces come to us. And then, our expansion in Zimplats, which the first phase is 80,000 ounces. So we already speak of 260,000 ounces that we need space for. You would have seen that during this past year we actually had stock that we couldn't process. So in the short term, we actually think we are quite tight as far as our own capacity is concerned. So should some of the IRS commitments fall off, it's actually coming out of our stock and not out of our final metal. For the longer term, with Zimplats' capacity coming online, and we're talking about from 2025-'26 onwards, we see the next growth probably be coming from Zimplats itself. And we also see that if we would take the Mimosa concentrates to Zimplats, it will free up capacity in our South African operations. I think there's no party out there that can deny that there's a shortage of beneficiation capacity in South Africa because there's quite a few projects that could come online if the beneficiation capacity existed. So we are not afraid that we will be sitting with excess capacity in the long run.

And then just a follow-up, if I may, on Rustenburg. You had a quite a tough year. Your guidance points towards the low end, a similar number. So I just want to understand what we should be thinking about Rustenburg from a long-term perspective. And the challenges that you incurred in the first year of the last year, are they going to -- are they getting better or worse? Sorry. And if you could also just talk to 16 and 20 Shaft projects. You haven't really mentioned any of that.

Thanks, Adrian. Mark, do you want to comment?

Yes. Thank you. Yes. Yes, we do have a challenging year. It was a very difficult year. I think particularly in the safety area we had a specific incidence at 16 Shaft and then 6 Shaft. And they impacted us, obviously the stoppages. And then that reduces your ounces and that impacts on your cost directly. So that's a straight follow-through on all those parameters. We definitely don't aim on repeating it. You must remember that just prior to that weekend, the 16 and 6 Shaft fatalities happened on the same weekend, one was Saturday, one was Sunday. Despite that number, Impala had just achieved 1 million fatality-free shifts, not before that, which is the best in the industry. And we were awarded by our Minister of Mines the trophy for the best mining company, the safest mining PGM mining company in South Africa. So you see the incredible record. There was this issue where one could say, yes, are there some socioeconomic issues playing out in the workforce? Is there more focus needs to be put in certain areas. Most definitely, we can improve in that. And then you'll also look at the underlying numbers, the loss time injury frequency rate has continued to improve over the years. The lost time injury frequency rate is [indiscernible]. So from that point of view, we do not aim on that reoccurring. We do not envisage that presenting itself this year again. But then obviously on the other areas, I think the socioeconomic challenges in the community, we've definitely had less stoppages recently from the community side, that has improved. We have stepped up our efforts in engaging the community communication and the projects that we're doing in the area. So from that point of view, I think Eskom hasn't impacted as significantly as you might have expected recently, and that is a good thing. So I think we work in vetting that area. The load shedding that communities get, the industrial side of it doesn't get that. We worked closely with Eskom to ensure it doesn't affect our business. And even smaller issues like the [ Sumsumas ] and the illegal mining. Well, we definitely don't have what you have in the Jonesburg area. We definitely don't have that. And I think we're also -- we've increased security in that area, and we've got a much better handle on some of those key issues. So those are the key areas that impacted us this past year. Definitely, we've learned out of it, we've grown out of it, and we do not envisage those going forward.

And just from a production profile point of view, I don't think there is structurally anything that prevents, Mark, from producing between 1.3 million and 1.4 million. I mean we didn't produce it this year. I think as soon as Mark can change the conversation from which union and all the wires associated with that and can get back to the safety improvements that we've shown, I think he is in a very good position structurally to produce between 1.3 million and 1.4 million. The problem with Rustenburg is that, that doesn't continue forever. Between 5 or 7 years from now it starts dropping off [ hence the other players ] transactions.

Just to be clear, 1.3 million to 1.4 million is achievable now unconstrained, and does that talk to the fact that 16 and 20 is where you expect it to be? Or is it not?

