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

Good morning, ladies and gentlemen, and welcome to the annual financial results presentation for Impala Platinum. Joining us today on the webcast and also on the call will be some other colleagues. As usual, we'll do a high-level reflection on the results and then provide an opportunity for robust engagement. I'll take questions in the room first. And after that, we will divert to the webcast and the call for questions as well. So very, very welcome. You'll see today a slight deviation from what we've done in the past. I'm going to ask the expanded team to just talk at a high level to the results before we go to the Q&A. So following me, I'm going to ask our COO, Patrick Morutlwa, to just reflect on the operations, Meroonisha Kerber, our CFO, will then just give highlights on the financial side. And then we'll ask Nico just to close the formal proceedings before we jump into Q&A. We operate as a team. So we felt it's very important that you also get the faces and the sound waves of the entire team. So hopefully, that they don't disappoint me too much. So no pressure guys. So without further ado, let's start. I just want to point out to our forward-looking statement. Just please take note of that again. And then without further ado, I'm going to hand over to Patrick. Patrick, please.

Thanks, Johan, and good morning, ladies and gentlemen. Let's start first on the safety side. Regrettably, we had a regression in fatal injuries. We recorded 19 fatalities for this year. And this is despite a year-on-year sustained improvement on our LTI frequency rate and total injury frequency rate. If you look at it from 2019 until last year, we have seen 29% improvement on our rates, but it's not necessarily translating in reduction in fatalities. We have a plan and I'll present the plan in the next slide. Move over to operations. We had a strong performance from our operations, 13% year-on-year, mainly because of the inclusion of IBR. But we also had strong performance from our key asset Rustenburg, we have seen a 4% improvement year-on-year. Zimplats plus 6%, we also have seen 5% -- 4% from Mimosa. And Canada, despite us changing our operating strategy in response to the low palladium price, the Western Limb also performed very well. The unit cost below the inflation of 4.6% primarily also driven by good production and also the cost cutting that we've done during the course of the year as a response to low platinum prices. Capital mostly is because we've now included IBR and also our expansion capital mainly from Zim. During this year, we've also completed our key projects. All our three furnaces in Rustenburg have all been rebuilt, which comes in handy to work down the work in progress stocks that we have. We have completed 35 megawatts solar project in Zimplats. We've also now completed our 38-megawatt furnace in Zimplats. We should be bringing it online now in October. So -- and also, lastly, we have seen us completing the BMR debottlenecking project. That will give us about 10% more capacity. So very, very disciplined execution of our projects in this year. So we also see improvement for this year at Marula and Styldrift. Let me now for now talk about Marula. So Marula did not perform up to expectation mainly because we have encountered difficult geology that actually decimated our face length. We have plans in place to restore that face length. I'll touch on Styldrift in the following slide. Styldrift, it is still very key to our success and future at the Western Limb. Let me try and dive deeper on safety. So on the 24th of November last year, 3 days before the 11 Shaft fatality, we actually called safety summit where over 150 of our leaders led by ASCO. We convened at Rustenburg. We also had a Minerals Council attending because we felt after the third fatality last year that we should reflect on the next steps and really come up with plans to eliminate fatalities from our business. We also had a follow-up on May this year. And from those two safety summits, what you see on the board, that's the plan that we've come up with. Because as in players, we believe, without any shed of doubt that fatalities can be eliminated. We have [ profit ] of excellence within our own group, which has proven that it is possible. And I'll just mention one, we have a shaft at Marula, Driekop since it's inception 14 years ago has never had a fatalities. So we can learn from this product of excellence and actually eradicate fatalities. Since the implementation of this plan somewhere early May, I know it's still early days, but we have seen some promising green shoots. If you look at quarter 4, in particular, it was the lowest quarter in terms of LTI frequency rate and total injury frequency rate for the last 20 years. Within a recent period, we have seen what we call white flag days. We have seen three of them, two of them actually happened in August. So white flag day is a day where all our employees, all the way from Canada all the way to Marula, they go on a [ graph ] for 24 hours and none of them got injured, even a medical treatment case. So we've never seen this before in Implats. So we believe that this plan that we have in place, it is starting to show that if we are relentless, this will be in execution, we will definitely be able to see the elimination of fatalities. Personally, I have been part of this journey before. So it is possible to actually eliminate fatalities from high labor-intensive environment like what we see in Rustenburg. So we beg ourselves with the team that we have, both operational and also from the safety front and all the changes that we've made to strengthen the team in this previous year, to be able to eliminate the [indiscernible] fatalities from Implats. So what has happened has not dimmed our belief and commitment to see fatalities being eliminated from our business. Moving over to Styldrift. You will all remember that last year, we stood here really this time in August after we've taken over IBR. And we told you that IBR have got 3 parts. We said, BRPM, it is meeting the expectation. And you will have seen that despite the labor unrest that we've experienced in that shop in particular, it still delivered according to play. We told you at the time that processing, we were unhappy with the recoveries because of the extensive knowledge and expertise that we had in Rustenburg [indiscernible]. We believe that we will be able, within 12 months' time to reverse that trend when it comes to recoveries, and I'll talk about it now. And lastly, Styldrift, we acknowledged that it was lagging behind in terms of the ramp-up. And we said it is about 18 to 24 months' job for us to get it set up to be able to ramp up to full capacity. So today, I want to talk you through this simplified value chain. But before I dive deeper into it, I really need to tell you that it is supported by a very comprehensive framework of work that we're doing. For example, we are in integrating IBR now into Impala Rustenburg to leverage the synergies that we've identified before the acquisition. We have changed the reporting lines, the Executive Head of IBR report directly to Moses. And from last year, the process division has been actually reporting to Rustenburg. So now going into the value chain. So last year, we told you there's nothing wrong with the mine design. We still maintain that. The bulk of the structure is still in place. We have no problem with that. Development is actually going very well to a point where we had to stop some of the main capital development because they're actually far ahead of schedule. Last year, it was very clear that our bottleneck was the man hour [indiscernible], and that's what we've been working on for most part of the -- over the last 12 months. So the graph at the bottom, you will see that last year, we had only 7 workable face length instead of the 16 that actually explained. And it's just mainly because most of the sections were flooded. They had backlog in terms of some of the support ventilation issues. So later, you could not complete the whole mining cycle in those sections. So I'm glad to say that by the end of this financial year, we now see 16. We've got 14 stoping crews. So literally we're sitting with the flexibility of 1.2. So yes. Then the other problem that we had at the time was sectional infrastructure. That's your tip-to-face distances, your roadways way. We have done a lot of work. You can see the graph tip-to-face distance that we've managed to drop it 116. The idea is about 110. So there's still work to be done together with the roadway conditions and also water management. At the time also, we were not happy with the grade. So for us, it's quality before quantity. So there was a lot of work we've done to fix the grade. As we have seen, it is now responded. We're now about 4.01. There's still a bit of work to be done, but that turnaround has been affected. And so as I speak to you now, where we have a bottleneck. As you know, value chain, if you saw a problem here, you actually moved down the value chain. It is now our ability to move the ore. But like I said, it is also composed of some of the problems, we are talking about leadership that we're dealing with. So we now have brought [ Sandvik ] onboard to really look at the whole fleet management to really to empower ourselves to be able that if when we blast and generate this ore from this section that we have now created, we have the ability to move that. For completeness' sake, also, as I said, that another area of improvement was the process division. We have brought the expertise that we have in Rustenburg and we have been able to turn around the recoveries now to about 82.2%. The ideal we're looking for is 85%, so more is still to be done in terms of changing the agencies. Continue with the work that we actually put in place to embed those changes that will become now ways of how we do things. So as I close on Styldrift in particular, is that it is still a world-class asset. It is still high grade, long life and shallow and mechanized fleet. So -- and that's where we believe that the future of the Western Limb actually reside. And that's why we back ourselves that in the next few years, we should be able to be exact by FY '27, towards the end of it, we see ourselves that we will get Styldrift to the full capacity and stability on the nameplate. On that note, I'll hand over to Meroonisha.

