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

Good morning to all of you, and welcome to our 2025 interim results presentation. Thank you very much for taking time out of your schedules to join us today. We will keep the presentation fairly brief, with an opportunity for questions afterwards. Joining me in presenting today will be Marileen Kok, our Financial Director, who took over the reins from Deon in October last year. You are welcome to refer to our SENS and RNS announcements 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 disclaimers and information on forward-looking statements on Slides 2 and 3. So, as a gold mining CEO, I'm often asked about my view on the gold price. As we present today, the U.S. dollar gold price is again hitting all-time highs, with a very bullish view in the market on the metal short and medium-term prospects. As producers, our job is not to forecast the gold price, but to focus on providing our investors with the best possible sustainable returns from our business, and maximize the margin achieved from these gold prices. Reflecting on the last 6 months, I believe Pan African has made good progress in our ongoing strategy to position ourselves as a safe and sustainable, high-margin and long-life gold producer. Some of the highlights include bringing MTR into production, ahead of schedule and below budget. This is an asset with a life of more than 20 years, producing some 50,000 ounces per annum at a world-class, all-in sustaining cost, with further growth potential in the near-term. We also concluded the acquisition of TCMG in Australia. This project is again tracking on budget and ahead of schedule, similar to MTR. It will be producing gold much earlier than previously communicated with a full year of production in our 2026 financial year. I am pleased that, our Consort Mine at Barberton has turned a corner, producing more gold and contributing cash flows in the last months. The reporting period unfortunately also has not been without challenges. I would like to extend my condolences to the family and friends of our colleague who passed away following a mud rush accident at Evander shaving shaft on December 30. We will continue to work towards our goal of zero harm. The delay in commissioning the sub-vertical shaft for hoisting at Evander cost us dearly in terms of gold production at that operation, and also inflated unit costs, both for the mine and for the group. This shaft is now commissioned with production ramp-up in progress, and we look forward to a much-improved performance going forward. We also decided to restructure our Sheba Mine at Barberton, and further reduce related overheads to ensure the sustainability of this operation into the future. This restructuring will be complete by financial year-end. In such a high gold price environment, the synthetic forward sale that we entered into 2-part fund MTR constructions wide heavily on the sets of results. I'm happy that at the end of February, the group will be materially unhedged and able to provide our investors with full exposure to the excellent gold price. We've also impaired our Sudan's exploration venture with our focus shifting to Australia, and to further expansions of our surface business, where we have ample scope to grow further. I believe Pan African is now incredibly well positioned to capitalize from current gold prices and our increasing production profile. And I look forward to sharing some thoughts and further detail on many of our initiatives and plans in the following slides. On Slide 4, an overview of the presentation. We will start with Pan African's health and safety performance, which is obviously critical in our business and then provide an overview of the group and our operating environment, some key features from the last 6 months, including our new operations at MTR and TCMG, with detail on asset performance as well as our cost and capital outlook. We will then spend a couple of minutes on ESG, before allowing Marileen the opportunity to highlight elements of the group's financial performance for the half year. The presentation will then conclude by outlining focus areas for the year ahead. If we then proceed to Slide #6, our safety performance and our journey to zero harm. We continue to focus on safety initiatives and interventions, and on maintaining an industry leading record. We can also celebrate a number of safety milestones achieved during the period, whilst reflecting on the recent very sad setback Evander. In terms of safety during construct, you will have to look long and hard to find a more successful project than MTR with only one lost time injury during all the construction phase, 1,600 employees on site during construct and 1.8 million man hours worked. Slide #8, a high level representation of our unique portfolio of surface remining and underground assets. The addition of MTR and now TCMG means that we now have 3 large mining complexes in South Africa and one in Australia, all contributing towards a material increase in gold production in the year ahead. Surface operations reduce unit costs and turn legacy liabilities into profits, whilst the underground provides long life-of-mines, solid returns on investment as a result of a large sunk capital base and also attractive optionality, which we are bringing to account in a circumspect and considered manner, always thinking about the best way to allocate our capital. Slide 9. Production was slightly down from the last 6 months for the reasons we will discuss under the performance by asset. Importantly, the coming year will see us moving towards an even more balanced portfolio of low-cost and stable surface remining and high-grade long-life underground assets, now with geographical diversification into Australia. This asset mix should also reduce our group all-in sustaining cost profile, with Elikhulu, BTRP, MTR and TCMG producing at all-in sustaining costs that are very competitive globally. If there's one takeaway from the slide, it is that we are growing profitable production very materially in the year ahead. We expect to be well north of 200,000 ounces of annual production in 2025 with both MTR and TCMG coming online earlier than expected. Pan African might not be the biggest gold producer, but that is also opportunity. None of the majors can grow their production by almost 50% in such a short space of time. This is what we are doing in the year ahead. Slide 10, a bit more detail on our current asset mix. I think what is very helpful is that our assets now have extended lives with the shortest life being the BTRP at 7 years, which is still quite a while. If we compare ourselves with the rest of the global sector, many producers are running out of life on the assets, or have to spend significant capital for future production, not the case for Pan African. We do not have to go and acquire more assets to maintain and grow production, and we have pretty much spent all of our significant growth capital. Slide #12, our operating environment. We continuously seek ways of making our business less susceptible to adverse external impacts in South Africa. We have seen an extended period now without any load shedding, and we are rapidly expanding our renewable energy footprint. Our mining rights are long dated and we have multiyear wage agreements in place. Pan African's track record demonstrates we can operate and grow in South Africa, and do so very successfully. Our experienced Australian colleagues will ensure the same success in that jurisdiction. If we then proceed to key production cost and financial features from the half year past on Slide 14. We produced just under 85,000 ounces of gold. Production was down due to delays with the commissioning of the sub-vertical hoisting shaft at Evander and Eskom transformer failures at Barberton. Early production from MTR, to some extent, compensated for this. However, underground costs are mostly fixed. So, lower production meant a large increase in unit all-in sustaining cost for the half. This will normalize in the second half of the financial year. We expect an H2 cost performance of between $1,450 to $1,500 per ounce, which is very much in line with the industry. For the next financial year, FY '26, with full years of production from MTR and TCMG and increased production from Evander 8 shaft, we can expect unit costs to decrease further in real terms. Net debt increased as a result of all of the gross capital invested; however, liquidity remains healthy. Marileen will deal further with this, but the opportunity cost of the synthetic gold forward sale of some USD 80 million weighed heavily. The last delivery on this instrument will be at the end of this month, and it cannot come soon enough. And despite all of the growth and capital reinvestment, we were able to maintain our sector-leading dividends to shareholders. After year-end, our Board will again review our dividend policy. Given the gold price and anticipated de-gearing, we will also consider an interim dividend in the next year. Slide 15, should be an interesting one for our investors, demonstrating how nicely we've expanded margins in recent years. And this excludes any meaningful contribution from MTR and TCMG. If we then move on to more detail on the performance per operation, starting with Elikhulu on Slide 17. This really is a flagship asset for the group, just under 9 years of production remaining, producing at just over $1,100 per ounce. Gold production remained stable in the half. We look forward to another year of more than 50,000 ounces of production and clearly excellent cash flow generation in the current gold price environment. The asset generated $26 million of EBITDA for half year. Phases 3 and 4 of the Kinross Tailings Facility, the final expansion were delivered on budget and on schedule. We carried all of the learnings on building and operating Elikhulu over to MTR to ensure construction and commissioning went as smoothly and safely as possible. Slide 18, the BTRP, another sterling performance from our first gold tailings retreatment plant commissioned in 2013 and the lowest cost producer in the group. As we flagged during our previous results, very exciting news for the BTRP is that we have now managed to extend the life of this operation from surface remining only to 7 years. The capital requirements for this new initiative is also relatively modest, some $4 million for a new pump station and then a new tailing storage facility for all of the Barberton complex. BTRP will therefore continue to form an integral part of Pan African's tailings retreatment story for many more years. MTR, on Slide 19. We commissioned a plant in October last year, ahead of schedule, and with savings of approximately $8 million to upfront capital, we have built all of the plant and infrastructure in only 14 months, a testament to Pan African's ability to secure conceptualize fund and then execute world-class mining projects. In December, we already exceeded the plant's nameplate capacity by 11% with a throughput of almost 900,000 tonnes. In the current gold price environment, payback on this $130 million initial capital investment should be approximately 2 years with a project life of more than [ indiscernible ] the life is 13 years, with total gold recovered of more than 600,000 ounces. On Slide 20, the Soweto cluster consists of more than 130 million tonnes of tailings, currently containing a manual reserve of more than 500,000 ounces of recoverable gold. This mineral reserve will extend MTR's life-of-mine from 13 years to 21 years. Total gold recovered will increase 1.1 million ounces. It is also important to note that, we believe we have enough gold reserves at the Soweto cluster to sustain a stand-alone operation, treating 1 million tonnes per month over an approximate 10-year life-of-mine. The feasibility on this option should be concluded by September this year. Given our presence in the area, there's definitely also scope for the consolidation of tailings facilities we do not already own. On Slide 21, we cannot say enough about the socioeconomic and environmental benefits of this project. Concurrent rehabilitation is in progress. We are uplifting local communities, providing much needed economic and employment opportunities, and working with law enforcement to eradicate illegal mining. Slide 22. I think it is fair to say that, Pan African has a record second to none in terms of the construction and operation of tailings retreatment projects. These long-life assets now form the cornerstone of our business, and I believe we have further room to grow in this space, which should be very attractive for our investors. Slide 23. I think the acquisition of TCMG caught most of our shareholders by surprise, given the jurisdiction. But by the time we concluded the acquisition, we had spent more than a year assessing the assets and working with the local management team. The investment in TCMG ticked all of Pan African's boxes in terms of deploying capital for growth with the following brief points worth emphasizing, low project construction and execution risk in a Tier 1 jurisdiction, quick payback on our investment, we secured a dominant position in the gold field with the largest ever processing facility to be operated there, very exciting exploration potential with an experienced management team taking ownership of project delivery. Talking about our management team. I'm now very pleased to introduce Peter Main, the Managing Director of our Australian business, to talk to the next slides, which provides some more context to the assets and the excellent progress being made with plant commissioning. Peter, over to you.