So let me answer that question because Mark is going to overstate his position. So I mean we don't continue to report because the projects -- I mean, so from a purely project point of view, it has been completed. But neither of those projects have achieved the steady-state reduction volumes that we aspire to. So it will be fair to say, Mark, I know you're between 80% and 90%. We've seen most recently a dramatic improvement at 16 Shaft. But 20 Shaft has always been on a difficult path towards achieving that full steady state. And I don't think we've overcome that. It's still going to take some time. I think 2 years ago I said 2 years. So I'm not sure if I can get away with saying another 2 years now and whether it would make sense. But that is honestly my sense, is it's going to take another couple of years for us to get to that level.

Arnold, you've got a microphone, and then René, if that's okay.

This is Arnold Van Graan from Nedbank. Two questions from my side. Nico, the first one is, I just want to understand your renewable strategy and the sequencing around that. So you're starting off with Zim and Marula, and now only starting to do the study at Rustenburg. So what informs that sequence? Is it returns? Is it life of mine? Or -- and how do we look at that going forward? Then the second question is, Nico, you keep on referring back to this issue of the union. So my question is, do you think we're going to see a repeat of the situation that played out from about 2014 to 2015, '16, where you had running battles as unions or as were vying for membership and trying to increase their membership? How do you see that playing out? And how -- what role are you playing to try and avoid a repeat of that?

Gerhard, you can supplement. As far as the sequencing of renewable is concerned, I wish I could offer a very smart, eloquent, strategic invasion plan. But to be quite honest, it's got to do with the readiness at each of the operations. I think we are, for instance, behind in Rustenburg because it's more complex. Also, we have to balance there what we do combined with. We are also discussing with Royal Bafokeng Nation potential interventions where they set it up and own it. And so from -- of the ZAR 290 million in Rustenburg, ZAR 170 million is earmarked for solar power, the other ZAR 120 million is for a potential milling arrangement. So I think, [ Alex ], it’s ahead of the curve, and that's why we are ahead there. It's not because of any specific intervention. What we will do at each of these projects, we will be looking at what it does mean from an ESG point of view. We will obviously look at the financial returns expected and what it -- how it talks to potential energy security. Not that in the mining industry we can do, and we can truly get secure energy supply because we have -- because we can just provide a contribution to get an increased security. But when we -- it is unforeseeable that we are ever going to self-generate the entire load. Also, if you look at the distribution of the load works in a day. So I know that's not a sexy answer, but I think it's got to do with the readiness of each operation. In terms of the continuation of the conflict, I don't expect a multiyear conflict. And I think as the mining right holder, as the employer, we have an obligation. So NUMSA has had their own internal issues and they were looking at invading new terrain. And so they saw a soft underbelly in the mining industry and particularly with our contractors. And so the question is why that area? And it's my contention. I think I share the view of the end, to the extent that there are discrepancies in remuneration generally between the contractor firm and mine employees, it presents an opportunity for an opportunistic trade union to come in and to exploit that and to promise to equalize. And so Lee-Ann has gone through -- is going through a very extensive process to look at what disparities, if any, exists, and to what extent we can contribute to closing the gap to the extent required to make sure that there is fairness. And I think that will take the tension that's created by NUMSA targeting specifically the contractors away to a large extent. Lee-Ann, I'm not sure if you've got additional comments to that.

No, I don't think there will be a repeat of what had happened in 2012 and 2014. And the reason why I say this is AMCU still has a stronghold with our own employees in the Rustenburg area. And we've just concluded the 5-year wage agreement. But as Nico has just said, the problem or the approach to dealing with it is two-fold. One, from a labor relations perspective and ensuring that NUMSA follows the legal prescript, but the other one is around aligning pay and benefits, which requires some more detailed thinking. And in that, we have engaged AMCU and working in partnership with AMCU to find longer-term solutions. So the fact that NUMSA can't -- don't have access to the workplace, I think is a strong position for us, but it's what happens outside of the workplace in terms of intimidation. And we do have strategies in place to deal with that.

