Pan African Resources PLC (PAF) Earnings Call Transcript & Summary

Thanks. Ladies and gentlemen, a very warm welcome to the 2020 Pan African Half Year Results Presentation. To those attending in person, thank you very much for taking the time to be here today. It's always nice to see some familiar faces and then also some new ones. Welcome to those of you dialing into the conference call facility in South Africa from the United Kingdom and from elsewhere. Rest assured that we will keep the presentation fairly brief, even though we, again, have a number of positive developments to highlight. [Operator Instructions] I know that some companies dread the Q&A part of their results presentations. I do, however, think that we as a team are fairly well prepared today. So feel free to fire away with questions when the opportunity presents itself. We run and manage Pan African for our shareholders and for our other stakeholders, and your views and comments are always welcome. Please do refer to our SENS and RNS announcements and to the supplementary information available on the Pan African website, should you require further detail not dealt with in today's presentation. We are actually very proud of our new Pan African website, launched only this morning. Please go have a look when you have a moment. Thank you very much to Neil Symington from our office and to Germany's team from our perspective for putting all of it together. As per usual, our disclaimer and detail on forward-looking statements can be found on Page 2 and 3 of the presentation. On Slide 4, in summary, as part of today's proceedings, we will provide a brief overview of our operations and then spend some time on half year highlights and key focus areas in the year ahead. Deon, our Financial Director, will analyze some of the half year numbers. And we will conclude with an update on organic growth projects and our outlook for the business. On Slide #5, our strategy for Pan African is simple but we believe powerful: position ourselves as a sustainable, safe, high-margin and long-life gold producer. We are proud to say that in the first 6 months of this financial year, we have seen -- we've taken significant steps towards realizing this strategy. If I had to describe the first half year this -- first half of the financial year in a single word, it would be robust. The dictionary defines robust as: of a person or animal, strong and healthy or of an object or system strong and unlikely to break or fail. In terms of results, sure, let us give some credit to the gold price, both in U.S. dollars and in rand terms. The U.S. dollar gold price provided us with some really nice tailwinds. This was further magnified by the weakening in the rand. When the rand appreciates materially, like we saw in our 2016 financial results and now again, it certainly assists our margins. It's also worth noting, with the current rand gold price is more than 10% stronger than the average for 6 months we are now reporting on, I'm not so bold as to forecast the gold price or the rand. But what I can say with certainty today, it's in pretty close to an all-time high in rand gold price terms. Robust does not mean or imply that we are not presented with threats or challenges. In the last 6 months, we had to deal with community unrest Eskom load shedding, the most December rain in probably 20 years and some geological issues at Barberton, and yet our portfolio, for the most part, delivered. Even more importantly, our assets are now well positioned for the second half of the financial year and beyond. The work our team has done in this regard will demonstrate very clearly in the slides ahead. Slide 7 and 8 provide you with a brief overview of our assets. As most of you will know, all of our operations currently are based in the Mpumalanga province in South Africa. The business that we have built now represents a unique combination of underground mining and surface remining. In terms of ounces produced, almost half of our gold comes from surface operations. These operations are low cost, not labor intensive, not that exposed and not that exposed to electricity woes. Some more detail on these assets. Barberton mines in the Barbeton underground. This is where it all began for Pan African. We used to call Barberton, 'a universal opportunity.' I believe this still holds true. We will detail some of our plans and opportunities for Barberton later. We do some 80,000 ounces per annum from underground operations, and our MRC orebody, at Fairview, life is still some 20 years, sometimes at a grade as high as 100 grams per tonne. The BTRP or the Barberton Tailings Retreatment Plant and Elikhulu are our surface operations. As I've said, these operations now account for 50% of our gold production. BTRP again delivered an exceptional cost performance. In the period past, all-in sustaining costs of less than $650 per ounce. Elikhulu, which means the big one, really is a big one for Pan African and for our investors. Initially, we forecasted a payback of approximately 4 years on this project, $120 million of capital spend. Given the current performance and gold prices, this payback is much closer to 3 years, I think. You will have to go far to find a better gold operation. Elikhulu is also a testament that one can get large-scale projects done in South Africa, on budget and actually ahead of schedule. The way we now have to think of Elikhulu is a