Hi. My name is Peter Main, Managing Director of Pan African's Tennant Mining Operations. Before I provide an update on the Tennant Creek assets, I'd like to share a brief background on myself. I'm a mining and finance professional with over 35 years of experience. Over the last 13 years, I've held various leadership roles in the gold mining industry, more recently as Managing Director of TCMG, leading the company from conception to execution. Prior to my executive leadership roles, I spent 20 years in the mining finance, including 11 years managing the Royal Bank of Canada's Asian-Australian equity sales and trading business. Now, let's turn to Tennant Creek. In advance of going through the slides, I'd like to give you a glimpse into Tennant Creek's remarkable history. Tennant Creek was one of the last Australian major gold fields to be discovered. Even today, it holds the title of the nation's highest grade gold field, with deposits exceeding 50 grams per tonne. This legacy was primarily driven by the 3 iconic mines, which Pan African now owns 100%. Warrego produced 1.4 million ounces of gold and 128,000 tonnes of copper over 17 years. Nobles yielded 1.1 million ounces of gold at an average grade of 17 grams per tonne. Juno produced an extraordinary 815,000 ounces at an astounding average of 56 grams per tonne. Despite its remoteness, Tennant Creek benefits from an excellent infrastructure, mainly due to history. I will now walk through the key points of the Tennant operations. Slide 24, transaction highlights. Total acquisition cost, USD 54.2 million, with expected payback less than 3 years. Acquisition cost for PAR was less than 6% of the current market capitalization, while at the same time, the project has a material impact on the group's production, increasing it by 20% to well over 250,000 ounces a year. The Nobles project largely de-risked with construction now at plus 80% complete and plant commissioning and first gold expected by Q4 FY 2025. Forecast production over the first 4 years budgeted to average 50,000 ounces a year, mainly coming from Tennant's 100%-owned assets, while life-of-mine average production per annum is expected to be around 65,000 ounces a year. The project NPV is USD 130 million, and has a real ungeared internal rate of return of 144%, including current mineral reserves only, with all-in sustaining costs USD 1,300 an ounce, life-of-mine free cash flow of USD 420 million. All financials are based on the gold price of USD 2,600 an ounce. Slide 24, strategic rationale. Understanding Tennant Creek's history and the existing untapped potential of the field helps understand Pan African's acquisition decision, as the field complements, Pan African's portfolio, providing long-life, near-term and low-risk ounces with significant returns for shareholders. Key drivers behind the strategic rationale include Tier 1 mining jurisdiction, attractive production growth at Noble's project, minimum initial 8-year life-of-mine inclusive of 5 years in the current mineral reserves, access to attractive asset portfolio in one of Australia's highest grade mineral fields, under-explored region with less than 8% of all drilling below 150 meters depth, potential to expand life-of-mine beyond 15 years, dominant player in the region, fast tracking the project into production with a landholding in excess of 1,700 square kilometers, utilizes a hub-and-spoke growth strategy to process multiple deposits, experienced in-country management team. Slide 25, key projects map. Prior to outlining the delivery drivers of Stage 1, Nobles Project, I thought it important to share Tennant Mining's consolidation strategy, whilst at the same time, developing a largely de-risked business model. Tennant Mining's consolidation strategy began in late 2020, and includes 100% acquisition of the 3 largest historical producing assets, which we spoke about earlier, Warrego, Juno and Nobles, an earning joint venture acquiring 75% for USD 6.5 million spend over 5 years, USD 1.24 million remaining and should be completed by June 2025. Acquisition of a transportable Como Engineers processing plant from Cloncurry in Queensland, originally constructed to operate at 800,000 tonnes per annum in 2019. TCMG paid less than USD 700,000 for this asset, which is remarkable given the age and the quality of the asset. Purchase of an 85-room hotel in Tennant Creek, ensuring readily available workforce accommodation at a fraction of the cost and time line of building a new camp. Tennant Mining's development strategy follows a 2-staged approach. To-date, we have invested USD 55 million since 2020, underpinning Stage 1 Nobles Gold Project and the commencement of work at Stage 2 from a feasibility study perspective, which is the Warrego Copper Gold project. Slide 26, Stage 1 Nobles Project, current status focusing on delivery. Construction, ahead of schedule and within budget. Commissioning and first gold pour planned for Q4 FY 2025. FY 2025 production range between 7,000 and 10,000 ounces. First full year production FY 2026 expected to be between 48,000 and 60,000 ounces at an all-in sustaining cost of USD 1,250 an ounce. Debt strategy, USD 32 million construction debt capacity to repay well within 12 months. Local employment impact, over 60 workers during construction with 30% from the northern territory, mainly the Barkly region. Crown Pillar Stockpile and its open pits drive a minimum of the first 2 years production. Slide 27, Stage 2 Warrego Gold, Copper Project. Targeting 100,000 ounces a year of gold and 10,000 to 15,000 tonnes of copper. Project extension targeting a minimum of 10 years plus. Adding a copper circuit targeting plus 1 million tonnes per annum throughput, producing copper concentrate of around 20% copper. Complete definitive feasibility study by mid-2026 at a cost of USD 2 million, indicating build capital of circa USD 40 million to USD 45 million. Targeting funding from cash flow and debt finance. Opportunity to grow our regional gold and copper deposits. Finally, to sum up, the acquisition of TCMG by Pan African has been a game changer for all stakeholders. Shared values, efficient management and a strong financial foundation have enabled seamless integration, fast tracking of exploration, and unlocking of growth opportunities. With Tennant Mining's vision and Pan African's backing, we are poised to create long-term value for our shareholders and the region. Thank you.

