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

Good morning to all of you, and a very warm welcome to the Pan African Resources Annual Results Presentation. Thank you very much for taking time out of your schedule to join us today. This financial year has again seen excellent progress with Pan African strategy of positioning ourselves as a safe and sustainable high-margin and long-life gold producer. We are also excited about near-term production growth, which firmly established Pan African as a leading mid-tier gold miner. Pan African has managed to balance this production growth with maintaining our very attractive dividend to shareholders, which is no mean feat. The next slide contains some highlights of the year past and also our strategic plans for the future. We will keep the presentation fairly brief with an opportunity to address questions afterwards. Joining me in presenting today is Deon Louw, our Financial Director. You're welcome to refer to the SENS and RNS announcement and to the supplementary information available on the Pan African website should you require detail not dealt with in today's presentation. Please note the disclaimer and detail on forward-looking statements on Slides #2 and 3. On Slide 4, an overview of the presentation. In Section 1, we will provide information on the group's excellent safety performance in the last year. We will then follow with some of the highlights and key features for the financial year and also further detail our portfolio of unique surface re-mining and underground assets now with attractive exploration upside outside of South Africa in the Republic of the Sudan also. As part of this section, we will discuss the group's all-in sustaining cost performance and outlook and how we continue to reinvest in our mining assets via capital spend to ensure the sustainability into the future. I look forward on spending a couple of minutes discussing progress on our ESG initiatives, where our aim continues to be to go beyond compliance. Deon will analyze our financial results with record headline earnings per share and an attractive dividend proposed to shareholders despite a flat rand gold price that prevailed over the last year. We will then conclude the presentation with an update on our growth and expansion plans and by demonstrating that Pan African is firmly on track to continue to create value for all of our stakeholders. If we then move on to Slide #6, our safety performance and our journey to Zero Harm. We have managed to build on our industry-leading safety performance in FY '22. I think Evander mines deserve special mention here, no reportable injuries despite ramping up difficult pillar mining activities. Our operations also achieved a number of fatality-free shift milestones. The combined Evander Elikhulu operation achieved 2.5 million shift in January, and Barberton mines 2 million fatality free shifts in May of this year. From a safety perspective, I wish to commend our operational teams, all of our people on their performance in this period. As we have said before, normally, when safety goes well, production also does, as is evidenced by our operational achievements in FY '22. If we then progress to Slides #8 and 9, some highlights from the year. We again delivered an excellent production performance with gold produced almost 6% higher than the initial guidance for the year. Financial year '22 saw Pan African set a record in terms of gold production, not something a group has the pleasure of reporting on too often. Other than Sheba and Consort at Barberton, all of our operations performed on plan or better than anticipated. For these 2 smaller operations, we are implementing turnaround plans with further detail provided later in this presentation. In terms of costs, our all-in sustaining costs came in a bit higher than what we had hoped, impacted by the dollar-rand exchange rate and also by the higher cost operations. Year-on-year, all-in sustaining cost was stable at just over $1,280 per ounce despite inflationary pressures experienced by all global miners. Noteworthy is that 87% of our group gold production was delivered at an all-in sustaining cost of below $1,150 per ounce, which is a good achievement, I think. We are guiding a group all-in sustaining cost of approximately $1,250 per ounce for the year ahead. On Slide #9. Deon will provide detail on our financial performance, but some pretty compelling numbers to highlight here. Profit after tax was steady despite a flat rand gold price and the impact of inflation on costs. We achieved record headline earnings per share. We are maintaining our annual dividend to shareholders. And despite