safe, long life and low-cost gold annuity. In the slides, Deon will demonstrate how we expect a very attractive cash flow generation from this asset to translate into a very rapid degearing for Pan African and also imminent increased cash returns to our shareholders. The last asset is the Evander 8 Shaft pillar. Now last year we were asked, "Why don't you just settle, close the Evander 8 Shaft, and what will the cash burn be on the Evander underground?" I think we have now done the hard yards, and we forecast the payback on this project of less than a year. We anticipate that the pillar will produce 30,000 ounces of gold or more per annum at an all-in sustaining cost of less than $1,000 per ounce, also a very nice cash cow. Now let us spend a bit of time on the highlights for the first half. On Slide #10, and I have to say, these are actually fairly easy results to present. From a production perspective, the gold produced by the group increased by some 15%. Elikhulu, the first period of steady state in full scale production. Our production at Elikhulu increased by more than 90%. And the 8 Shaft pillar, as we've said, is on track to achieve steady-state production pretty much in the next couple of weeks. From a financial perspective, group profit after tax increased by 125%, EBITDA demonstrated a very significant increase, more than 80%. Earnings per share in dollar terms is more than doubled. Group net debt decreased. And at the same time, we reinstated and reinitiated our dividend. So I guess the one sort of read point on the slide is all-in sustaining costs that increased. And I'm quite happy to detail how we will deal with those cost increases in the period ahead further on in this presentation. Also, I think from an EBITDA -- adjusted EBITDA generation perspective, it's a good performance. All of our operations contributed positive cash flows, even scratching around on 24 level at the Evander underground. This is why our expectations for 8 Shaft pillar are justified, we believe. And just have a look at the EBITDA from Elikhulu. This performance was at a lower gold price, and we expect an even better operational performance from Elikhulu in the second half. On Slide #12, safety and group safety. If we cannot mine safely, we cannot mine. I, along with the rest of the South African mining industry, are very proud of the achievements over the last years. It was definitely a team effort with contributions from the respective companies and our employees, our regulator and our unions. In an industry that has made significant improvements as far as our safety record is concerned, Pan African's operations stand out for our performance. We can, however, not rest on our laurels. We need to continue to do better. Some years ago, I stood before you and committed that our senior management would regularly engage with individual employees on safety in a small group environment. This continues to happen. We are also now involving the families of employees in safety campaigns. I again implore each and every one of our employees and contractors to take charge of your own health and safety and to continue this incredibly positive journey for our group. Slides 13, 14 and 15 provides you with information on some of our ESG initiatives. We do not operate in a vacuum. We are dependent on and need to safeguard the ecosystem in the broadest definition of the world in which we operate. We built clinics, libraries and schools. We invest in the training of our people and communities. We rehabilitate old workings and our closure liabilities, on Slide #15, are fully funded. Our Tailings retreatment operations clean up historic liabilities and free up land for agriculture and other development. Our employees and contractors number more than 4,000. In the last 6 months, we paid almost ZAR 400 million in salaries and wages to these employees. In the current South African environment, you can imagine what a difference that makes. I'm proud of the positive impact at Pan African -- what Pan African's operations has on all of our stakeholders. And I think we need to, however, become better telling our story in this regard. If we then move on to Slide #17, I think I'm moving through these slides quite quickly, allow more time for questions. So what are the key focus areas in the year ahead, in addition to continuing to mine safely? We need to deliver into the group production guidance. We need to reduce our all-in sustaining costs across all operations, as I've said. We're certainly seeking to reduce all-in sustaining costs for the year to below $1,000 per ounce. We need to continue to operate successfully in South Africa, and we have to reduce debt levels and increase dividends. So on Slide #18, group production. In terms of production guidance, the first half provides a solid platform, which will allow us to meet full year production guidance. So in terms of Elikhulu, we believe that we're well positioned for the second half. We have a new satellite pump station that's being commissioned. Over the next 6 months, Elikhulu will be in the higher grade, dam 1 and 2, remining areas at Kinross. So certainly, we expect even better performance at Elikhulu. In December of last year, we were actually targeting 180 kilos of production at Elikhulu. That didn't materialize because of principally the rain. I'm very happy to report that in January, actually, this year, we had a record month in terms