Thank you very much, Patrick. Maybe just to start off with. I mean, notwithstanding the combination of a very commendable operating performance, excellent cost controls and several initiatives that we implemented around prudent capital allocation, the key feature of the results was is actually the lower PGM prices. That affected profitability and free cash flow generation. If you look at our earnings for the year, there were two notable one-off noncash items. The first was the combination of impairments at Impala Rustenburg, Impala Canada and both are JVs. And that was largely just due to the lower pricing environment as well as the elevated levels of interest rates that we're seeing at the moment. The other significant charge that we had during the year was ZAR 1.9 billion once-off IFRS 2B charge. And that arose on the conclusion of our landmark empowerment deal, which we did full value and which basically underpins our commitment to sharing value even whilst the sector faces reduced profitability and margin compression. If I look at the cash flow, similarly, the cash flow was impacted by 2 large items. The first one was the conclusion of the RBPlat transaction. We had a ZAR 11.4 billion outflow to acquire the remaining equity of RBPlat, but we also funded almost ZAR 900 million worth of transaction-related costs, largely from Impala Bafokeng. The second material item on our cash flow statement is really -- and you'll see the significant increase in capital expenditure as we basically have progressed many of our processing expansion projects as well as the installation of solar at our Zimbabwean operations. Despite the lockup in working capital, so you'll see our in-process inventory went up to 390,000 ounces as a result of constrained processing capacity, but also the late receipt of Impala Bafokeng data, which is really just due to contractual terms. I think what we're very pleased with is that all of the growth we managed to fund from our entirely generated cash flows. After 3 years of really elevated capital expenditure following the decision we made to strategically expand our processing capacity, you should see the business return to more normalized levels of capital intensity. I'm particularly pleased with where we ended up on the balance sheet. We ended the year with strong adjusted net cash with only ZAR 1 billion worth of, Nico calls it real bits. And that was largely on Zimplats drawing down to fund its peak capital funding requirements. But also more importantly, ZAR 17.7 billion liquidity headroom. So when I look forward into FY 2025, I certainly think the company is going to benefit from the labor rationalization or restructuring that we did, which underpins our commitment to controlling costs; secondly, reduce capital intensity. This is because of decisions we made around the portfolio around Impala Canada and Marula, where we adjusted production and project plans, but also given that most of our operations are through the peak funding of expansion and replacement projects. Patrick talked about our expanded processing capacity. I'm very pleased with that because that now gives us the opportunity to basically systematically work through the 390,000 ounces of excess inventory that we've built up over the last 3 years as we've rebuilt our Rustenburg furnaces. This cash should -- this -- the unlock of the stock should support free cash flow generation and, more importantly, protect the balance sheet. I think all of this actually positions the company well to navigate through and provides it with the flexibility to navigate through a period of low pricing environment. I will now hand over to Nico. Thank you.