all of our capital programs and the highest ever rand dividend paid to shareholders in December of last year, we also managed to cut our net debt to almost nothing at the end of the financial year. The last year was also again an excellent period for Pan African's ESG initiatives. We pride ourselves on getting on with projects, and this year was no exception. It actually was a year of first offs from an ESG perspective for Pan African that I look forward to discussing in more detail in the slides ahead. If we then proceed to an overview of our operating environment and operations starting on Slide 11. In terms of a track record of operating successfully in South Africa, Pan African's operations have a pedigree second to none. Our portfolio is unique, balanced between surface re-mining and underground operations. We also now have added very prospective exploration properties in the Republic of the Sudan. On Slide #12, our core surface and underground assets. Surface operations reduce unit costs and turn legacy liabilities into profits, whilst the underground provides long life of mines, solid returns as a result of a large sunk capital base and also attractive optionality, which we are bringing into account as demonstrated by our progress on the Evander underground. Slide #13. Few mining jurisdictions are without challenges. It is therefore key that you have quality assets and a responsive management team, experienced and equipped to deal with problems and challenges as they arise or when possible, preempt and avoid some issues altogether. We continuously seek ways of making our business less susceptible to adverse external impacts in South Africa. Some matters to highlight in terms of our operating environment over the last year include the following: we are reducing our reliance on Eskom, the South African electricity utility. Our first 10-megawatt solar plant at Evander is up and running. We are planning to have at least 30 megawatts of our own generating capacity in the next 24 months. In South Africa, we continue to have ready access to technical support, infrastructure and mining skills and our legal and taxation systems function well. This is not always the case in other mining jurisdictions. Pan African's assets have long lives with extended mining rights. From a security perspective, our efforts to safeguard our people and operations and minimize the impact of illegal mining are ongoing. We continue to roll out a number of new technology-based solutions to increase the effectiveness of measures and reduce our security costs. I have to say that cooperation with law enforcement has definitely improved over the last year. I think government is increasingly realizing that cooperation with a legitimate miner is essential in combating the menace of illegal mining. In terms of stakeholder interaction, we invest heavily in our social license to operate. Pan African's operations make a meaningful positive difference in the areas where we operate. So the bottom line on operating in South Africa is that it is difficult. I think most jurisdictions are these days. Our track record demonstrates that we can operate and grow and do so very successfully. If we spend a couple of minutes on the operational performance of each of our core assets, on Slide 14 is a picture of the newly completed Leslie/Bracken pump station at Elikhulu constructed in less than 12 months. Elikhulu on Slide 15. Production was stable for the full year despite some challenging conditions. We made up in grades and tonnages what we lost in recoveries and weather. We expect production to improve somewhat in the year ahead as we start re-mining Leslie Bracken. Elikhulu remains a flagship asset for our group, long life with really attractive margins. It is a testament that large mining projects can be successfully constructed in South Africa. We will carry all of our learnings on building and operating Elikhulu over to Mintails in the year ahead. As promised, Elikhulu is also now seeing the benefits of renewable energy. In August alone, we saved more than ZAR 4 million or some $250,000 on our electricity bill with our solar facility in full operation. Slide #16. The current year, again, saw an excellent performance from the BTRP with the asset generating $14 million of EBITDA. We can maintain this level of production from the BTRP for approximately 2 more years. However, the future of the BTRP is processing Royal Sheba ore. We will spend a bit more time on Royal Sheba when we discuss our growth projects. Slide 17, the Evander 8 Shaft pillar. Our Evander underground team delivered an outstanding performance in the year producing almost 50,000 ounces