of production. We produced almost 180 kilos. So that's a fantastic run rate for Elikhulu. At Barberton, we will also be in our new 257 high-grade platform during the month of March. We will then again have 3 platforms in this incredibly high-grade MRC orebody. So the bottom line is, I think we're well positioned to meet the production guidance of 185,000 ounces for the full financial year. In terms of reducing the all-in sustaining costs of the group, again, to the magical $1,000 per ounce level, we have tangible and concrete plans to get there. So if we analyze our operations, excluding Consort and Evander underground, we actually delivered at below $1,000. So that's for certainly Elikhulu, BTRP, Fairview and Sheba mine. A more problematic operation, so to speak, really is the Evander underground. We came in at a high number of almost $1,800, and then also the Consort Mine. So let's talk about the Evander pillar and how the pillar in the next 6 months will assist in driving down that all-in sustaining cost to the group. As we said, the pillar access development at 8 Shaft has been completed. Secondary development and ledging operations are ongoing. Currently, I think we have 5 stoping crews in the pillar. By March, we will have all of our 9 stoping crews in the pillar. So pillar will be mined at a rate of almost 12,000 tonnes per month. We were very conservative in terms of their hit grade. I think we plan for the pillar, which is about 7 grams a tonne. Currently, we believe we can potentially do better. Again, estimated all-in sustaining cost for the pillar is below $1,000 and production of more than 30,000 ounces per annum for 3 years. So just a couple of other points on the pillar. What's going to assist us to bring down the cost and actually deliver into the guidance? Environmental conditions, due to the fact that the pillar is much shallower and it's right next to our intake airway, environmental conditions will be significantly better, productivity numbers should increase dramatically. We will have increased face time, with the pillar being right next to the shaft, expect the traveling time to the workplaces at about 10 minutes from the station, compared to roughly 1 hour and 45 minutes to the 24 level stopes. This equates to a gain of roughly 3 hours of productive face time per day. This makes it much, much easier to achieve a quality daily blast. And then lastly, reduced ore handling. As I said in the past, sort of mining on 24 level is a bit of a nightmare. So in the pillar, only be transferred 3 to 4 times before reporting to the plant compared to approximately 22 times from between from the 24 level stopes. Ore will also only be transported about 4 kilometers from the pillar versus 14 from the 24 level stopes. The combined effect of fewer transfer points and reduced transport distance will equate a big improvement in our [0:15:53 mine] factor we anticipate. If we then move to Slide 21, the other sort of the key area of focus at Barberton is the Consort Mine. And during our final presentation last year, I stood here and I said to yourselves that we will find a solution for Consort. Now an easier solution probably or more convenient would have been to close the Consort mine that would have impacted 348 of our employees, and we didn't want to do that. So we looked at alternatives, and I think we've actually come up with a very good plan. So we will mine the PC Shaft pillar at Consort that was going to give us another 10 to 20 kilos per month for a 3-year period. And that will give us enough flexibility to do more exploration, open up more areas and get Consort to be a sustainable operation over the long term. People forget that some years ago Consort was actually the highest grading orebody in Barberton, and ideally, that's what our exploration geologists need to get us back to. So we have a number of exploration targets at Consort, 36, I believe, so we're looking forward to some exciting results there. In addition, we've upgraded the plant capacity at Consort. So we've increased the plant capacity to almost 10,000 tonnes a month. We have sufficient surface stockpiles to actually keep that plant going for some years. So that's also going to certainly assist in margins and keeping Consort sustainable. So certainly, we're now in the throes of executing on our plan, and I very much look forward to reporting an improved performance from Consort during the next set of results. Lastly, Sheba, it makes profit. It's a long-life operation. We still have 9 years at Sheba, that excludes Royal Sheba. It's too high cost at the moment. We've spoken about Project Dibanisa before, which really looks to combine some of the infrastructure of Fairview and Sheba. We've made very good progress, working on an implementation plan at the moment. And again, please watch this space, but we certainly will work to get Sheba down in terms of all-in sustaining costs. That has the other added benefit of freeing up infrastructure for our Royal Sheba project, which we will discuss and speak about a little bit later. Now I mean, in terms of Slide 23 and all-in sustaining cost, which is so critical for our business and internationally, it wasn't a bad performance for the last 6 months, just over $1,100 per ounce. And really, what we need to get to is $1,000 an ounce benchmark, and that's what we're guiding towards. And that will put us very solidly into the sort of low-cost range