Thank you very much, and a hearty welcome to everyone year-over-year from my side. I just want to acknowledge Patrick and Meroonisha was far more eloquent than our I could ever will be. And also our silent weapon at the end there, Moses, who is the Chief Executive of Rustenburg. He will answer any questions. Further to that, Mark, Kirthanya, Sifiso and online, Lee-Ann as well as our Chief Executives, Tim from Canada and Alex from Zim. And on top of that, the management teams and the other 60,000 people that have assisted the company to deliver its results. I mean, we often say it, but it remains true, without our people. we are nothing. A company is not steel, brick-and-mortar. It is the people. And so it's wonderful to have them to share the load with me. From my side, I'm going to restrict myself just giving a broad 30,000 foot view of the company. And I'll start off with a bit of a guidance. One of the key features of this year is the conclusion of the RBPlat transaction, thankfully. And on that note, it was associated with very important transformational elements such as us joining hands with a new partner. And I'd like to welcome [indiscernible] as well and Imran. As our new partners, They're sitting on some of our Boards, and already, they've added significant value to the conversation, so welcome to you as well. So if you look at the left-hand side of the slide, it broadly depicts market conditions. I mean, we know that there's been a 30% decline in the rand basket price. From our point of view, the analysis that MI assist us with, we see the markets in certainly for the next year or 2 in deficits. However, we are also aware that the prices of PGMs are not determined purely by market dynamics. There's also the global economy, global sentiment. We see persistent high interest rates. It has a negative bearing on sentiment. And so if you want to think about how do you divide your attention to respond to that, on the right-hand side, if you just look at the elements, the company is really focused on a defensive posture, strengthening the internal business. So our tension predominantly is not in M&A and growth and all of the wonderful things that we do when we are in a super profit cycle. It is about making sure that we can strengthen ourselves to the point where we can remain successful even at current spot, which for our company is around ZAR 24,000 an ounce. We are cautiously optimistic that there may be price support. We have seen some indications, some signals that interest rates may start to be lowered late in the year, certainly in the U.S., and that will be followed in other jurisdictions as well. So if I look on the right-hand side, no mining company has ever been successful when they have had a large number of fatalities of poor safety record. So that's why -- I mean, Patrick spoke about two things. For us, it's really important that we make sure that every employee who arrives to work returns safely to their families. We have to develop a shared vision, shared behavior. If you want to reduce the speed on the freeways, you can have traffic, police fines. But ultimately, it only works when the population desires safe conditions and desire to travel at lower speed. So that's -- I think that's the challenge that we have, is to make sure that we've got a shared vision, a shared passion and shared behavior towards this improved goal of zero harm. From an internal operational point of view. Patrick spoke about successes. We've had our 3 biggest assets, RBPlat -- not RBPlat, Rustenburg, Zimplats in particular, we've seen strong performances. Canada has done exceptionally well under the current conditions. I mean, they -- so I mean, I know we've got our annualized numbers in the financial statements. But in the fourth quarter, they produced palladium at $948 an ounce, which I mean, when we acquired the asset, we spoke about the $1,000 an ounce objective. And soon after, I mean, our operating cost went up to $1,200. So for that operation to change the strategy to improve profit margins on the ounces that they're producing and becoming that $948 is just an unbelievable achievement. And we are so proud of their efforts. So part of our thinking is to take the positive momentum that we have at the assets that we have and to continue driving that and to bleed that into the other parts. Two big areas of improvement. Marula, you spoke about it. And naturally Styldrift, which is our -- the latest part of our portfolio has got so much potential. I mean, we've now been part of it. There is nothing wrong with the ore body, it's exactly what we anticipated. We're currently producing 480 -- I mean, we produce 583. That mine has got the potential to go up to 650 by 2027. I've got absolute belief in the support of Moses and Patrick, I think that we will get there. I'm very encouraged with the progress that we're making with developing our understanding of where all the critical constraints are on the business. So we have to maintain operating momentum where we have it and then develop improved performance in the areas that we have -- that we've perhaps not done particularly well in. One of the things that I think the company did particularly well is cost leadership. We mean how -- if you -- so if you exclude RBPlat integration of the company, our unit cost went up by 3%. And that's below mining inflation, it's below inflation. On top of that, we may change and restructure the labor. So that's going to assist us when we get to the guidance later on, See, we're also guiding a 3% unit cost increase for next year. And so I want to thank the team for assisting us in the commodity industry. You have to get -- to compete on unit cost, and that's the one thing that I think we've done particularly well. And then there is -- I mean, Meroonisha spoke about the strategic decision to invest in our processing capacity. Base metal refinery improvement it springs, the smelters at Zimplats. We've got all three furnaces in Rustenburg operating, massive opportunity to leverage that capacity. There is the processing of excess inventory there is potential opportunity to look at partnerships to utilize the surplus capacity to expand through tall arrangements with other partners to the extent that that's possible. So these are things that we can focus on. And so whilst I've said that our past year, our focus is predominantly internal to strengthen the business given the markets, through Kirthanya's thought leadership, we are keeping an eye out on our long-term competitive position. And so we want to make sure that we've got flexibility in our portfolio, that we manage the portfolio to suit the conditions. I mean, we do a lot of market analysis, as does the rest of the industry but we know that we can only do it on the best information of the [indiscernible] changes, and we don't quite understand the rate of technology development, whether it's battery electric vehicles or hydrogen, we take positions and then that changes depending on how the technology evolves. And so we want flexibility. And so one of the strengths that we have as a company is that we are exposed on the Eastern Limb and Western Limb. We've got some interest in the Northern Limb. And then in particular, we've got a very substantial footprint in Zimbabwe, and that's also where we believe future world-class assets is located. So we want to make sure that we always consider the movement in markets and how we organize the company's asset portfolio to suit the prevailing conditions. And then the other thing that we want to focus on is, I say, growth. And by that, I don't necessarily mean ounce growth, I mean, value growth, and it is associated with portfolio management. So we want to make sure that we own and operate assets that we are able to operate at a position below the prevailing price of today and make sure that we've got the right balance to ensure longevity and robustness to prosper throughout the cycle. And then just the last comment I want to make on that is organizational leadership. For me, it's very encouraging today to sit with the team. During the past year, we've had a number of critical changes. Mark came up in Rustenburg. He's now the Chief Technical Officer. Patrick joined us as a Chief Operating Officer, and Moses transferred from Marula to take the very onerous task of managing Rustenburg. And so we in the past year, we had in those three positions as well as in our safety, we've got the retiring of very strong pillars in the company. We had positions and now a year later, I think that we have established some maturity and continuity in those positions. And I think that's going to help us in the next few years. I then just want to talk to our group outlook. I'm going to start with 6E ounce production, which is essentially the second blue line. Oh my goodness. I will have to just go to the slide as is. It's fantastic animation, but I'll have to forgo that. So the group production, you see we are guiding between, well, 3.5 million and 3.7 million ounces, and that's broadly in line with what we achieved in the past financial year. But if you look internally, there are a few changes. There are 2 operations where we are forecasting an improvement. And the one is Bafokeng. So you should look at -- we achieved 483, and the other -- so we are guiding 490 to 530. And that is as a consequence of our assurance that we are engaging with the process. I mean, as I said earlier, we want that operation to grow to around 650 in financial year 2027. So we are confident that we are going to increase production during this coming year. And the other one is Marula. As Patrick has mentioned, once we have dealt with the geological challenges that we've encountered, reestablished the available working phase, we are guiding that to go up from 223 to between 230 and 250. But then there are two operations where we -- there are two areas where we are guiding lower production. The one is Canada, if I can remember correctly, I guess, I can't see Canada. So it was 281 for this year, and we are guiding to 250 to 270, and that's as a consequence of the change in strategy. We are favoring higher profit ounces and foregoing some of the lower profit ounces and that's in order -- I mean, we could see the positive results that Canada has achieved as a consequence of that. And of course, then the last one is our third-party treatment, IRS And so what -- the way we guide on IRS is always based on the existing contracts. We had two contracts that lapsed in the past year. And so the guidance there purely is based on the existing contracts and the volumes associated with that. If you then look at refined production, so I'm going to go to the top now, refined production. that is taking a step up. So I mean there's two ways I look at refined production. First, refined production in relation to group production, and you always have processing losses. So it's always going to be a bit less. But you'll see that the guidance of 3.45 to 3.65 is higher than what we achieved this year. And in part, that is as a consequence of us guiding between 100,000 and 130,000 ounces of excess inventory, given the fact that we've got all 3 furnaces in Rustenburg plus the Zimplats furnace kicking in. And so we will have excess inventory coming through as refined production. Group unit costs, I have spoken to earlier, -- if you take the 21,000 to 22,000 to midpoint, that's 21,500. That is essentially 3% higher than the 20,922 that we achieved this year. And then the capital expenditure is going to decline from around -- from ZAR 14 billion to between ZAR 8 billion and ZAR 9 billion. And also for the next few years, we are estimating capital to remain steady at between ZAR 8 billion and ZAR 9 billion. I'd like to thank everyone again for being here. We are very happy to take questions. Thank you so much.