Thank you very much, Peter. Very exciting times for Pan African in Australia. Slide 29, the Evander underground, a disappointing performance in the half. The delay in commissioning of a sub-vertical shaft for hoisting impacted us severely. Thankfully, this project is now completed. The new infrastructure pretty much doubles our hoisting capacity. No more cumbersome conveyors. These are to be decommissioned in the next months. Lower costs with a higher mine call factor. We are now ramping up, so expect a much better performance going forward. 50,000 ounces or more for the next financial year, with a long life-of-mine. All-in sustaining unit costs will obviously reduce commensurately with a ramp up. It is tempting to gloss over the delay in commissioning, but to be honest, this has been the most challenging, large capital project that Pan African has undertaken. We were rushed due to the accelerated pellets extraction, and made some choices and decisions that we will not repeat, a number of learnings from this project. If we proceed to Slide 30, dealing with Fairview. Our flagship of underground operation at the Barberton mines complex. We would have performed much better if it wasn't for multiple Eskom transformer failures in November, which we estimate cost us at least 2,500 ounces of production. This is incredibly frustrating as third-party infrastructure is largely out of our control. We have, however, consulted extensively with Eskom, our power utility, and have now established additional engagement mechanisms and a program to ensure that their system has adequate redundancies in future to cater for equipment failures. At Fairview, we continue to source the bulk of our ore from the MRC and Rossiter orebodies, with development to the 262 platform on track. Rehabilitation of existing ramp infrastructure from 38 level downwards is progressing according to schedule also. This decline will be used to transport personnel and material to the working phases on the 3-shaft section, and will further alleviate logistical pressures on 3 shaft, which will then mainly be used for rock hoisting and improving logistics. The small underground operations at Barberton on Slide 31. In terms of Consort, the rehabilitation of the PC shaft has been completed, and now enables the contractor to recommence mining on the high grade 41 to 45 level mining sections. Additional development is ongoing on the MMR and the PC shaft to access mineral reserve blocks, which will give us access to more ground to mine. I am pleased that all of the work on Consort is paying off. In both December and January, we produce 25 kilograms of gold, which means this operation is cash flow positive and sustainable. As far as our Sheba mine is concerned, the additional benefits from continuous operations have unfortunately reduced in the period under review. We've now taken another hard look at the operation, and our Board has decided to engage with all stakeholders on a possible restructure. Section 189 notice has been issued under South African labor law with a number of attractive orebodies achiever; however, productivity at current levels is unacceptable. Let me reassure you that the intent is not to shut Sheba, but to rather ensure sustainability into the future. This will include right sizing, additional capital development, and a project to combine some of the infrastructure of Sheba and Fairview. As I've said, we intend to have the restructuring complete by financial year-end. On Slide 33, a section dealing with all-in sustaining costs. Almost 85% of our portfolio produced at an all-in sustaining cost of $1,466 per ounce, impacted by the lower underground production, some once off items and a stronger rand exchange rate. Slide 34 illustrates that our cost performance continues to be very much in line and better than the average for the global sector, with most producers having experienced significant cost pressures in the last couple of years. For the group, we expect all-in sustaining cost to improve in the second half of the financial year to between $1,450 to $1,500 per ounce. As I mentioned earlier in the presentation, the next financial year should see further improvements with full years of production from MTR and TCMG. On Slide 36, group capital projects. We continue to invest MTR assets and into growth, with all of MTR's upfront capital now spent. With most of our growth capital now done, we expect a material reduction in capital spend going forward. For FY 2026, sustaining capital for the group should be between $50 million to $60 million. ESG, on Slide 38. Very proud of our achievements on this front, particularly on progress with renewable energy, water treatment, and social projects. We really do make a positive difference where we operate. To elaborate further on our renewable energy road map, on Slide 39. The Barberton solar facility is now fully ramped up. We still anticipate first power from our 40-megawatt sturdy energy power purchase agreement also in 2026. You can also expect other announcements on renewables from Pan African, who will add even more capacity. I will now hand over to Marileen, who will provide an overview of the financial results for the half year.