in terms of cost of production, not only from a South African perspective but also internationally. So let's talk about another key area of focus for us in the next 6 months, continuing to operate successfully in South Africa. On Slide #25, security. We have completely overhauled and professionalized our security function. I have to say that the onslaught is constant, and we have to continue to adapt and devise new strategies in this regard. I really feel that it's time for government to stop talking and start doing as far as the policing and enforcement is concerned. The electricity situation in South Africa has been well publicized. I don't think Eskom will fall over, but we need to anticipate and plan for load shedding in the years ahead. And fortunately, as I said before, our operations are not as exposed as the rest of the industry who relies on master refrigeration plants, master power consumption, et cetera. From a tailings perspective, power cost is only about 15% of our total input cost of production. And we are a much lower power consumer vis-à-vis the rest of the industry. And then, also, quite exciting from our perspective, we completed a bankable feasibility study into a 10 MVA solar plant at Evander. We're now working to get all the other boxes ticked from a regulatory perspective and also exploring nondilutive funding options. And for a plant like this, which certainly makes economic sense for a long-life asset like Elikhulu, we believe that the funding should not be a major issue. Mining tenure. I mean it continues to be a challenge all over. Now our Evander mining rights are actually valid till 2038. So it's not something we worry about on a daily basis. That's quite a long and good time frame. On Barberton, our existing mining rights expire in 2021. We actually, in a very timely fashion, submitted the renewal applications. And we believe those applications are in progress at the DMR. So again, tenure -- from a tenure perspective, I really think we have things under control. Stakeholder engagement, which is the fourth point and seriously critical and important for our business, and this relates also to our communities. As we said before, our people in South Africa are desperate. They are unemployed with very limited prospects, and a situation where people have nothing to lose is very dangerous. We have and we will continue to up our game in terms of community engagement. We make a massive positive difference in the areas in which we operate. And it's important that we have our communities understand how interlinked our future fortunes are with their own. Now these challenges might appear daunting, but for the most part, we have equipped and skilled ourselves to manage successfully in this environment, and we have a proven track record of doing so. It's also important to note that South Africa is not unique in its challenges. I will ask Deon to please spend a bit of time on the numbers and cash flow generation. Thank you.

Thank you, Cobus, and good morning, everyone. As Cobus stole my thunder on the financial results analysis, I'll endeavor to contextualize the group's cash generation and deleverage potential in the next couple of slides. Slide 27 provides a breakdown of the group's cash flows for the reporting period. Notable is the decline in net cash generated by operations to $13 million relative to the $21 million of the corresponding period. Now this is a bit of an anomaly as the cash flow consequences of the 20,000 ounce gold loan entered into in July 2019 is recognizing cash inflow from financing activities and not cash generated by operations as the proceeds we used to refinance a portion of our RCF. Now compare 2019 cash inflows from operating activities to that of the corresponding period, an amount of $11.2 million, representing 10,000 ounces, delivered during the reporting period in settlement of the gold loan has to be added to net cash generated by operations, which then together with the net dividend of $2.9 million, increases cash inflows from operating activities to $27.1 million relative to the $21.3 million of the corresponding period. The gold loan was entered into as -- was entered into benefit from an interest rate arbitrage between the gold lease rate and the right -- and that of the RCF interest rate at that point in time. There were no principal installments due on the RCF during the reporting period, as redemptions only commenced in June of this year, as I'll demonstrate in the subsequent slide. There was a comment from an analyst that we entered into the gold loan because we needed to redeem an installment of the RCF, which is just simply not the case. With the construction of the Elikhulu project completed in the corresponding period, cash outflows from investing activities declined to $12 million as capital expenditure reverted to more normalized levels. Commensurately, cash inflow from financing activities also declined as the group's requirements for external funded debt declined. Net cash increased to $7.4 million relative to $3.5 million in the corresponding period. The RCF facility enables us to deposit and redraw from the facility. And in this manner, we make use of surplus cash to reduce the group's interest burden to minimum. We do, however, monitor our available liquidity on a daily basis and ensure that we have access to immediately available short-term facilities, such as the undrawn balance on