Thank you, Nico and team. I think it's important and that you had more voices and saw more faces because truly, we operate as a team and we deliver results as a team. So there is some microphones being passed around in the room. So let's start with questions in the room. So if you raise your hand, please just introduce yourself for the people online, so they can also hear who's asking the question, and then we'll just deal with questions here. For people on the call, you can start queuing so that we can see people on the call as well. We will give you a second tranche. And then on the webcast as well, there's an opportunity to type questions. I'll receive that, and I can share it with the audience in the room. But let's start in the room. Chris, please start there.

Nico, Patrick, Meroonisha and team. I'm going to do what a lot of analyst always do and just focus in and maybe one of the problem children. But before I do that, it's probably worthwhile saying well done on the cost performance and volumes. It was a very good year all considered. So I'd just like to chat a little bit more about Impala Bafokeng. I think three questions around that. So obviously, you're guiding volumes higher this year. In that current environment, do you think that the mine can be free cash flow breakeven? Styldrift in particular, or do we still need to deliver more there in terms of volumes and costs to get that mine to a breakeven position? That's the first question. Second question, you talk about excess capacity. The 50% of the concentrate at Royal Bafokeng, that's at your option? Is it not time to maybe bring that in-house now? What are your thoughts around that? And then the final question, you note that you're looking at chrome and tailings processing at Bafokeng. Maybe if you could just give us a bit more info on kind of volumes, parameters, what you think that could bring to the asset.

Thank you so much, Chris. I'm not sure, Moses, are you happy to lead in some of the answers? Okay, cool.

So perhaps if you look at -- if I can come through, I mean, the question is, will we be cash neutral this year. I think that's our intention. And if you look at the experience and what we are bringing from Rustenburg as a team the capacity that we were in Rustenburg that we are taking into Bafokeng, and if we look at the progress that we've made so far, I think we are on our way there. If we look at how we've taken our employees at Royal Bafokeng into account, because the other ones who must make this difference, they are the ones who must improve, they are the ones who have a buy-in. They understand the model that Rustenburg is used to produce. They understand the credibility that Rustenburg have managed to achieve with the performance that they've done. And they are rallying behind us with the experience that we want to roll out at Royal Bafokeng so that we can easily get to cash neutral as soon as possible. So the signs are there. that we can get to cash neutral. I think the most important thing is we had what Patrick said and what Nico said. There's nothing that prevents us producing in that mine. We just have to address a few issues which we are currently addressing and we should be able to get cash neutral.