at an all-in sustaining cost of $1,100 per ounce and an excellent safety performance also. With the addition of 24 Level and now 25 and 26, this operation has a life of mine of 14 years, excluding any gold production from Egoli. The Evander underground has been a real success story for Pan African in recent years. And we look forward to ramping up this operation further in the years ahead. Slide 18 to 20 provide more information on the Barberton underground operations. The flexibility afforded by the 4 to 5 operational platforms at Fairview's 11 block continues to assist us from a production perspective. Fairview's production increased by more than 5% in the year under review. We are focusing on both the high-grade MRC and Rossiter orebodies. They're open at depth with exploration ongoing. The feasibility work for the sub-vertical shaft from 42 Level is also in progress and planned to be completed in FY '23. This project will be aimed at increasing Fairview's hoisting capability from the deeper levels and also then gold production. As an interim measure to ensure that we can continue to operate optimally at Fairview, we have signed off on the development of a #4 decline and also additional cooling infrastructure in the next 2 years. It is planned that the decline shaft winder room and head kibble development will be completed within FY '23, which will then be followed by the installation of a winder in FY '24. The winder room will be positioned on 64 level with the raising of the decline planned to commence from 70 level also to be completed in FY '24. Slide 19 and then also Slide 20, contain information on our turnaround plans at Sheba and Consort. Quite simply put, these operations have to pull their weight. As evidenced by the detailed slides, we have the reserves and resources and are opening these up. We expect both Sheba and Consort to perform better in the second half of the new financial year. We have launched an initiative called It's Time at Sheba Consort and we look forward to reporting an improved production performance in the year ahead. Slide 21, the section dealing with all-in sustaining costs is a picture of the fully commissioned Evander Elikhulu solar plant. Slide #22, 87% of our portfolio produced at an all-in sustaining cost of below $1,150 per ounce. We expect the unit costs at Sheba and Consort to reduce in the second half of the new financial year, benefiting from the turnaround plan currently being implemented. Slide 23 demonstrates that our cost performance on core operations is very much in line, if not below the average for the global sector. We move on to Slide #25, group capital expenditure. We continue to invest in our assets. Now some of the Elikhulu capital for the Leslie Bracken pump station and the tailings dam extension has been moved from FY '22 into the new financial year. In FY '24, Elikhulu capital should come right down. At Evander, we are effectively building a new mine on 25 and 26 levels. We have 2 years of fairly high elevated capital to execute into this project. And we're going to have the benefit of the spend for more than 10 years. Included in Barberton's expansion capital is also the 4 Decline development. On Slide #26, environmental, social governance. Now the increased focus on ESG in recent years has required our group to explore opportunities of improving our operations and ensuring that we future-proof our business. This year, together with the integrated report, we released our second dedicated ESG report, reporting in terms of the Global Reporting Initiative, or GRI. We will also commence assurance work on our ESG reporting for the next year. At Pan African, actions speak louder than words. I mentioned earlier that this was a year of firsts for us on ESG, most notably, we are the first South African miner to commission a 10-megawatt solar plant at Elikhulu with this plant currently performing better than expected. We are commissioning our first water retreatment plant at Evander in the next months. In terms of biodiversity, we continue to protect our natural heritage in Barberton. In the last year alone, we incurred costs in excess of ZAR 20 million in securing and safeguarding our assets and sites together with the nature reserve areas at Barberton. We handed over 1 clinic and 2 schools at Barberton also. And then we are exceptionally proud of our Barberton blueberry operation delivered on time and on budget with the first phase alone, providing seasonal employment to up to 400 community members, mostly women for almost 5 months of every year. Please allow us to play a short clip on Barberton Blue this large-scale agriculture initiative. [Presentation]