the RCF facility and our general banking facilities of no less than ZAR 250 million or the equivalent of approximately $18 million. As of this morning, we held ZAR 233 million or approximately $22 million in immediate available liquidity. Slide 28 summarizes the movement in net debt for the reporting period. We commenced the reporting period in July last year with net debt of $150 million and since then have redeemed $21 million of the senior debt during the reporting period. Senior debt comprises the revolving credit facility, with a capacity of ZAR 1 billion and the Elikhulu term facility, which originally had a ZAR 1 billion exposure after Elikhulu's construction. During the reporting period, we repaid ZAR 394 million, approximately ZAR 28 million of the RCF facility from the proceeds of the gold loan. And we also repaid the first 2 quarterly installments of Elikhulu term facility of ZAR 100 million, equivalent of approximately $7.1 million. Since inception of the gold loan, we redeemed ZAR 197 million or $40 million of this gold loan, which is equivalent of 10,000 ounces. The remainder of this loan of $40 million will be redeemed by the end of this financial year. Also included in net debt of ZAR 1.74 billion at December 31, 2019, are 2 noncash big components comprising ZAR 77 million of operating leases now capitalized in terms of IFRS 16 and an unrealized hedge profit of ZAR 44 million. Slide 29 shows the accelerated rate of degearing due to the prevailing robust rand gold price and the increased production profile. As all our debt is rand-denominated and if the rand price of gold of approximately ZAR 730,000 a kilogram or $1,514 an ounce holds for the next 18 months and subject to the other assumptions mentioned in the slide, we anticipate to be fully degeared by June 2021, as is depicted by the green line graph. This forecast also provides for increased dividend for the 2020 financial year. The blue line graph is the contractual debt repayment profile of both senior debt facilities. And the bar chart in the lower section of the slide shows the senior debt contractual principal repayment obligations, with the red bars representing Elikhulu's principle debt redemptions and the green bars representing the extent to which the RCF's capacity reduces over the next couple of years. The RCF balance was, as of yesterday, ZAR 697 million or $47 million at an exchange rate of ZAR 14.9 to the dollar, which is already well below the balance of ZAR 750 million, to which the facility must be reduced by 15 June of this year. The Elikhulu facility's balance is now ZAR 800 million or $54 million after the first 2 quarterly installments of ZAR 50 million made in September and December of last year. To clarify, the only further contractual principal debt redemptions required for the remainder of this financial year of the 2 quarterly Elikhulu installments of ZAR 50 million, $3.4 million each, and the reminder of the gold revolver ZAR 197 million. Together, these obligations amounted ZAR 297 million or approximately $20 million for the second half of this financial year. Since June of this year, the contractual debt repayments are relatively muted until June 2022, when the RCF facility terminates and this sheer balance of ZAR 500 million, which is $34 million approximately, is redeemed as a bullet payment. The graph shows the full repayment of this bullet in 2022, which is unlikely as it will probably be extended as a core indebtedness if there is still a requirement for a revolver at that stage. Slide 30 shows the existing 0 cost collars hedges in place for the next 12 months. For the remainder of this financial year, we have 50,460 ounces hedged at a floor price of approximately ZAR 656,000 a kilogram, approximately $1,370 an ounce and kept at ZAR 856,000 a kilogram, approximately $1,745 an ounce. For the first half of the 2021 financial year, we have 40,000 ounces hedged at a floor of ZAR 690,000 a kilogram, approximately $1,440 an ounce and kept at ZAR 925,000 a kilogram, approximately $1,951 an ounce. These hedges underpin our cash generation for the next 12 months and by implication our ability to redeem our debt. Finally, Slide 31 shows the group's historical dividend yield. In the 2018 financial year, we suspend the dividends, following the cessation of large-scale mining at Evander's 8 Shaft and in light of the resources required to complete the Elikhulu project. For the 2019 financial year, we reinitiated dividends at a relatively pedestrian level when compared to prior years, but it signaled our confidence in operational and financial stability of the repositioned group that Cobus referred to. Our dividend policy is still to distribute a minimum of 40% of discretionary cash flow after capital expenditure and debt redemptions. Historically, our dividend yield was sector leading. And since we restructured the RCF debt in the 2019 financial year, the gold price, as in rand terms, increased by approximately ZAR 200,000 a kilogram. If this prevailing rand gold price holds and based on a constant 185,000 ounce production profile going forward, if you just use for assumption purposes, the forecast annual, incremental, post-tax cash flow amounts to approximately ZAR 800 million, which is compelling in our belief that the deleverage of the balance sheet and reverting to the historical sector-leading dividend yields can occur in unison in a short term. Thank you.