Thank you, Cobus. Slide 41 provides a high-level overview of the financial results for the reporting period. You will note that revenue is fairly flat for the current period compared to the prior period. This is as a result of a decrease in production, offset by the increase in the gold price. The group did not fully benefit from the increased gold price, which was 21% higher in U.S. dollar terms as a result of the synthetic forward transaction. The synthetic forward transaction was used to fund the construction of the MTR operation, and resulted in an opportunity cost of approximately $17.8 million for the current reporting period. We are pleased to advise that this transaction will now be completed at the end of February, and the group will now fully benefit from the impact of the higher gold price going forward. Production costs were well contained in absolute terms, with only a 12% increase in U.S. dollar terms and a 5.5% increase in rand terms in direct operational production costs. The cost increase is attributable to the inclusion of the MTR operational costs for a 3-month period, as well as a 4% appreciation of the rand relative to the U.S. dollar and other inflationary increases. Unit cost of production was negatively impacted by lower gold production, given our cost base, which is materially fixed, but is expected to reduce in the second half of the financial year, as we have guided. Adjusted EBITDA and headline earnings were lower compared to the prior year as a result of lower profitability due to the lower number of ounces produced. The main adjustment between headline earnings and attributable earnings is the gain on the acquisition of TCMG of USD 25 million, which is excluded from headline earnings. Earnings per share and headline earnings per share were also marginally impacted by the issue of the new shares during December 2024 to acquire TCMG. The 47.3% decline in operating cash flow to $29 million is mainly as a result of working capital changes, increased finance costs associated peak debt levels, increased depreciation charges, mainly related to the MTR and Evander underground operations, and once of long-term share option costs resulting from the increased share price. $92 million was spent on capital during the 6 months, the bulk of which related to the MTR project. The net movement in borrowings was $86 million, resulting in net debt increasing by $165 million to $229 million, inclusive of the $31 million of debt acquired as part of the TCMG transaction, resulting in peak debt levels for the group. Given the positive cash flow generation outlook for the group going forward, capital allocation and maintaining a balance between investing in our near-term growth projects, returning funds to shareholders and de-gearing will remain priority focus areas for the group. Slide 42 demonstrates the group's contractual and anticipated debt redemption profile. The group has now reached peak debt levels with the MTR project construction completed, and the term loan facility for this project fully drawn. The TCMG project is also fully debt funded, and this debt of $31 million is included in the group debt profile, with the project being close to completion. The group's current debt constitutes a debt-to-equity ratio of approximately 49%, still well within the senior debt covenant of 1:1. The group's debt facilities consist of the revolving credit facility and general banking facilities. Mintails term loan facility, the 3 domestic medium-term note bond tranches, green loan facility and the TCMG debt facility. The green loan facility also provides for an embedded accordion option of $40 million for future funding requirements of this nature, which is crucial to the group's renewable energy strategy. The group's liquidity is robust, with cash and undrawn facilities of $32 million available as of 31st of December 2024. The group's attractive cash flow generation going forward is underpinned by the current gold prices, increased production of high margin ounces from our operations, resulting in the group's debt being repaid faster than contractually required. It's likely that the RCF will again be extended, as has been the case in the past, as it constitutes a key component of our core finance facilities. As mentioned in the past, our funding approach to projects of Elikhulu and MTR Soweto a merger is to fully fund the project's upfront capital with a debt redemption profile sculpted to its cash flow profile, leaving the rest of the group's cash flow largely unencumbered for other capital expenditure programs and returning cash to shareholders. The TCMG funding also aligns with this principle, with the debt repayment sculpted to the cash flow profile of the operation, with any redemption likely at current gold prices. Once the synthetic forward transaction is completed at the end of February 2025, the group is materially unhedged with the last zero-cost collars expiring in June 2025. Slide 43 demonstrates the group's ability to return cash to shareholders in the form of dividends. The dividend declared for the 2024 financial year represented a payout ratio of approximately 53% of cash flow, as defined by the dividend policy. And it is an increase of 22% in rand terms and 26.5% in dollar terms relative to the prior year, the highest dividend paid to-date. Thank you. I will now hand back to Cobus to conclude on today's presentation.