I will now hand over to Deon, who will provide an overview of the financial results for the year.

Thank you, Cobus. On the summary of the financial results on Slide 30, it's unfortunately evident that the increase in the gold production of 1.9% was, to a large extent, offset by the decline in the average rand gold price of 1.3%. As virtually all our costs are rand denominated, the appreciation in the average rand-dollar exchange rate by 1.2% contributed little to subsidizing the all-in sustaining cost per ounce in dollar terms, which commendably increased by only 1.8%, and contributed to the all-in sustaining cost margin declining by only 1% to 30%. The increased ounce production to 206,000 ounces also assisted in reducing the all-in sustaining cost and all-in cost per ounce in an environment of cost increases, in many instances, well in excess of inflation. In contrast, the 2022 financial year closing rand-dollar exchange rate of ZAR 16.28 rand to the dollar is 14% weaker than it was a year earlier, adversely impacting the translated dollar values of assets and the dollar dividend, which I'll touch on later. Although EBITDA declined marginally by 4% relative to the prior financial year, attributable earnings were largely flat, but the lower number of shares following the buyback of 11.8 million shares in the 2022 financial year, contributed to a slight increase in earnings per share and if the impairment is added back, a 1.6% increase in headline earnings per share. Despite earnings being largely flat for the year, net cash flow from operations after the 2021 financial year dividend increased by 45% to $110 million, enabling the group to fund its capital expenditure and reduce net debt. Slide 31 demonstrates the extent to which the group is de-geared with the year-end debt-to-equity ratio at 0.04x. During the 2022 financial year, the group repaid debt of $29 million, reducing net senior debt to $13 million. In anticipation of the Mintails transaction concluding, the group has agreed a credit approved term sheet with RMB, a major South African financial institution to provide an underwritten loan of ZAR 1.3 billion or approximately $80 million as the cornerstone senior debt component for the funding of Mintails development should the transaction proceed. Our approach is to fund Mintails in a manner similar to the Elikhulu project, with its debt redemption profile sculptured to its cash flow profile, leaving the rest of the group's cash flows unencumbered for other capital expenditure and returning cash to shareholders. Slide 32 illustrates the group's historical dividend yields and the yield of the proposed dividend of ZAR 400 million or approximately $23.1 million for the 2022 financial year. This equates to ZAR 0.18 per share or approximately USD 0.0104 per share or approximately 0.9p per share, which is a 4.6% yield in rand terms based on a closing share price of ZAR 3.94 relative to the share price of ZAR 3.41 a year earlier, which explains the decline in this year's dividend yield relative to the prior year's yield of 5.3%. The proposed rand dividend of ZAR 0.18 per share is identical to that of the prior financial year, but lower in absolute dollar terms due to the lower number of shares in issue following the share buyback I referred to earlier and the 14% depreciation in the year-end rand dollar exchange rate. However, if the proceeds of the share buyback of ZAR 50 million or $3.2 million is added to the proposed dividend, the group has returned ZAR 450 million or $26.3 million to shareholders in the 2022 financial year, which is unprecedented in absolute terms. You will also note that we've amended the dividend policy to give the Board a greater degree of flexibility by providing for a payout range of 30% to 50% of discretionary cash flow which is calculated as net operating income reduced by capital expenditure, not funded from external debt, mandatory debt repayments and once-off capital outflows. With the exception of the mandatory debt redemptions, which are disclosed in the notes to the annual financial statements, all other figures are evident from the consolidated statement of cash flows. Successful capital allocation is key to the success of our business, and Slide 33 illustrates the return on the group's shareholder funds for the 2022 financial year. The decline in the return on equity to 26% relative to the 32% of the 2021 financial year is to be expected given that we spent $83 million in this financial year relative to the $44 million in the prior financial year, allotted on expansionary capital, most of which, such as Evander 24 to 26 level development and the Leslie Bracken pump station will only commence generating returns in the 2023 financial year and thereafter. Our capital allocation objectives are still firstly, the sustainability of our operations to enable them to continue creating value for our shareholders and then the pursuit of generic and acquisitive growth that meets our stringent investment criteria. In this regard, we are confident that both Evander's 24 to 26 level development and the envisaged Mintails acquisition, should it proceed, will generate the requisite returns once in full production to justify the respective capital investments. Thank you.

Thank you, Deon. In addition to our current operating assets, Pan African also has exciting near-term growth projects, both organic and then also in expanding our tailings retreatment portfolio at Mintails and Blyvoor. Slides 35 to 37 set out more detail on Evander's 25 and 26 level effectively a new underground mine. In designing this project, we've had the ability to address most of the issues making SA deep-level underground mining expensive. With this development, we have now secured the future of the operation for at least the next 14 years, excluding any Egoli development. The project will be funded by internal cash flows assuming a reasonable gold price environment. We've put together some short images on the Evander underground to provide you with more context. [Presentation]