Thank you. Chris, I think it is our ambition to get cash neutral to that position in this next financial year. We don't want to have negative cash at any of our asset for any sustained period. That raises a lot of frustration within ourselves and things don't go well, if we don't have at least a likelihood of being cash neutral. So as far as the excess capacity, Meroonisha, do you want to talk to the agreements?

Yes. So Chris, as you mentioned, in August 2027, we will get our 50% of material from Impala Bafokeng. If you just look at the guidance we've given on the excess inventory, we are guiding that over the next 3 years, we will basically release all the excess inventory. So if you look, to say, FY '25, '26, '27 in -- once we're done with that, the backdrop of inventories through the pipe. And so when the IBR concentrate comes in, that's actually perfect timing for us. It actually doesn't make sense for us to get the concentrate earlier and then stop pilot. So I think the way things have worked out with the capacity expansion coming online, it actually works well for us.

And do you think you would want to comment on the IBR chrome and telling or so you ask maybe Mark or Adelle? Do you guys -- do you give maybe a microphone to Adelle, Do you want to comment on that? Adelle is our group metallurgists intimately involved in the chrome and the tailings treatment.

Yes. No, thank you for the question. We are busy with a chrome project as well as a scavenging project, and both those projects will come online in financial year pending legal environmental approval. And we'll be looking forward to -- from a tailing scavenging operation to at least see a benefit of 1% on our efficiencies in the specific concentrate where we will apply it. And similar to that is our chrome beneficiation. And we look at -- to at least see some 200,000 tonnes of chromite concentrates to be produced and then sold. Thank you.

Thank you, Chris. Yes, please.

Gerhard Engelbrecht from Absa. Nico, maybe just a little bit of a longer-term strategic question. I see in the reserves report, you show a hard stop to Rustenburg's production in 2034 with options to extend that with projects. Question is, when do you have to start spending CapEx on those extension projects? Is it something that is at the top of your mind that you're thinking about at the moment? And are they large mega projects or small things?

Thank you. That is a very appropriate question. Those projects typically are not large mega multi-billion projects. We currently have two underway. We've got 11 Shaft and 12 Shaft extension projects. These are typically mine replacement projects. They are much smaller. They are focused. They are some of our shafts where we are doing feasibility studies in order to do that. There are obviously other shafts like 1 Shaft, which has mined out its reserve and similar to 6 Shaft when that is more likely to close. But there is -- so there's a pipeline of projects that will kick in at the appropriate time to evaluate it. I mean, the challenge right now is to initiate any extension project and to have a financial return. So I mean, we don't want to just present life extensions if we don't believe that there's going to be some economic return on it. But I'm happy that we've got a very rich pipeline of projects at various shafts to look at the extension of Rustenburg life in the event that we have support of pricing.

Please, Arnold?

It's Arnold Van Graan from Nedbank. Two questions from my side. Nico, one of your focus areas for this year is reducing stained business capital. And you say about impacting the integrity of the assets and maintaining reserves and those types of things. But how do you do that? That's the first. How do you achieve that? And how long can you run at this reduced capital level before there's some sort of catch-up? Maybe the other way to ask the question, are you not setting yourself up for a big catch up staying business capital in the future? Then the second question is on Styldrift. It's a bit of a bigger, broader, longer-term question. And you emphasized that the ore body is fine, but there are lots of assets that we know about whether orebodies are fine, but they just never get to the production point that you envisage. So are you comfortable with the mine design and the mining method? And again, another way of asking the question, what surety can you give us the we're not sitting here year after year and we're still talking about Styldrift's ramp up? So is there a potential debasement of that production profile that would be sustainable? Because you need a certain level of volume or volume level to maintain that. So yes, broader big picture questions there.