Thank you, Marileen. If we conclude on Slide 45 and to again reinforce some key points. The market clearly had some concerns when we released our headline earnings. But please remember, we effectively only had 2 months of production from MTR, but increased finance costs and depreciation at an $80 million opportunity cost from the synthetic forward in these numbers. We now have tailwinds from the highest gold prices in history, and the group is materially unhedged. Even with slightly lower gold prices and much higher dividends, the group should be pretty much endured in the next 12 to 18 months. We've just commissioned and ramped up arguably the most successful gold tailings retreatment project in South Africa's history, below budget and ahead of schedule, and we will grow this operation further in the near term. Our Elikhulu and BTRP operations are performing really well, engineering fantastic returns and cash flows, and will continue to do so for many more years. TCMG was acquired with limited dilution to shareholders, less than 6% of our market capitalization at the time. We will be producing from this Tier 1 asset within 6 months of acquisition, having constructed the largest processing plant to ever operate in this gold field by a factor of 3. We are growing gold production very materiality in the year ahead, with almost 60% of these ounces from surface. Consort mine has turned the corner and Fairview will continue to tick along as it has for many years. We will have to take some pain at Sheba, but it will emerge as a lean and profitable operation by financial year-end. We've started hoisting from Evander sub-vertical shaft. Earlier this week, we achieved our run rate demonstrating hoisting capacity of 700 tonnes per day, and the ramp up continues. Thank you very much for your time this morning. We look forward to continuing mining for a future in the year ahead.

Thank you. We will take any questions from conference call line, Chorus Call.

We have a question from Richard Hatch of Berenberg.

I've got quite a few questions. Hopefully, we can just bang through them. Okay, so just on the assets. So Barberton, I just note that recovery is dipped to 84%, so a bit softer than where you've previously been. And then D&A has also picked up. So can we just unpack the reasons for that? And then also just on the costs. I mean, what is a sensible long-term cost for Barberton? And I see the guidance is steering to kind of -- yes, I mean, isn't below $1,900 a sensible sort of all-in sustaining cost for Barberton, or is $1,900 to $2,000 the new normal? The first one.

So to get back to, first, the costs, as we've said, Richard, I mean, there's definitely some savings that we need to realize in terms of the operations and then also some of the overheads. So that will be a restructure that we're working with the Barberton management team. But as you know, with underground mines, most of the costs are fixed. It's a product of how much you can produce. And definitely, the costs from Consort will assist as on a unit basis, these will reduce. And then also Fairview, if we produce more ounces -- I mean, you have those costs go down. So I think sort of, obviously, it's also exchange rate dependent, but a $1,900 odd number is -- for the next year, I think, is reasonable. And then in terms of recoveries, I mean, normally, the recoveries that we achieve on BIOX is excellent. It's 98%-odd and it's a product of some other material that we've put through in surface sources, et cetera. But generally, the recoveries are quite stable as far as Barberton is concerned.

And then just kind of second question is just on cost guidance. So on Page 1 of the release, it says that H2 guidance is $1,450 to $1,500. And then on Page 9 of the release, it says that full year guidance is $1,450 to $1,500. I'm just trying to clarify. And I've got a couple of questions on this as well. So what is the H2 -- is it H2 guidance, $1,450 to $1,500, or is it full year?

Thanks, Richard. So for H2, the cost will come in at the lower end of the $1,450 guidance. And then because the H2 production will be more weighted, the full year guidance should also come in at approximately $1,500 per ounce.

On Evander, the H1 cost, I understand was high because of the softer volumes push through. But again, like I can't seem to get my numbers to $1,800 to $1,900 for H2. I'd really have to kind of push the cost up. I mean, is there some CapEx numbers, CapEx that goes -- that slips into there to push that up? And what is, again, like the right kind of long-term all-in sustaining cost to think about for Evander? Because my numbers sort of hover around sort of $1,300, $1,400 an ounce range, but we're currently sitting net north of sort of $1,700, $1,800. So what's the right place to be?

So I mean, again, it's very much dependent on ounces, and we're trying to be fairly conservative as far as the second half is concerned, given the performance. The sub-vertical is ramping up. But obviously, in the later years, sort of FY '26, '27, when you are starting to mine on '25 level, things have stabilized, all-in sustaining CapEx goes down, very limited growth CapEx, then the cost will come down. So historically, we've looked at sort of a longer-term all-in sustaining cost for the Evander underground of, I'd say, conservatively at this point, about $1,450 to $1,500. And I think we should sort of stay at those levels.

And then on Elikhulu, I'm just trying to also just get a handle on the cost base. I mean, that's been pretty stable on an all-in sustaining cost basis. So again, sort of keeping that one at about $1,000, $1,100 is the right place to be in your opinion?