Thank you. On Slide 38. During the reporting period, we made good progress towards the development of Royal Sheba also. Just to recap again, Royal Sheba is a world-class Greenstone belt deposit with a strike length confirmed of 850 meters and mineralization occurring over what's averaging 10 meters. It will be mined using mechanized massive mining methods. It has always appeared a bit lost in the Barberton portfolio because of the higher grade of our other orebodies. The measured and indicated mineral resources alone account for more than 800,000 ounces of gold with significant upside on the open down-dip extent. Modeling only BTRP capacity, Royal Sheba demonstrated an 18-year life with steady-state production of circa 25,000 ounces a year. We also have additional processing capacity at our Sheba and Consort metallurgical facilities to increase this production number. We have now successfully completed our bulk sampling project at Royal Sheba, with the results exceeding our expectations. The next step is to complete a full project plan including how to deliver this ore to the BTRP. We look forward on reporting our detailed plans in the year ahead. On Slide 41, Mintails. We need to make a final call on whether to proceed with acquiring the Mintails assets by the end of September. The recent horrific rape incident at Mintails, again highlighted the disastrous impact of illegal mining in this area. Now our studies demonstrate a compelling project, a further long life and low-cost tailings business for Pan African and all of our stakeholders. From this low-risk surface business, we could add approximately 50,000 ounces of production per year for anywhere between 13 and 20 years or more, if one includes the Soweto resources. Slide 42, the way forward on Mintails. If we do proceed with the transaction, we can start construction early next year and be fully commissioned by the end of 2024. Finally, on Mintails, Slide 43, I will demonstrate that if we are allowed to process these legacy liabilities, we will remedy a material part of the current environmental and water contamination headache for the area also. Finally, in terms of Blyvoor, our study work is also ongoing. Slide 45, our exploration venture in the Sudan. We believe Sudan is incredibly prospective for gold and we have an early mover advantage compared to most other African jurisdictions, who are yet to really pay up for resources and valuations often are not reflective of real country risk. The recent large Perseus Mining Orca transaction demonstrates that we are not the only ones interested in this jurisdiction. The exploration blocks we have secured are large and importantly, very close to the logistics hub of Port Sudan. To date, political instability in the country has not impacted our activities. Our assay laboratory has arrived on site and is in the process of being commissioned. So hopefully, we'll be able to report some exploration results in the next 6 months. Finally, on the Sudan. On Slide 46, some of the work that we've completed using remote sensing has delivered some very encouraging results. If we then wrap up on Slide 48, Pan African is well positioned for continued delivery. Key focus areas for us in the year ahead include the following: we will continue our proactive journey to Zero Harm through a focus on health and safety initiatives. We will focus on maintaining our production run rate and work hard to turn around the smaller underground operations at Barberton. We need to successfully execute into the capital projects that will sustain and increase future gold production. We will mitigate the inflationary pressures experienced through optimization and other initiatives. We hope to progress the Mintails transaction and start project execution and construction. We will continue our focus on ESG through programs to support sustainable host communities, the increased use of renewable energy and recycling initiatives. And we'll maintain our sustainable shareholder return centered approach to capital allocation, creating value for all stakeholders. Thank you very much for your time this morning. As always, we look forward to continue mining for the future in the year ahead. We will now be available to address any questions.

Thank you. Again, I think let's start with any questions from the conference call.

Thank you. At this stage, we have no questions from the line.

Excellent. So should we go to the other online questions?

Thank you. We have a few questions online. Firstly, we have a question from Mark Bentley from Share Society. The question is in FY '23, are there any measures you can take to mitigate the increase in Elikhulu AISC that occurred in FY '22? .

Yes, Mark. So the principal reason for the increase in the AISC or all-in sustaining cost was drop in recoveries. As we said, we're moving to Leslie Bracken, we actually expect first re-mining to happen at Leslie Bracken this week. So if we can produce more ounces then we obviously saw higher recoveries one can expect the cost to come down. As with all global miners, we've also been impacted by cost increases and excessive inflation for the likes of cyanide, clearly electricity. So we continue to work on reducing that all-in sustaining cost, but Elikhulu is an incredibly competitive high-margin business when you compare it to most international miners. We're producing -- even producing at $1,000 it's still very compelling. Also what should assist us in the year ahead is the exchange rate. So to the degree the rand exchange rate remains weak, then one can expect a reduction in all-in sustaining cost in dollar terms also.

A couple of more questions from Mark. What differential in AISC do you anticipate a BTRP when it transitions from treating tailings to Royal Sheba ore?

So yes, Mark, that work is ongoing. We can expect increased production and hopefully that increased production would offset increases in costs. BTRP has been an incredible success. We've managed to extend the life on a number of occasions. And we're excited about Royal Sheba, we're doing the work now to make sure that sort of we come up with an optimal manner in which to get that project done.

Again, for Mark, regarding community and workforce relations and security at Barberton. How have these developed, the same, improved or worsened?

Well, I think generally, our feeling is that the -- our relationships have probably over the recent year has improved. I think there's a recognition that Barberton being one of the largest economic group in that area, the continued prosperity of Barberton is critical to the well-being of the people in that area. And the initiatives like our Blueberry project, where we employ really a lot of local people, mostly women, I think that's also brought us a lot of goodwill. So as we said, I mean, we continue to make a meaningful positive difference where we operate, and we need to be probably better at making our actions known. But generally, we think things are -- have improved from a securities perspective, One has to keep a close handle, but we're comfortable that certainly the situation is not deteriorating. We've had good cooperation with law enforcement also in the last year in terms of assisting us. So that's encouraging.