Just, sorry, just well done on your dividend. Very appreciative. I just had a question Impala Canada. Meroonisha early on said costs about CAD 1,200 to CAD 1,500 assume per ounce going forward. So that's about USD 1,000 to USD 1,200 an ounce costs. And then that compares, obviously, to palladium at about 2,000-odd. It looks like it's open pit, if I'm not mistaken, Gerhard, not underground. Okay, so how long do you think you can carry on? I'm thinking about the sensitivity of that part of the world. Our costs are going to go up, if you're looking at sort of $1,200 an ounce and the palladium price doesn't play ball. What is your sort of intention with Canada palladium. It's 250,000 ounces a year, I see. Is it really worth all that management trouble going forward?

Gerhard?

Thank you, René. Thank you for that question. So Impala Canada, the LDI mine started off as an open pit and then moved underground. So currently, about 90% of the production can be sourced from underground. It's only been constrained with our capacity of bringing it up the shaft. But where we are now, we are strengthening that business for it to do more volumes. At 250,000 ounces of palladium, you are going to battle to break the USD 1,000 barrier. We believe that with the multicoupling project that we firstly create space between our production and our milled so that we can at least make stockpiles and then bring some more surface material in. We'll be able to up the volumes. We're currently running that operation at about 12,500 tonnes milled per day. That on good days it gets to 14,500 tonnes milled per day. The ideal would be to run it at 14,000 plus, which gets us on the short term to USD 950 an ounce. Longer term, slightly great drop to $970 an ounce. We are very certain of ourselves that we have to stay below the $1,000 palladium per ounce if we want to make money out of that operations. I think we've seen the worst, which is low volume and high cost. Our volume increase and maybe our containment of costs through the strengthening of the infrastructure will take us to that position.

Just, sorry, at what sort of margin would you consider disposing of the operation?

Sorry, which margin?

If the margin gets to a certain level, what sort of margin would you think of maybe?

None of our operations will be allowed to run at a loss. And I think an option would be, if there's no margin, we will put it on care and maintenance and wait until the margins recover again.

Bruce?

Bruce Williamson, Integral Asset Management. Just following on the Canadian issue is, have you guys sorted out your labor? Are you fully staffed? Or do you still see a battle going forward?

Part of the cost increase we've experienced at Impala Canada is to try and get ahead of the curve. After COVID, we've seen a loss of a lot of skills, of people that were not prepared to come back to fly-in fly-out operations. They found jobs closer to home and so forth. And there was a huge demand for skills in the mining areas of Ontario. So very early on in the year, we did something unusual by offering a 10% wage increase across the whole workforce. And then we had a very aggressive recruiting process. Where we find ourselves now is we are fully staffed. We -- it's part of our cost increase -- but we'll find that some of the neighboring mines are now trying to catch up. I don't think it's a permanent solution. I think other people are going to try and wear away our labor again. But at least, they're with us at the moment and not with anybody else.

Sorry, can I just weigh in on the Impala thing. If you could go back to 2019, would we make the same decisions as we did knowing what we know now? Absolutely, we would. I mean that asset has produced lots of cash regulatory because of market conditions in palladium price and not through operational performance. So from when we acquired the asset to now, it really has [ not ] made very, very generous returns. Also, I think if I -- so if I look at any business and look at where the key constraints is -- to see the constraints to see where is the problem. In my personal mind, it's actually in the area that you want. The big problem with Canada has been the reliability of the -- and the capacity of the milling plant. So most mines generally have the problem underground, and that's a bit more difficult to resolve. So I actually am quite confident that we are going to see a continuation of generous returns but because of improving operational performance. And I say that with quite a level of certainty. I think -- I mean so what I certainly have seen in Canada is giving me great courage. And I agree with Gerhard. We probably won't consider disposing off of the asset. But as we do with any of our other assets, if we go into a loss making, it will be a problem. So just to look at Marula because, I mean, in 2017 we tried to, but we couldn't sell Marula for a rand. It had a stellar performance last year. And I think Canada has got the same potential. When we get the reliability of the infrastructure, the plant work, it can be really a good operation for us.