Thank you, Arnold. So firstly, when we talk about capital reduction, predominantly we are referring to expansion capital and, in some cases, replacement capital. So we're talking about the Two Rivers, Merensky project, the North Hill project to provide life extension to Mimosa. Typically, it does not include material reductions in [ staying ] business capital other than in a few isolated cases. And if you take one, and this is again going to sound counterintuitive, at Styldrift, we've got an alternate shaft decline, we've got decline extensions that have been planning. But they're so far ahead, you've got a multiyear buffer, which is not entirely required. So I mean, those things have been advanced, derisked to some extent. But I mean, the length of buffer that you have is not required. And so if we're going to lean times, it's not necessary. So typically, it is not a major area of focus. So when we talk capital deferment, it is the things that I have mentioned. It is the base metal refinery in Zim. It may touch on aspired solar plant. But it's not -- so -- I mean, so for us, the integrity of infrastructure -- and I include in that the existing face length is critical. And I'm not convinced that you can cut staying business capital and not increase risk exposure in your business. Patrick mentioned in the beginning, of the 19 fatalities that we have, 17 were engineering related. We had the 13 shafts. We had conveyor, we had trackers, mobile equipment and 2 inches. Already, that is an indication that we have to be very intensely focused on all the integrity of our trackers fleet as well as our infrastructure. So I apologize if we've created an impression that we are focusing on the reduction of SIB. And then the second question was Styldrift. Now, I'm not sure with what credibility, I'm going to speak -- we spoke here about 16 and 20 Shaft for 10 years. And today, in hindsight, we probably took a decade too long to bring that integration. I mean, thankfully, it did. So let me just talk to the mine design. It is a broadened pillar mechanized mine design. To be quite honest in mining, that's probably the -- I mean, the only thing simpler than that is probably an open cast. But it's probably the -- one of the simplest mining methods that are out there. I mean, I always say it's like running 100 meters is not running the [ comm ] race. We must learn how to run 100 meters. It's not difficult. Most of us can finish 100 meters, but not all of us can do a sub 10. And so for me, that's the issue with mechanized broadened pillar. The only complication is that you're doing it through a vertical shaft. Whereas some Plats 2 levels with the other operations, we are doing it through a decline, so you're going to have surface workshops and on so. I don't think technically that the design is the issue. Also, if you look at the stoping work, it's matched to the ore body is at the moment. So I think that the mine design has always been absolutely perfect. That's not the issue. It has been the operating performance. So as leaders, our ability to do the things that we have to do properly. What is the guarantees? I can give you that we won't sit here at the end of next year. I can just give you our expectation. I can give you -- every time you speak, we will give you assurance of our perceived level of progress. I think that we have made progress. One of the things that we've done which I think is absolutely key is that we have integrated IBR under Moses and his team. If you look at Implats, we have got a very small corporate team. The bulk of our technical expertise in the company is, in fact, based in Rustenburg. We've seen the early benefits of that so the 2% improvement in recovery in the concentrator plant. We've not quite seen it as far as mining volumes are concerned. We've seen a grade improvement. So that's another area that we have seen improvement. But I would suggest that in the year that we have now been in control of it, we have not actually seen the trajectory change. I think that it's been a year of getting the teams and the expertise and understanding that developed. I believe that we've got the absolute right skills within the company to deal effectively with the issue. And the fact we have taken 16 and 20 from a decade of ramp-up constraints, and we managed to overturn, turn that into a success over the last 2 years, I mean, that gives me assurance. Because all those people are still part of the company, they are all based in Rustenburg. We can clearly apply the same methodology.

All right. Leroy in front, and then I'm going to go to the conference call. So just early warning on that.

I'd like to echo Chris' sentiments, well done on your operational performance, especially at Rustenburg, where you had to deal with the tragedy towards the end of last year. That was really impressive. Just for my understanding, Impala Canada, the strategy there was to focus on higher grades. But when I look at the grade trend year-on-year, this year, it's been pretty flat compared to last year. Is that still expected to change? And then on Marula, you had a very good year FY '22. I think last year, the issues were community disruptions. This year, it's geological issues that have affected your face length. I mean, do you believe you can deliver a similar performance than you did in 2022? And what is really required to get back there? And then lastly, if you could please just comment on the IFRS third-party material, the profitability of that operation as it relates to third-party material, please? Because we understand prices have come off, energy costs continue to increase. And your outlook for those, can you renegotiate some of those contracts?

I'll ask Meroonisha to prepare herself for a financial position on the IFRS contracts. Marula, Patrick can start thinking about expressing a level of assurance or not on Marula. And I think Tim is on the line, but let me talk to you on Impala Canada. So I think Implats has used the word "we are going to change to a high-grade strategy," means your question, if you follow the grades. I think the right interpretation actually, Leroy, is we've gone to a higher-margin production. So if you look at the production zones within Lac des Iles, some parts of the ore body is deeper. It's more expensive to mine. It takes more effort to truck it from underground. So we are focusing on lower-cost ounces, not necessarily higher grade ounces. So if we have spoken about higher-grade strategy, that technically is not entirely correct. It's a higher-margin strategy. And where you can see it is in the cost reduction. I mean, I spoke about the $948, they -- so they have come from over $1,200 an ounce to below $950 an ounce, not only because of the high-grade strategy, it's also restructuring and optimization and cutting some costs. But a big part of that journey has been the higher-margin strategy. We are nevertheless expecting marginal grade improvements in the next year. But I caution it is -- the strategy should not be interpreted as a high-grade strategy. It's an improved margin strategy, okay? So Patrick, do you want to talk about Marula?

Yes, let me talk about it. So I think it is not uncommon for a mine to lose face length because of some geology that we did not anticipate. But I think it is how quickly do you bounce back from that setback. And I think Marula was also hampered by a high turnover on critical skills given the location of where it is. So we have worked very hard to appoint the right people so that we give ourselves the ability to execute the plans. And I'm very confident that we have filled all the positions. We have made capital available to be able to access the new areas and to bring those we have lost through redevelopment. But like I said, it was also accelerated by the fact that the high turnover, we do not have the people consider there to execute the plan. So I'm very confident that we will see the phase of coming back. There's a lot of things I can't report. But 6 months ago, we're sitting with [indiscernible] was 0.5. It has now improved to just below 1. We want to be around 1.2, 1.4 because then you have flexibility. So we are seeing exactly that. But we're also looking at broader issues, infrastructure, as you recall that Marula is now mining at the lower levels. But it is all anchored on having stability on the leadership front, which I believe we have now.

So the Eastern Limb is very interesting. We got the Steelpoort fault and all the mines to the South of that generally perform well. [indiscernible], Two Rivers, historically, Orebodies are more benign. Communities generally are more mining friendly and to the north of the Steelpoort fault [indiscernible] Decoma, everything north has always been challenging. And one of the difficult things there is to attract -- to attract and retain the right skills because north of the Steelpoort fault, you start moving to Steelpoort, which is not deemed the most attractive. If you're mining professional, people prefer to live south in Linenberg. And so the recreation happened when we transferred Moses to Rustenburg. So we have certainty that he could move back if we don't -- he must leave a lasting legacy and not allow -- so I think so Patrick worked with lean, and I think that the -- so the changes -- I think the appointments that they're looking at now are people that have been there that we have got assurance of them being there for a long time. And so I think in the East and North, I mean, we can talk about community and the -- it's my view that in the lean times, we probably under-invested in some aspects of Marula, for instance, the mobile fleet. But essentially, it's got to do with the strength and the continuity of leadership. And I think that we are at a point of changing that and creating consistency there. So I see his optimism. I think it can get back to 2022 levels. And can be maintained there.