Great. And the last one for you from Mark is do you anticipate any hiatus between completion of Shaft 8 pillar mining and the start of Level 24 mining? Or will there be an immediate transition?

Well, we certainly are working on an immediate transition. So we'll start mining the 8 line in the next week or so. The cooling plant is commissioned. That's very good news for us on 24 level. And then we sort of need to, in the next year, develop all the other raises to make sure we can continue our production run rate from the EGM underground.

Thank you, Cobus. From Arnold Van Graan at Nedbank. How much will you spend on exploration in Sudan over the next couple of years? Which other jurisdictions are you looking at from an exploration perspective, if any?

So I think we probably have our hands full with Sudan now. It's -- as we said, we're very excited about what we're seeing on the ground. The exploration spend in the next year will be only about $2 million. So we get a really good bang for our buck. The areas where we have concessions. There's a lot of artisanal mining happening, a lot of toll processing, banks and banks of mills treating our artisanal materials. So -- there's definitely a lot of gold, and we have one of the largest assay laboratories, if not the largest in the country operating soon. So hopefully, we can report some very good results when we next speak.

Okay. And the last part of the question, are there any other jurisdictions you're looking at?

Yes. So I said, I mean, I think we have -- updates are pretty full at this point.

Okay. And a few questions for Deon. First one from Mark Bentley. Regarding Note 5, what was normal tax -- or why was normal tax significantly lower in FY '22 than in FY '21?

Thank you, Mark. It pretty much has to do with the entities that generate the taxable income and the capital shield they have. So Barberton in the last '23 -- '22 financial year, generated less taxable income than Evander. And Evander's taxable income was shielded to a large extent by the capital expenditure and capital allowances at that mine. So you'll see the actual tax paid is less, but the deferred tax charge is actually quite a bit higher. So the composite tax rate, again, approximately 29%, 30%.

Thanks, Deon. From Gavin King, will any more buybacks state the highest price that the company will pay, for example, only lower than 16.5p share buybacks always split opinion because buybacks, financially reward share sellers and dividends financially reward shareholders.

Yes, I think it's a fair observation. The share buybacks a lot without controversy. And the way we look at it is that any share buyback program needs to compete with all the other capital priorities we have within the group. So I think that I don't want to exclude it, but I think it's unlikely given the exciting projects that we do have at the moment, 24, 26 Level at Evander, the Mintails project and that it probably would make more sense to allocate capital to those projects given the expected returns.

Thanks, Deon. Lastly, on the share buybacks from Arnold Van Graan at Nedbank. Are you still convinced that share buybacks are the best way to return cash to shareholders?

I think -- I don't think it's the best. I think it's one of the ways. And when it's opportune to do so, then it's a viable method of returning cash to shareholders. Clearly, we need to weigh it up with the dividend that we want to continue paying to our shareholders as well as all the capital -- other capital applications that we have within the group. So I don't want to exclude it going forward, but when it's opportune, one would need to consider it again.

Thank you, Deon. A question from [ Sandilia Matakuna from Tomball ] Wealth, a few questions, actually. We'll go through them. Why investing in Sudan? And secondly, where do you see Pan African production profile in 5 years?

So thanks, Sandilia. Why Sudan? I mean we spent quite a bit of time looking at assets all over Africa. It's difficult to generate the requisite returns just because when you still have to pay up for a reserve or resource and then pay up the development capital, generally in financial returns unless you're hoping for a much higher commodity price it's difficult to achieve. So we continue to look at assets. We spent a lot of time actually assessing spend in-country. We think it was opening up after the revolution. Clearly, it's had a couple of setbacks subsequently, but things on the ground are calm, and we're very excited about the geology. So effectively, I mean, it's -- certainly, it's risky spending money in a jurisdiction like Sudan. But a disproportionate upside that we potentially can -- we can achieve if we find a large deposit open pitable or similar, I think that would -- so on a risk basis, it makes a lot of sense. So we're excited about what we're seeing in Sudan. And then in terms of our production profile, we sort of guided that we're able to maintain our current run rate in the year ahead. And clearly, then it's going to depend on our growth projects. So excited about what's happening with Evander, it's going to be a new mine, 25, 26 Levels, very different to most of the other wet underground mines which have been going for many years. So that will give us exciting growth. And then hopefully, we can work and get Mintails going. It's going to be, as we said, 50,000 ounces a year. If we include Soweto resources, we can be going for 20 years there. So we think with the organic growth and hopefully Mintails, you can expect our production profile to increase in the next years.