And just another question that's sort of very broad and industry related is that when corporates go and look for acquisitions, and at Gold Fields, Yamana is the big one that's been looked at right now. There's a whole -- there's a big percentage of investors globally and locally that just rebel against that. And they think management are out of line, they don't know what they're doing, and they're spending too much money. When you guys had a look at RBPlat, and I know you can't really unwind and go back and try and factor in what the cost of discovery and the exploration and licenses was all about. But have you guys got a number in your head of what would it cost today, and how long would it take to put all the infrastructure, shafts, development to be ready for production? I mean what sort of number would it cost?

Sure. That's a very interesting question, Bruce. So there's virtually…

I just don't believe that the market knows or thinks about valuing assets in the group.

As you say, it's virgin ground. We have to do all the exploration and capital development. I think it will be a frightening number. To be quite honest, I think that is why the industry has been scared away from doing investments in the last number of years. I mean, we had industry discipline issues up until 2010, and then we got too poor, but -- and then we are often asked about what is the incentive price to return back to these investments. And it's more than just incentive price because it's incentive price over and long enough time. And I think the risk associated with a new shaft, which is upwards of ZAR 15 billion, that's -- if you understand, the ore body and done all the modeling and it's a frightening number. So I don't quite know what…

I can venture a quick answer. If you say Styldrift 1 is doing about half of the ounces from the whole of Implats. To build a Styldrift 1, and we know from our 20 and 16 Shafts because it is going to be on the wrong side of ZAR 20 billion to build. So 2 Styldrift 1s gets you to ZAR 40 billion. So there's no concentrator plant, there's no infrastructure, there's nothing, there's 2 holes in the ground. But the much more important factor is you will only get ounces from that 10 years out. And that's the time value of having ounces being produced from an investment now than making an investment into the unknown for the next 10 years.

[ Farrant ], do you have a microphone there?

[indiscernible] Nico, you spoke about Marula. I've seen the reserve statement. You increased the reserve ounces by about 4 million ounces, 6-year ounces. Just want to align that with your CapEx plan. The CapEx that you spent there and the CapEx that you've announced, can you mine all of that 4 million ounces? Or will you need to spend additional CapEx to access that increase in the reserves?

Yes. So that -- so the capital -- well, the capital and the reserves is associated with our Phase 2 [ decline ] extension. And so that is the -- that's all the upfront capital required to develop additional 5 levels on Marula side. And I think that is the capital that is required to open up the new block of ground. So it would obviously not include all capital. So let's assume you get there, there will be, let's say, equipment vehicles. And so there's ongoing SIB, but that's really the capital required to open up that block of ground in order to then become a normalized operation.

Yes, the definition of our reserves, we only account reserves if the capital has been committed for those reserves.

I'm going to take one more question in the room, and then we're going to give a chance for people on the call. I see Chris Nicholson has already queued, but we will revert to the conference call after -- Leroy, you got a microphone?

Leroy Mnguni from HSBC. My first question is on your costs. So there have been a lot of drivers that have pushed your costs up over the last 2 years, the discretionary bonus, extra staff complement to help you cope with COVID, that's inflated your costs. We're now going into a more normalized environment. When should we expect those costs to come down? Or should we be looking at current costs as normalized costs and then increasing them over the medium term from that base? Or is there a rebasing that we should expect? And then on RBPlats, the team there has been struggling to ramp up Styldrift. Does that affect the way you view the value of the business at all? Are you concerned about that? And then my third question, probably I'm trying my luck, but you've previously said that you will get a controlling stake in RBPlat one way or another. And that may be interpreted by some as even if it means you have to buy more of them in the process if you're unsuccessful in getting the controlling stake. I'm just curious as to whether you've done the numbers on whether or not it's likely that you would get Com Com approval for a transaction like that theoretically if it was to happen.