Yes. So if you look at IRS margins, even in a low price environment, because your material is bought at a cost that's related to the market, typically, your margins will still be stable because we conclude them as purchase of material contracts. So I would use margins of between 9% to 10%. So similar margins to what you've seen in this year. Clearly, when prices are on an upward trajectory, then the margins have -- depending on how the timing of purchases and stock releases, those margins can then vary either up or down.

Perhaps one true set that you touched on, it's not necessarily going to do with pricing. But we, as a company, have invested significantly in upgrading our processing capacity. So if you look at historical terms of these offtake agreements, it was purely based on the marginal increase in cost associated with treating and processing. But right now for us to consider new offtake in terms and agreements, it's not just a marginal increase in cost. It's also the recovery of that proportionate share of capital that we've invested. So I think the existing contracts, they are what they are. But for all new contracts, we have to consider a different financial position in offering terms to new customers.

Thank you, Leroy. We've got 5 or 6 minutes left. I definitely want to go to the call where we've got 50 participants. I see somebody who's already queued, but I'm just going to hand over to the operator to just talk you through, and then we'll take some questions from the call.

[Operator Instructions] The question we have is from Adrian Hammond of SBG Securities.

I'd like to ask a few questions. Firstly, Nico, you talked about long-term competitive positioning for the business with a capital of options within the portfolio. But you did allude to Zimbabwe as having quite a few options. Do you plan on investing more in there? And could you expand a bit more on whether that will sort of be metal-based? And maybe tie that up with the expansion capacity you're currently doing, does that allow -- how much capacity spend do you have? And was that sort of earmarking the growth you expect to get from Bafokeng to 650,000 ounces, I think you mentioned in 2027? And then just to qualify that, should we be modeling that now in our forecasts going forward for Bafokeng? And is the CapEx guidance you've given, which is pretty flat over the next couple of years, does that accommodate for that growth? And then also, just perhaps you could just give us a feel of how you've integrated Bafokeng into the business given particularly on the labor front, you do have two very different unions with very different leadership styles. How does is that [indiscernible] to be managed? And do you intend to ever consolidate Bafokeng into the group -- sorry, into Rustenburg such that you could actually realize further synergies with those two legal entities? And then perhaps, if there's time, if Johan can comment on the market dynamics. You did mention in the past, there was some increased buying from your clients. Perhaps you could give us some color where that sits today and where do you think the destocking cycle is.

Goodness me. That is a mouthful. What I intend doing is sharing the load, so let's just allocate. I'll talk about Zimplats and [ posting ] and engagement appetite. Mark or Adelle, between the two of you, they need a mic, if you want to talk about processing capacity and what capacity we have. There was a question about the -- sorry?

The guidance.

No, no there was the ZAR 8 billion to ZAR 9 billion capital and maybe that provides the growth, I can touch on that. IBR integration, perhaps you want to lead, Lee-Ann is on line, she can also assist consolidation, we will talk to -- Meroonisha, you can talk to that. And then Johan, between yourself and Emma, you can talk to the market. So as far as our investment appetite or investment posture is concerned in Zimplats, we've been present in Zimbabwe since 2000 -- no, just after 2000, so 20 years. It's always deemed a high-risk jurisdiction. For us, it has been an exceptionally positive experience. We understand that there have been policy changes that happens from time to time. We frequently engage through Zimplats with the government. We are aligned with them. On top of that, they have the remaining world-class assets: Shallow, the Great Dike is associated with mechanizable broadened pillars, Shallow assets. So in my mind, if I look at the globe's PGM opportunities, I mean, that has to be the most attractive. So I would suggest that if there's going to be any new developments in the future in PGMs, if you're going to rebalance the assets of the industry, I am predicting a higher probability of us having new production emanate from Zim. We are not planning any new growth in Zimbabwe. We will do everything that we can to extend the lives of Mimosa and [indiscernible] not happening and Zimplats, when the new portal studies are on close. So our current position is to maintain life. We got 50% of the group's reserves in Zimbabwe. And so we see a long life. But we do have the processing capacity, which historically was a constraint. So now we've got the -- Mark can talk to the exact excess capacity. But at least we've got the ability to consider treating Mimosa's material -- part of the material at Zimplats or potentially any new production that may emanate in that country. So don't take my comments as having an investment option on the table that we are going to announce to the market. It's more a long-range strategic direction coming -- that I made. Capacities, Adelle, do you want to talk about...

Thanks, Nico. Yes, we're in a very fortunate position to have good capacity available at the moment. Based on our road map on how we're going to use the capacity, as Meroonisha already mentioned or alluded to, for the next few years, we will use capacity to destock some of our concentrate stockpiles. After that, obviously, we will get the Bafokeng material in, 50% of that, and that is part of our road map. . And then we will have excess capacity going forward for our own growth or more third-party concentrates. And if I need to give -- if I must give an estimate in terms of how much capacity will be available, depending on the base metal content of the concentrate, if we look at 660 ounces, I will say, capacity-wise in the next 3 to 4 years will be between 600,000 and 800,000 6E ounces that we will have available going forward over the next 4 or 5 years of the depletion of our stockings.