And BTRP has 2 years life of mine. Any plans to enhance the surface operation life of mine?

Yes. So I mean there is potential to extend if we can figure out a way of pumping some of the Sheba tailings to BTRP and that coincides with our work we're doing on Royal Sheba. So there are some bits and pieces of material lying around, so we can clean up some of the rehabilitation issues in that area, plus then keep BTRP going. But as we flagged for some time, BTRP is a great asset. It was the first tailings operation we did in gold, $30 million paid itself back in 18 months. But at some point, those resources run out, and that's why we're looking towards Royal Sheba.

Also from Sandilia, where do you see net debt position in the next 12 months?

Well, I guess, Sandilia, it really depends on the Mintails decision and the rate at which we develop Mintails. If the transaction is concluded at the end of the month, we would like to think that we would commence in the first quarter of next year with the construction. And as we mentioned in the results, we have negotiated a ZAR 1.3 billion debt facility with RMB. So we anticipate that the existing mines will continue to de-gear the existing indebtedness and that we would then re-gear with the Mintails indebtedness. Depending on the rate of drawdown, which we don't have clarity on at this point in time, the net debt will increase with the Mintails indebtedness. As I mentioned in the presentation, we're anticipating to fund Mintails in the same manner we did in the Elikhulu project, where the debt redemption profile is ring-fenced to the mine's cash generation and in so doing it won't impinge on the rest of the group's cash flows and our ability to continue paying dividends and fund our capital programs.

Lastly, from Sandilia. Can you also provide any insight regarding wage agreements across the operations? Do you see any near-term risk of a strike in any of your operations?

Well, we are fortunate in that we have a wage agreement with our employees. It still extends for 2 years. So we don't foresee any issues there. And we're working with all of the other contractors to keep an even keel and keep things stable. So we certainly -- a strike serves no purpose and we need to manage. And hopefully, we don't have any of that in the next year.

A question from Edward May, a private shareholder. Please could you elaborate on the likely capital still needed beyond the new RMB mentioned debt facility to finance the prospective Mintails project. How are you thinking about the relative attractiveness of the alternative means of financing?

We're busy with the final engineering costing. I think our priority was to secure the ZAR 1.3 billion of senior indebtedness, approximately $80 million. That's a cornerstone to the funding package. We have received approaches from a number of institutions and funders for the balance of the funding. And we'll obviously assess those going forward for the individual merits. So we'd like to think that towards the end of the year that interims will be able to provide more visibility on the funding package, but there's no shortage of funding for a project of that nature.

Thanks, Deon. A few questions from Tutuko [indiscernible] from SBG Securities. And Tutuko says firstly, congratulations on achieving another record production. The questions Tutuko asks are AISC of USD 1,284 an ounce was about the target of USD 1,200 despite an average exchange rate lower than the assumed 15.20. Is this solely attributable to a lower-than-expected reduction from Barberton? What were your key cost drivers this year? Are there any costs that could pose a risk to achieving the target AISC of $1,250 an ounce? I think we can stop there.

Yes. So I think we guided initially sort of approximately $1,200, but that was at a 15.50 exchange rate. So the 15.22 then obviously impacted costs as did the higher cost operations at Barberton as did escalations and the likes of cyanide, et cetera, et cetera, that all of the industry is experiencing, clearly, electricity is another issue. So yes, we need to work hard and the best way of reducing your unit cost is by producing more ounces. And that's why we've detailed the plans that we have Sheba Consort. The exchange rate now has weakened. So we're sitting at north of 17 that should also assist us from a U.S. dollar per ounce perspective in terms of all-in sustaining cost. But then also, in fairness, we were guiding 200,000 ounces. So almost 90% of our production came in at an all-in sustaining cost of $1,100 -- below $1,150, which I think is really good. So if you exclude the most expensive ounces we probably got very close to $1,200 per ounce for 200,000 ounces of production.