So can we start off with the last question, and that is when we are going to buy Northam I think is what you're asking. So from a Competition Commission point of view, it is unlikely that we will ever get approval for a transaction whereby why Implats acquires a controlling position in Northam. And it's already been contested at [ London ]. And so I think that is unlikely to happen. Now whether that means that we will have no share in Northam forever, that's a different question. And that's a conversation that I can't have right now. And so we will be weighing up all avenues of pursuing what we believe is to be a strategic transaction for this company, and that is to have a high level of control of RBPlat. I'm not saying that -- so as it is unlikely and I don't know if Kirthanya, you can perhaps give a view. But it's unlikely that we will ever get approval for a controlling position in Northam. I think given their size and our size, there could be a view that the competition is contracting to the detriment of the industry. As far as the cost is concerned, there are cost optimization initiatives at every one of our operations. This was a strategic decision-making. For instance, we spent the last number of years deliberately spending more money at Rustenburg. And it is to upgrade the infrastructure that over many years because the loss-making position that the company has been in to upgrade the infrastructure, to accelerate the development. Those things are strategic decisions. So I think that there are now questions that we need to answer. Mark has employed more labor than it needs, and it was with our consent. It was to offset the absenteeism during COVID. Johan has done a fantastic job getting our COVID vaccination rate up from 26% at the end of '21 to 91% at the end of this financial year. And so I think that -- and I've got a Board member that always says low cost is just a decision. So I think that there are a number of levers that we can pull to offset this global inflation. Not -- so now I'm going to give you a conflicting position. So notwithstanding the fact that I am aware that there are things that we can do and that we are going to do, our guidance is at 7.5%. And so I think that the influence of that regrettably is that it actually establishes the new base, the new cost as a cost base because 7.5% would typically be assumed to be in line or slightly above what we know as mining inflation. When we achieve success in reducing our costs, which I'm confident that we are going to achieve, we obviously will come back to the market and provide new guidance, which hopefully will be lower. And there was the third question.

Styldrift ramp-up.

We have not changed our position on Styldrift. The initial ramp-up is a part of a much bigger picture, including all of the reserves resource at Styldrift too and long-term market forecast. So it is unlikely that on short-term variations from when we made the offer to now to evaluate that, the performance of the company over such a short period to make a material impact on our valuation. So the answer is no. We remain committed.

Maybe just one last question. Are you able to share with us what Northam's appeal is to the tribunal? Exactly what is it that they feel is not right? Or what are they opining?

Yes. So I think let's not go into too much detail, but I mean, the theories of harm that's being postulated is that it's -- that it will have a negative impact on particularly junior miners and that we will absorb the concentrate from RBPlat and therefore we will not have a capacity to support junior miners as we have done. So the theories of harm has got to do with horizontal and vertical competition. So of course, our position is very, very different. I mean we are investing in additional capacity on all of our beneficiation. But in addition to -- I mean, if we just look at the fact that in the last 3 months we've had 2 of our junior miners withdraw from our offtake agreements, it clearly suggests that there is ample capacity in the industry besides Implats who is investing additional capacity anyway. But I mean, I don't want to argue the point here, but -- I mean, that's essentially the essence of the appeal, correct. Kirth? Sorry, Kirth, just hang on a second. The people can't…

We can amplify your voice.

Yes. So the limited intervention rights which were granted by the tribunal on this initial -- so when Northam first took it to the tribunal to get intervention rights, the tribunal considered their arguments around the vertical theories of harm and provided them with limited intervention rights. So suggested that there was, based on the evidence that they saw and what Northam could potentially bring to the argument, there is only -- there is a limited scope on which they can argue the case with -- to the tribunal as part of their consideration of the competition issues. So the Competition Commission found that there were no vertical or horizontal issues from a competition point of view. But the tribunal then on that basis said on a limited scope you can come in Northam. That is what the appeal is about. Northam is appealing its limited intervention rights in relation to the 2 vertical theories of harm. And once full, well, full intervention rights across the competition issues.