Thank you. And then the capital -- the question on capital growth. the growth that I see happening in the company is from existing infrastructure. So it's in the form of Styldrift, Marula, a bit of expansion at Zimbabwe. There's no new capital projects required. It's from existing infrastructure that has the capacity to yield this increase in pit production. So I'm not concerned if the agent that requires more capital investment in order to -- there's no expansion capital required in order to get there. . IBR integration, are you integrating or are you not and if so, what are you doing on that?

Yes. Nico, I can comment on that, then maybe Lee-Ann can add. I mean, Adrian's question is really on how do we integrate the two entities and take into account that they've got different unions. I think our objective is very clear. We basically want to make sure that this integration, make sure that RBPlat makes money. I think that's very clear. And we obviously, we know it's a good asset. It will extend the life of mine in Rustenburg, I mean, we take that into account during this integration. Nico spoke about few projects as well earlier on. And we obviously are aware that we want to make sure that people's jobs are secured. So if we look at the operating model that we've put in place, we've taken these three points that I've mentioned into account. So IBR asset entity now reports to me. I've spoken earlier on with regards to what we intend to take to IBR from the experience point, from the performance point of view. And I think we should be able to cover those 3 areas that I've mentioned. That's a program office that we've set in Rustenburg. The intention of the program office is really just to make sure that the low-hanging fruits from the synergies point of view is rolled out as quickly as possible. If it has to do with cost saving, we need to do it as quickly as possible. So we can just get RBPlat to cash neutral. I think that's from the operational point of view. If you move on and look at it from the stakeholder -- the key stakeholder point of view, we've got a framework. And I think Rustenburg has in a long time, implemented a strategy where we engage unions openly in robust discussions. We've made sure that we've set it up as such at IBR to make sure that if there are issues on the flow, the forums that -- and the ability of allowing people to raise open issues in those forums is actually addressed -- those issues is actually addressed. I think that's what we intend to do, Nico, from the IBR point of view. I'm not sure if Lee-Ann has got anything to add.

Lee-Ann, do you have any comments?

Very well. I think the one thing that I would like to add to the question specifically is that while it remains two separate entities we will maintain and honor the recognition agreements that we have in place with the two majority unions there. At IBR, they do have the close-shop agreement that doesn't allow for other unions to gain recognition. And we are working through a [ CCA-facilitated ] process. at the moment to look at the close-shop agreement. But once the business becomes one entity, then we are going to have to get the [ NUM and MCO ] around the table so that we can go into a different recognition agreement. So we are foreseeing that, that will happen before the end of the financial year. But we have been engaging all of the unions with regard to consolidation and how it will affect the recognition agreements. Thanks.

Just to end off on that issue, when we acquired the asset, we made certain undertakings to management, unions. It was competition division and so forth. And our undertaking was to provide jobs security and to make sure that there are no changes due to the transaction. And that was absolutely correct. The asset made a ZAR 3 billion loss last year. So at the time that we're doing this transaction, we're at a different price point and when presented the ability and the security and first provide that assurance. So when you make ZAR 3 billion loss, I mean, it changes things tremendously. It changes the landscape very, very rapidly. So we have to choose between what this in production improvements. But clearly, a ZAR 3 billion loss on an annual basis is not sustainable. It has to change. We're either going to change it or we're going to close it. It's one of the two. I mean, no company can support a ZAR 3 billion loss continuously. So it has always been our intention to, over a long time, to integrate it to and even to consolidate into a single company. But the undertaking was not to do that in the initial few years. So our ambitions has sped up. The position has changed. The urgency with which we do it has changed. There are many aspects. Lee-Ann, Moses spoke about the unions. So you've got the bargaining units and the unions represented. You've got terms and conditions of employees, you got management structures, then you got processes. And I think that there are massive opportunities for us to do different things over different time periods. I mean to integrate great set procurement systems, that probably is going to take some time. But we had our -- we had the two concentrators report into our mineral processing division within the first month. We've seen a 2% improvement in recovery because there are skills that can join hands and work together. And I'm not saying that we are superior. I'm just saying there are more mines that can be applied to the position that can support one another. I think those opportunities exist in other areas. And I do think, ultimately, we will see a consolidation into a single formal company, the two assets, no doubt about that. Markets, between yourself, Sifiso, Emma, client customer.

Yes, I think maybe we can just close on that. We are a little bit over time. There's also some questions on the webcast that I've taken note from JPMorgan, Bank of America, Citi, NOAH and Visio. Sorry, guys, I will make sure we get back to you. But maybe just -- we haven't spoken much about the market. I think the important thing is that I've spoken to Sifiso, so we are seeing strong buying from our customers. So all accounts, the market remains constructive. We are hopefully seeing signs that we're nearing the end of the destocking period. With prices coming down, it's obvious that people have been putting metal back in the market. Sifiso and his team are engaging with our extensive customer base, and they're going to be looking at signing new annual contracts. So we are confident that we're going to see a request for stronger metal into the next year or 2 and some of the buying action that we've seen and some of the destocking that's run its course. But we're better positioned to report on that. And I'll certainly welcome any conversation on the market where we have more time, and we can bring in some of our local experts to perhaps add to that. So I think there's clearly still a dislocation between what we're experiencing in the fizzle buying and the prices, and maybe we can explore that when we get together. So thank you for that, and thank you for my team, and thank you for everybody that has joined us today, either here or online. Please, as we close now for people in the room, the whole executive team is here. We would welcome some further engagement and conversation beyond this call. And for the people that we're going to be seeing in the next 2 or 3 weeks on the road, looking forward to meeting up and then perhaps exploring some further these issues that has been raised. Thank you very, very much. And with that, we'll just close the proceedings.