Thanks, Deon. So I think let's conclude by just a couple of points on Pan African and us investing in our future and then also the outlook for the year ahead. So I mean, most of you would have seen these graphs before on Slide 33, and we have a great, let's say, internal and organic project pipeline. We have more than 30 million ounces in resource, which is not insignificant. That's really sort of the likes of a gold major. But in this market, we recognize that ounce in the ground means nothing. Shareholders need to see profits, they need to see dividends. That's really what we will be targeting. So I do think we have a good track record of bringing internal projects to account. Recently, we can speak about the BTRP, that was a payback of 18 months. We can talk about ETRP, less than 3 years. Elikhulu, we're now saying also to the tune of 3 years. I think that's a very good track record. And we're not going to undertake any other project if we can't see the same sort of return metrics. Now just briefly on Slide 34, I just want to emphasize that if you look at the way we think about the cash flow generation and the cause on our cash, so clearly the first priority is to continue to reinvest in our asset portfolio, and that's what we've been doing. So the high gold price allowed us to put more money into the ground. At our operations at Barberton, we've increased the capital, doubled our rate of production on some of these orebodies. We've invested in new LHDs. I think we bought 5 new, very expensive LHDs in the last 6 months. So reinvesting our assets is critical, that ensures the long-term sustainability of this business, and it's very important on growth in our own portfolio. Let's talk a little bit about the Egoli project at Evander. Most of you, again, have seen the slide before. There's quite a bit of excitement around Egoli, and then also some concern, which I think is fair. Egoli is a deep level mine in South Africa. And understandably, we still have some work to do here. We have completed a mining feasibility study with DRI projects. It demonstrated very robust returns, and this study is currently in process of a third-party review by the mineral corporation. We will only release the results once we are comfortable that we have an executable project plan. Now on Egoli and in terms of funding the project, let me say this categorically, we will not cannibalize the current, very attractive, group cash flows to fund Egoli, despite our view that this is a very attractive asset and much better than anything for sale in this market, for that matter. If Egoli cannot stand on its own feet as far as funding is concerned, it will not be developed. Our funding options for Egoli include bringing in equity partners, we've discussed this before, and alternative financing arrangements such as gold streaming. On Slide #37, Royal Sheba. Again, this has been on our radar as a project for some time. We have scaled back plans for a large, big bang approach here. We just don't think the orebody can accommodate sort of massive capital on day 1. We do, however, see Royal Sheba contributing ounces in the next year's to Barberton's production on a smaller scale. So -- and again, we have the Royal Sheba uppers and we'll start trial mining at Roll Sheba uppers in the next 3 months or so. And then we have the very attractive Phase 2 of Royal Sheba, which we've actually been developing towards from the [indiscernible] for some years. We're now only about 390 meters from Phase II. And when we get there, we'll start opening up and certainly preparing that ore body for mining. So way to next FY '20 and beyond, I think what we've said hopefully in this presentation gives you some sense of sort of our priorities and where we plan to focus our time in the year ahead. And we started this presentation with some comments on group strategy and on our robust performance in the period past. Please bear with me for some final closing remarks in this regard. So we are often asked about M&A and our appetite for acquisitions. At the recent mining in [indiscernible], we were again questioned by senior journalists on African gold opportunities. Understandable that deals in the mining space are a lot more interesting than companies that keep their heads down, stick to their knitting and get on with the job. Everyone knows that we have looked at gold mining opportunities in South Africa and in many African jurisdictions, both producing assets and also development opportunities. At the moment, I have to say, it is very difficult to see value. Pan African Resources does not need to do a deal. And unless we can see compelling value and pay back similar to Elikhulu, ETRP and the BTRP, we will not do a deal. We will be sticking to our knitting, as I've said, and focusing on realizing value from our own portfolio. Most of our shareholders want to see the balance sheet degear and they want to see a significant increase in dividends. This is what we plan to achieve in the next year. I would like to conclude by thanking each and every Pan African employee for your hard work and dedication during the past year. The fruits of your labor reflect in our safety performance, our production numbers and our profits included in these results. There's a lot to be said for continued positive momentum. We all know what is required of us in the year ahead, and we will give our very best. Thank you very much. So I guess shall we open the floor for questions?