Yes, that's right. We've seen -- over the last couple of years, we've seen -- we obviously have the increases in electricity that's in excess of South African inflation. The next one will be about 12%, 13% again. And then reagents have reacted quite dramatically throughout the industry. So reagents have gone up. The current indications are that those sort of increases have stabilized. So if that is the case, then yes, I mean, $1,100 or $1,150 where we are currently, those are -- that's a reasonable assumption. I mean the Elikhulu team is doing fantastic work, I have to say, stable, really low cost. It's a great asset.

Yes. And then a note on Tennant. You've brought forward some volumes, which is great to see, 7,000 to 10,000 ounces for the second half. What kind of cost do we need to be thinking about that?

Probably USD 1,300 to USD 1,400. We're building a stockpile right next to the plant. And I mean, I don't think people appreciate the fact. I mean, we bought this asset in December, and we'll be producing gold in Q4 of this financial year. I think that's an excellent achievement. And I mean, really, we were out there a couple of weeks ago. The plant is looking great, nearing final stages of completion and then commissioning. We're building -- as we've said in the release, we put it -- building a fairly high-grade stockpile sort of 1.5 to 1.8 grams per tonne right next to the plant to make sure that we can achieve those targets. So I mean, it's very exciting for us, and obviously, then as we ramp up. Again, as we saw with Mintails, the first couple of months, your costs are a bit higher. But in terms of the release, I think we guided USD 1,250 million for next year, which is very attractive for Tennant.

Yes, Agree. Okay. Last couple. Just on the cost of restructuring at Barberton, can you just clarify -- is there a steer as to how much that's going to cost and where it's going to be accounted for? Is that going to sit in the mine costs, or is that going to sit as a separate line item?

So we've started the engagement process now with our unions and other stakeholders. I mean, the cost in the group context of the restructuring is not going to be material. But definitely, as we've said, it should align things and make sure that Sheba does what it's supposed to do. We said the productivity is unacceptable. The fact that so many of our employees are steering from us, I mean, in the last 6 months, there were 60 people that we've caught, and we think there's way more. So, we're drawing a line in the sand. I mean, we have the flexibility now as far as sort of really nice long-term low cost and stable production is concerned. So this gives us the opportunity of rightsizing and making sure this is a sustainable business.

Yes. And is the cost going to sit on the all-in sustaining cost line for Barberton? Or is that going to sit on the fence that's like an exceptional?

Richard, it will be once-off costs. So we will clearly disclose that to the market, but it will be below all-in sustaining cost because it would be a once-off item.

Yes, clear. And then last one. Look, Cobus, you kind of touched on it. I mean, it's -- I think that you've got some amazing assets, which are really low cost. And then you've got some more challenging assets, which give you volume, but clearly less margin accretive than Elikhulu, MTR, some of the Tennant operations. Like does the Barberton and Evander still have a place to play in this group? Or is it a case of you have to give them a couple of years, see how they go, if you can get the cost down, then they remain, and if not, then you perhaps have to take a strategic decision? Or do they remain caught even at these sort of prices?

Well, they -- I mean, at these prices, obviously, these assets should generate decent returns and cash flows. I mean, we can't -- we have to acknowledge the fact that underground mining in South Africa is increasingly difficult. Luckily, we only have a couple of these mines, which means we can give them proper TLC and make sure they perform. If you look at the group, say, 2018, I mean, those really are the only assets we had. Now 60% of our production going forward, long life, stable and high margin from surface. So we've invested a lot of effort, capital into certainly Evander. It has to now perform as does Barberton. I mean, Barberton is the -- these are the assets that the group was initially based on. It was the genesis of Pan African. We think there's a lot more potential, and we'll give them the necessary care to make sure they deliver.

And then sorry, Marileen, last one, just on that one line item for the Barberton restructuring. Like any quantum steer or guidance that we should just nudge into our numbers, like ZAR 100 million, a couple of hundred million? Are you able to give us a guide?

Richard, it's still early days. We've just started the Section 189 process, so we can't give an accurate estimate on that yet.

But again, it's in a group context, it won't be material, yes.

The next question we have is from Arnold Van Graan of Nedbank CIB.

A couple from my side, mostly follow-ons from Richard. Just on tenement, you give a big explanation on the earnings. So is there a way to simplify that? And is there any financial obligation over the next couple of years to actually execute those? And does that form part of the mine plan as it stands? And we can also take this offline, but I just hope you answer it.

I mean, to simplify, it's quite a complicated structure. The amount that still needs to be spent by ourselves/TCMG is not material in the group context, maximum $1.5 million, and that will be spent this year. And then we would have fulfilled our obligations. And then it depends on the sort of how we go forward. I mean, the beauty with Tennant Creek is, Arnold, I mean, by April or May, we're going to have a 70,000 tonne per month plant. And we have significant deposit on our own ground that we can treat here. So it's really about optimizing the value here, which is we don't believe the mine plan currently for the later years. It's optimal, which is why also one of the reasons we were able to acquire this asset for the amount that we did. But, yes -- I mean, in terms of obligations going forward, as far as the JV is concerned, they're not material in a bigger group.

And then sorry if I missed it, but what's the CapEx for this plant, nervous plant?

It's about $35-odd million, the total construction CapEx.

The guys did an incredibly good job in terms of sourcing a plant that was on care and maintenance for, I think that was $1 million...

$1 million.

And that significantly -- I mean that's one of the huge competitive advantages here. That plant normally would be in the order of USD 30 million, USD 40 million, and they picked it up for USD 1 million. That is sort of a great coup from their perspective.

And then just on to Barberton. I know there's been lots of discussions. So my question is just, is there a risk that you -- that at some point, you start losing critical mass? So Consort, you've restructured, seems okay. Let's see whether that's sustainable. Now, you've got issues at Sheba, which is fairly new because maybe the focus was always Consort. So I get the restructuring, it's probably long overdue. It's never nice doing this. We understand all that. But just from a critical mass and scale perspective, are you not running up against a big risk going forward?