The last one from Tutuko is, were operations significantly affected by Eskom this financial year. Could you possibly give that in ounces lost? And what drove the decision to fund your solar projects on balance sheet instead of off-balance sheet options available?

Yes. So the solar plant -- and we're very proud of that development. It really is a great success. As I said -- as we said in the presentation, ZAR 4 million saved in August alone in terms of electricity. And as you know, the winter months are not the best from a radiation perspective. So our view is if one has the funding ability, it makes sense to fund it on balance sheet. Why give away the equity upside -- or the upside to somebody else? If we are to be internationally competitive, we have to be competitive from an energy perspective and embracing solar with all the other ESG benefits makes all the sense in the world. So to the extent we can finance on balance sheet, you don't want to give away that equity to other people.

Question from Bruce Williamson of Integral Asset Management. Can you please give us an update on the COO position?

Yes. So Bruce, we -- Bert who was our COO, he's -- as many people know, he was tragically injured last year in a crime incident. He's fortunately doing a lot better. We are in close contact with him. He won't be taking up that position again. But we have a lot of technical support. We have a mining engineer also that's joined us, Edmond. So very happy with the technical team. And as I said, I mean, we wish Bert all the best. I know he's listening or watching us today. And yes, it's a miracle, and we look forward to continue monitoring his progress.

Question from Tim Huff of Peel Hunt. On Royal Sheba, over the next year, will you be running your base case Royal Sheba production scenario analysis in parallel with the expanded scenario? Or will you run the base case first and evaluate the expanded scenario only after the next year?

Well, I think if we have excess capacity at our Sheba and Consort plant, we need to look to fill that capacity. It's about how many tonnes we can take out of all Sheba. We need to do bulk mining, mechanized and then ramp it up over time. So it will be a ramp-up probably over 2, 3 years in terms of Royal Sheba. It's not the highest grade ore body. We're spoiled at Barberton. But then it's a massive ore body. It's 20 years life plus. So yes, we look forward to looking to see how we can make it work.

Question from Bobby Morse of Buchanan. I think we've answered the exploration budget for Sudan for next year. But Bobby says, great results, well done. Is Sudan one of your top exploration budget for SA? Or are you reducing SA exploration to fund Sudan?

Yes. So Bobby, we're not doing that much exploration -- thank you firstly, we're not doing that much exploration in South Africa. It's more development -- we're spending money on developing our known ore bodies. So we know we have a massive resource and reserve base, it's bringing those answers to account. So it's more sort of spending CapEx on development than it is actual exploration. There's no need for us to find any new ore bodies in South Africa. So in terms of greenfields exploration, the focus the most definitely would be Sudan.

And last 2 questions on our list is from Rene Hochreiter, Noah Securities. Noah says, nice results, well done. If the gold price averages $1,700 for FY '23. Can you increase your overall recovered grade that is? Do you have this luxury? And will you suspend some of the projects you mentioned? And if so, which are likely to be suspended first?

Well, the big focus Rene is just reducing the cost at Sheba Consort, it can't continue like this. But we have the resources. We have the plans. It's about executing and seeing the results. The rest of our portfolio at $1,700, we're looking good, Elikhulu it's $1,000 all-in sustaining Fairview, $1,300, $1,400, not bad. The EGM underground, $1,100, $1,200. So there's no need for us to do any at this gold price. And clearly, you wanted me to take account of what the rand gold price is doing. And currently, it's in excess of our budget.

And lastly, from Noah, a follow-up on that one. What is the main problem at Consort and Sheba? Is it the cost, the access or the grade?

Well, it's -- these are old mines, Sheba is a 130, 140 years old. At some point it gets more difficult. So as with any underground operation, you have a large chunk, probably 70%, 80% of your costs that are fixed. You have to mine enough gold to cover the overhead and make a profit, and that's what we're looking to do. We've identified the resources and reserves and now it's sort of developing towards those and bringing them to account.

There are no more questions from the online audience. And -- that's it from us. Thank you.

Thank you to everybody for joining us today. If there's anything else, you know where to find us. Have a good day.