Cobus, well done on your results. Nice cost reduction at the Barberton mines anyway. A little bit concerning the cost increase at Elikhulu, but hope after the rains you had, it will come down a bit. Concerning about Pan African is the very high, Barbeton, is the very high security cost to you guys earlier about 7% of total cost. You said it's come a little bit about 15% of total cost. Now that's 7%, how is that compared to the rest of the industry? And do you think you can ever get that 7% down? How are you going to deliver that?

Thanks. Quickly on Elikhulu, we produced at about $700 an ounce for this half year. If we increase production, which we anticipate to do, we have high-grade at the moment, and we've commissioned a satellite pump station. So we're comfortably doing a 40-odd thousand tonnes a day. So I would expect with Elikhulu increasing production, you will see that all-in sustaining costs come down. There are also some mines with costs included in them, in that all-in sustaining cost. On Barberton, Barberton is a long-life asset, and we have to safeguard the asset, and that's we're doing in all respects. We're investing more money in the ground. But from an eagle mining perspective -- and people love to talk about this, Barberton is not unique, but it is in a position where we're quite exposed to not only sort of what happens in, let's call, in South Africa, we've seen -- we've been seeing influx in illegal miners from Mozambique, Zimbabwe and from other countries as well. So about 18 months ago, we were in a position where if we hadn't done what we had done on professionalizing security, I believe we would have been overrun today. So what I can say to you comfortably because it's not a comfortable situation, but I do think we've made great inroads. We have a dedicated security initiative. As I've said, we've professionalized the function. So I believe we've sort of made that business sustainable from a security perspective. Obviously, it's great to reduce costs, and we'd love to do so. But our first and foremost priority is to safeguard the assets. So will the cost increase significantly going forward? I don't think so. I think we sort of have the situation under control. But is it a key area of focus? Yes. And we will do what we need to do to keep that mine going.

It's Arnold Van Graan from Nedbank. Just a question on the 8 Shaft pillar. What is the fixed cost to run that operation on a monthly basis?

So I mean, a key principle of sort of using the all-in sustaining cost is clearly that you have all of these fixed costs, and it's pretty much the same versus mining 50 kilos a month or 110 kilos a month. And that's the principle coming, bringing down the AISC to $1,000. I think the all-in cost per month, gentlemen, of 8 Shaft will certainly -- it's about $20 million -- I think $25-odd million. Power cost is very significant. And then we have the labor cost and the contracted cost. So the key focus is clearly producing more ounces. What you'll also see is, it reduces the power cost because we don't have to do the cooling on 24 level.

Bruce Williamson, Integral Asset Management. Coming back to the Barberton area, I mean, indirectly, our President has an interest in your company, and I guess, in the area. And David Mabuza is a kingpin in that area. Have you guys had an opportunity to sit face-to-face with his people or people close to the President and the Vice President and find a way to just ease the whole situation?

Yes. Bruce, so just firstly, on your first comment, the President does not -- other than sort of the sustainability of the mining industry, he no longer holds a stake in Pan African, for clarity.

Absolutely nothing?

Nothing. 0.