Well, that's why we have to be quite careful. But I mean, we've been -- in terms of -- it's not really new. If you look at for the last 4, 5 years, we've been splitting our portfolio in terms of lower cost assets and then the higher cost. And Consort, Sheba, for as long as I now can remember, has been sitting at high cost. And there's been a number of initiatives, most recently continuous operations, which initially -- certainly, it's bearing fruit at Fairview. At Sheba, it sort of did a bit, but now we're running out of steam again. And this is one of the things that you have to do on occasion is restructure businesses. If you think about it, we've been preparing for it for some time. About 5, 6 years ago, even we started the project the Dibanisa, which links Sheba and Fairview. And it's premature now to explain to you exactly what the restructure would look like. But there's lots of -- there's a strong argument to be made that Sheba and Fairview, to some extent, should be one mining complex. And then you can reduce quite materially. So we're quite cognizant of the fact that an underground mine needs certain scale. But on the plus side also, BTRP now -- when we were nearing the end of life, BTRP is going to continue for many more years. So as a complex and Barberton should generate attractive returns going forward as it has for many years.

And then last one, probably a similar question on Evander. So the performance, there's also -- always been quite erratic, right? And you've explained all the issues and you've explained all the issues over time, what happens there. But I guess my question is, given that history, given the complexity, I know you've put in infrastructure, but that $1,400, $1,500 all-in sustaining cost, is that achievable? Are we not going to -- this is not one of these assets where it runs okay for 2 or 3 quarters and then it struggles for 2 or 3 quarters. It's a very broad question, and we can spend more time on that tomorrow. But just give us some comfort that -- the worst is behind. And even in your intro, you talked about you did some stuff there in hindsight you probably wouldn't do again as a company. Just give us a sense of how you approach this, and what has changed? And is this new infrastructure the big breakthrough that's going to see a more consistent performance?

Well, Arnold, as you say, it's been -- most of the gray areas that you see on my head is related to Evander underground. And let's take a step back again. I mean, I think the group has done well in terms of diversifying now to lower -- less volatile ounces. We've spent the capital now. It's not the most complicated underground mine in South Africa. Currently, there's 11 or 12 mining crews, I mean, at -- sort of in its peak that ramps up to 15 or 18 or so. It's quite manageable. There's nothing wrong with the ore body here. The Kimberley orebody is sort of head grade at 7 grams, 8 grams per tonne. In the current context, globally, it's a good orebody. The infrastructure has been challenging, as we know. And we were very focused on extracting the pillar and the guys did an excellent job. We generated very good cash flows. It's not like -- it's not going to be a huge risk for the group going forward. And it's important to obviously sort of dwell on the downside. But the breakeven for this mine going forward in terms of cash costs is circa 65-odd kilograms with capital that increases, but most of the capital spend. So we have it under control. It's been incredibly frustrating. But in a bigger context, I think it's something that we need to manage and that we will manage.

The next question we have is from Raj Ray of BMO.

I got a couple of questions on your South African portfolio and then a couple on TCMG. First of all, Barberton, following up on the questions earlier. You talked about rightsizing. I know the target was to get to $80,000, but do you think that $65,000 to $70,000 is what you're looking at steady state for the next little while? And the second question is more broad, in terms of -- look, the share price performance has been good. Part of that gold price, part of that, I think, is long overdue as the company has been delivering a lot of metrics. But at this point, the focus shifts to free cash flow generation. We talked about your all-in sustaining cost at these gold prices, you're going to generate a lot of free cash flow. But then again, on top of your all-in sustaining cost, you have all the other development in terms of BTRP extension, the Sheba, Fairview infrastructure, Egoli. Can you give us some sense of what the capital expenditure is going to be over your sustaining capital over the next few years?

No, it's a good question. We obviously run our models very regularly from a cash flow perspective. And I think being fairly conservative using a gold price that's lower than spot, we're going to -- and this is what we've said in the announcement. We'd be including quite a very decent increase in dividends. The group will be materially un-geared in the next 12 to 18 months. So the beauty, Raj, is that we've spent pretty much all of the growth capital. The BTRP extension will be in the order -- the pump station is going to be sort of $4-odd million. It's not a huge expense. Only in 2027, 2028, do we need to start building a new tailings facility at Barberton, and that's not going to be a massive expense. Egoli is a separate growth project, and there's been no final decision on undertaking Egoli. So our sustaining capital for FY '26, which obviously then speaks to the very attractive cash flow generation for the group, we estimate currently USD 50 million to USD 60 million, with very limited large growth to spend there.

Okay. That's good. And then on TCMG, just want some clarification. So the next 5 years production, that is based on 100% attributable to Pan African. The JV is not included there. Is that correct? And secondly, also -- go ahead.

Yes, there's some small numbers on the JV. But again, we have lots of optionality, if you talk about cash flow generation, so -- unless we got our numbers massively wrong. The debt that's sitting in -- Australian debt that's sitting in TCMG should be repaid, and I'm trying to be fairly conservative, let's call it, 6 to 12 months given the open pit. Everywhere, we -- there's huge potential on reserves and resources. And this is -- sort of part of what we will do is optimizing the value for Pan African shareholders in terms of coming up with a mine plan that we believe that works. But we can run for a number of years without going to JV ground.

And then on -- how much do you expect to spend on exploration and studies at TCMG?

So, I mean, it's AUD 5-odd million per year. If we look at the exploration success up to now, AUD 5 million goes a very long way in that gold field.

The next question we have is from Peter Mallin-Jones of Peel Hunt. At this stage, there's no response from that line, and we have no other questions.

Great. Thanks. Hethen just -- some of the webcast calls.

We've got just a few questions on the online platform. First one is from a private investor, Dana. He asks 2 basic questions. Why aren't you listing on the FTSE 250 now that you qualify? And in this high gold price environment, how are you going to get to your ASIC back down to $1,400? And the last question is, how much debt did you take on from the Tennant acquisition?