Let me just make a concluding remark on that. Obviously it's very frustrating for us, the extension of time, but it is a contested transaction. And from a competition point of view, so if I look at it from a different angle, so in any transaction in anywhere in the world, if there's an environmental lobby group or a community or any stakeholder that objects, I think it's the right thing for the arguments to be heard in order for society in general to align with an outcome. So I mean, for us, this is a very time-sensitive transaction, and we would like to drive it to completion as rapidly as possible. We are working with the competition tribunal, with the court system. But in the -- from a public interest point of view, we support what the competition tribunal was trying to do, and that is to make sure that all arguments are heard. It is my view that it is driving to an advanced stage. But with these things, there's multiple avenues to recourse through the legal system to higher levels of court and appeals. So we are just now this week awaiting an outcome from the appeal court, and that will determine the unfolding of the rest of the tribunal process. We are hopeful that it will be a more speedy process, and it will come to a conclusion soon.

All right, conscious that we're running out of time, and I think we're only going to have an opportunity for one question on the call. So [ Maffei ], if I can go to you. I see Chris has already queued himself. So if we can try and hear from Chris Nicholson. On the web I've received some questions from [ Itamaling ], and [ Cateco ] and Dominic. I think what you're asking has, to some extent, been answered, but we will certainly revert back to you and make sure that we cover your questions in the detail that you require. So if we can just see if we can hook Chris up.

Chris.

I wanted to just go back to a statement you put in your forward outlook where you talked about increasing internal capacity for new businesses and future-facing high-value commodities. Could you just talk to me a little bit about what that is? How far advanced are you? What commodities you're looking at specifically? And just with an argument, clearly that there are clearly obviously commodities within your existing portfolio that I guess could be considered high-value future-facing commodities, for example, your nickel exposure, iridium, ruthenium, et cetera.

Chris, I think the first comment that I must make is that Implats is a long way away from making a decision on future-facing metals. We typically would favor metals that we are already involved with. So typically, your copper, nickel we would favor, but it will. So the point about the whole comment is that, firstly, we have high levels of confidence in the PGM market. And please understand that is a very firm Implats position. Notwithstanding, we do understand the long-term strategic set of electrification. I mean, my view is that, that set has been pushed out over a number of years that electrification probably does not have the ability to penetrate at the levels previously forecast, but nevertheless. So when you have electrification of drivetrains in the auto industry, which affects the highest component of demand for your metals, it's something that -- you can't afford yourself to stay blinded against that. So we think it's a long time out. The day that this company decides to be more than just a PGM company, it will be a very big decision. And we understand shareholder positions in wanting the opportunity themselves to diversify the different metals. So it's not a decision that we take light. It is something that will take some time to develop answers. We need to go through with the Board to align ourselves around that. It's not something that we are eager to jump into. I think to the extent that we will, it's probably a number of years out. And I suspect the way that the company will do it will be very systematic and deliberate and with meaningful steps to the extent that we get to a position with where we start doing it. So I don't expect Implats to in the near term to get into a number of opportunities. And as I say, we will do -- so at least we are gathering intelligence. We are making sure we get to understand the markets. We need to understand where the attractive opportunities lie and in which commodities that they are, which jurisdictions they are, all these things have varying. And then the closer that they are associated, as I said, to what we are currently producing and marketing in our portfolio, the better for us. Okay. So I just want to repeat. Please don't expect an announcement in the next 6 months on this. This is just a long-dated position that we are quite comfortable to take our time with.

I'm conscious that we've run out of time. So I think what remains for me is to thank everybody that's joined us in the room today and also people on the call and the webcast. No doubt there's more questions. We're going to be quite active on the road meeting up. Our telephones and e-mail lines are open, and we'll certainly get back to everybody that's lodged a question on the web. So with that, we're closing the venue here now. There's still an opportunity outside to have a couple of coffee with us. So please join us for a cup of coffee. Squeeze in some more questions there, if you like. And hopefully, we'll see some of you on the road very, very soon. Thank you very much.