Do you want to answer that the debt question?

On the debt included from the Australian acquisition, it was a total of $31 million, of which $6.5 million was actually a debt facility from the northern territory government and the remaining balance of the debt was provided by an Australian finance company.

So in terms of listing, yes, certainly, our view is we'd qualify FTSE 250. The AIM market up to now has worked quite well for us. There are concerns around AIM, particularly taxes and liquidity, but we understand that there is a review ongoing. So as the group has grown, we continue to assess sort of where we will get best value. And most markets work well if you are able to engage with the investor base over time. So that's what we've done in the U.K., and we remain committed. There are costs involved, and that's one of the options we are looking at is potentially upgrading at some point to a main board listing in the U.K. As far as the question on cost concerned, you can't look at cost without looking at your production increase also. So, we're moving from 200,000 ounces to 270,000, much rather have 270,000 ounces at $1,500 than having 200 at $1,400. Gold is -- I've come to the conclusion, gold is so valuable because it's so difficult to mine profitably over time. I think that's what we are able to do. The global sector has seen huge increases in costs. Most or many of our cost increases are out of our control. Reagents, we simply need cyanide. Otherwise, we can't produce. Electricity, unfortunately, even though we've made good strides as far as renewables is concerned, we're very much still reliant on the South African power grid. So the only way to mitigate this is to be efficient. And if you look at our overall cost increases in rand, these have been very well controlled. And again, cost discipline is part of what we do as Pan African, and it's also one of the reasons we're now re-looking at the Sheba mine. So yes, I can assure you that cost control remains front of mind for Pan African despite the really good gold price at the moment.

Lebo Mofokeng from Truffle Asset Management says, hi, Jacobus and team. Thanks for the opportunity. There's 4 questions. Can you please guide us on guidance and ASIC for FY '26, the restructuring costs at some of the underground operations, guidance on the production profile for TCMG, and capital allocation given spot prices? Do you see more acquisitions at this point, or is it largely a dividends and de-gearing story? And please explain the mismatch between production and sales volume?

Do you want to do the production and sales first?

Thanks for the question. The only difference between the volume of gold sold and the volume of gold produced is just that the volume gold produced includes deliveries made to rand refinery that haven't been settled yet to the bullion banks, so we cannot credit that as sales, whereas gold sales only include the gold that has been transferred to the bullion banks yet.

So it's quite a significant number, about 5,000-odd ounces in the last half year. So that did impact our performance results. As far as capital allocation is concerned, nothing changes for Pan African. We're conservative. That looks -- if you compare -- look at most of our investments, it's a 2, 3, 4-year payback, and that won't change. We'd love to increase dividends. And at this gold price, there's every reason for us to look to do so. And again, we can do that and de-gear and continue to invest in our assets in this very good gold price environment. As far as the TCMG production is concerned, I mean, I think the average is about 65,000 ounces over the initial life-of-mine. We've said that, there's a lot of work still to be done there. But rest assured, FY '26, the guidance is 48,000 to 60,000 ounces, which I think is going to generate a lot of cash and a lot of profits for this group, again, at this gold price. What was that last question, Hethen?

The capital allocation, given spot prices. Do you see more acquisitions at this point? Or is it largely a dividends and de-gearing story?

So I think in this -- our business, you either move forward or you move backwards. That means you have to continue to look. But we now have the benefit of 3 large complexes in South Africa, one in Australia. There's no need for us to go buy anything else at this point to maintain and increase our production profile. And as we've demonstrated in the past, I mean, the best assets, I mean, you can wait for and oftentimes, it sits in your own portfolio like Elikhulu. Mintails, we were exceptionally -- I wouldn't say lucky because it took a lot of work, but Mintails, we acquired 2 million ounces for sort of less than $2 an ounce, exceptional. So those are the sort of acquisitions we like to do. TCMG, it was also a specific set of circumstances. We were very fortunate to have picked it up. But there's such a lot of scope for growth now in our portfolio. There's no reason for us to go scouting for assets. And certainly, the situation in the rest of Africa at this point, a lot of jurisdictions have deteriorated and very difficult to go and do long-term investments. We're very happy now in terms of how we have positioned the group.

Just 2 more questions. Lerato Tshoni from Momentum Investments asked. How do we intend reducing debt levels?

Well, it's quite simple. I mean, we produced quite just more or less what we said we would at a gold price that's a bit lower, call it $1.55 million per kilo versus 17 at the moment. And in the next 12 to 18 months, that de-gearing then sort of pretty much takes care of itself.

And the last question from Dineo at Sunday Times. What is the impact of the section 189 at Sheba on the workforce? And the second last part is, can you give more color to your comments about consolidation of tailings? I guess that would be Mogale and Soweto cluster.

Yes. So we're now engaging in a difficult process with our unions, and we can't yet exactly say what the impact will be. But I mean, we, as Pan African and as Barberton mines, have sat back and said -- the current situation is unacceptable, the productivity per employee is unacceptable, and we now have to move to something that makes this mine sustainable to the benefit of all stakeholders. So this is a process, and we've committed to having it all done and wrapped up by the end of our financial year, which is June. As far as consolidation is concerned, the fact that we now have a world-class plant to be able to expand, you need a certain scale to actually get into the tailings business as we know. And there are stranded smaller assets in that part of the world, both Soweto and in Mogale, which we, over time, can consolidate. Not that, we need to do so in the short term. Mogale by itself, you'd remember, has a 13-year-odd life. If we add Soweto, 21 years. So yes, it's just quite simply, we have the infrastructure and we have the people. So that puts us in a very competitive position.

That's all for now. Thank you, everyone, for participating, and that's all for now. Let's see at the next results.

Thank you very much.