Tharisa plc (THA) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Tharisa plc Karo PGM project investor presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Phoevos Pouroulis, CEO; Michael Jones, CFO; and Ilja Graulich, Head of Investor Relations. Good afternoon.

Good afternoon, everyone, and thank you for joining us this afternoon for a very exciting development in the Karo PGM project, the development of a Tier 1 asset. So if we look at what are the highlights of this project in Zimbabwe located on the Great Dyke, it is truly a Tier 1 world-class PGM asset. It is fully licensed with the mining lease for the life of mine, not only for Phase 1, but for subsequent phases thereafter. I think we've been extremely pleased with the availability and the competency of skills within Zimbabwe. It is a mining jurisdiction, but Great Dyke is well known for some significant PGM projects. I think this Phase 1 that we are going to unpack and share with you today is very exciting. In that it has many similarities to the Tharisa mine and the long life that we have there. To that end, we have an open pit in Phase 1 of 20 years. It is low risk in the sense that it is an open pit. It's quick to market. It's scalable, which gives us flexibility, low cost. And as mentioned, this is the first phase of potentially many phases. The technology and the processes that we've identified and are engineering as we speak are proven, tried and tested. And so the risk around processing is known and certainly, it is something that we are familiar with as a group. The Karo project itself will yield on an annual basis, 150,000 ounces of PGMs. I think what's important about this project is we have very strong copper and nickel credits and even some cobalt credits. By virtue of the fact that we are developing an open pit mine, we have an accelerated time line to first production to be within 24 months. And this is quite unique when we look at other projects in our industry and the time and the capital that's required to develop some of these deep-level shaft complexes. The team, the Tharisa team has a proven track record, and we have taken a greenfields project in the Tharisa mine into the success of what we see today and the product of the Tharisa mine. So the team has that record and are excited to develop this next project. I think this is quite a significant milestone for Tharisa, but equally for the Zimbabwean government who are shareholders at 15% and at the Karo Mining Zimbabwe level. And the Minister of Mines, Honorable Minister, Chitando has been very supportive of this project from the outset. And this really represents the first new large-scale PGM mine on the Great Dyke. So it's significant in terms of it's impact. And the Chairman has been working tirelessly over many years and decades to that end to secure and to get these mineral, right, so that we are in a position to develop them as the Karo project and the Phase 1 that we are sharing with you today. I'd like to hand over to Michael now, who will just run through the transaction for us.

Thank you, Phoevos, and good afternoon to the audience. Before going through into the project details itself, I'd just like to give a brief overview of the transaction structure in terms of the formal arrangement that Tharisa plc has exercised. So Tharisa has acquired or increased its shareholding in Karo Mining holdings to 66.3%. The purchase price is being settled through the issue of new Tharisa shares. It equates about 4.85% of the issued share capital and current market price at imputed value of ZAR 27 million to the purchase price. Now this purchase price was negotiated and agreed at a discount to the underlying net present value of the valuation metrics of the project and really negotiated back in 2018 when Tharisa acquired its first shareholding in Karo Mining Holding as 26.8% and committed to writing funding for the exploration program. If we just move to the diagram on the bottom right there, you'll see that Karo Zimbabwe Holdings owns 85% of Karo Platinum, Generation Minerals owns 15%. Now Generation Minerals is a special purpose vehicle. It is wholly owned by the Ministry of Finance in Zimbabwe. And just to note that, that is a free funded carry. So no, there's no funding obligations on Generation Minerals for that 15%. As part of the transaction negotiations, the Zimbabwean government negotiated an option to increase its shareholding by a further 11% in Karo Platinum. It's a very limited option period, it's exercisable after 24 months, and that's after the build, but before 36 months. And the price for that option is payable in cash based on today's net present value of the project. I mean that's a normal fully funded shareholding. They need to follow any capital right, and rights to effect is a dilutive shareholding. And if we have a look at the project itself, we have continued the project following through from the exploration stage. And this early works program has, in fact, commenced and continued through this period, and we have committed $25 million to fund that particular project. If we look at the Karo project itself, it is a high-impact investment. As Phoevos mentioned, it's the first major investment, foreign direct investment into Zimbabwe and to be for the benefit and upliftment of all shareholders. All right. This really is an investment in a Tier 1 asset in terms of Karo Platinum. One of the key risk mitigants, as Phoevos has already mentioned, is we've got the mining lease granted for the life of the mine over this prospecting area. Situated in Great Dyke, it is an open pit resource, and this is initial one of 152 million tonnes, concerning 9.97 million ounces of PGMs at just over 2 grams per tonne, and that's on a 6-year basis. The declared reserve 35.5 million tonnes, containing 2.6 million ounces at 2.3 grams per tonne. If we just look at the full split itself, very strong in both platinum and palladium, 45% and 42%, respectively. And as Phoevos also mentioned, very base metal rich, 0.1% copper and 0.12% nickel. When we started the exploration program, we're looking at a low-risk entry and focused on an open pitable area. And I'm pleased to advise with 20 years' worth of open pit mine plan, and that's an average grade of 3 grams per tonne. It really is a large-scale mine, targeting average production of 150,000 ounces of patent group metals and concentrate, so very much in line with current production levels at Tharisa Minerals. And very strong financials for this overall project. CapEx estimates at the moment in budgets, $250 million of CapEx with a peak funding requirements of $310 million. And that yields a project post-tax NPV, and we used a discount rate of 12.9% and current spot prices, that's internally generated net present value, just over $770 million. And all those project economics and hurdles meet and, in fact, far exceed the minimum required of Tharisa of 25% hurdle rates. The project also benefits from such a special economic zone. It's already been declared. We already got the benefits from those. And it typically relates to tax benefits. You'll see one that you've highlighted there, duty for importation of capital equipment. I mean there's a significant saving on the overall project spend going forward. Moving from exploration project to an actual project itself, we now qualify for national project status and an application is, in fact, pending.

Thanks, Michael. So if we look at where we're situated, we're in the central portion of the Great Dyke. Our neighbors to the south and to the north of at Ngezi Mine, Unki mine and Mimosa. So we situated some 80 kilometers southwest of Harare, 35 kilometers southeast of Chegutu. It is a very large area, some 23,903 hectares. And the resource that we've declared is really outlining the open pittable portion Phase 1 and the potential to grow is fairly significant when we look at the historical resource declaration. We are in the main sulfide zone, which typically is between 2 to 3 meters thick. We're targeting a wider cut in the open pit of some 5 meters, and that's really managing the grade and the strip ratio. And the length of the Great Dyke running, obviously, north to south is some 550 kilometers in length and some 11 kilometers wide. So historically, Zimplats have done exploration on this area. And their resource yielded some 96.4 million ounces on a 4E basis. Now bear in mind, that includes the whole extent of the 23,903 hectares. So you can see our open pittable resources close to 10% of what was declared historically. So lots of potential and opportunity for growth beyond the 20 years' life. We've declared a SAMREC compliant mineral resource and reserve. And Michael ran through those numbers earlier, some 152 million tonnes of resource, 35.5 million tonnes reserve giving us that 20 years open pit life. I think the diagram on the right-hand side really talks about the 4 open pits that we envisage and the strike length of some over kilometers, so significant large-scale open pit to a maximum depth of about 100 meters. So you can see Karo Platinum Southwest being the open pittable resource on the Western side and then the majority of the open pit resources being on the eastern side. We undertook an extensive exploration campaign to get to this resource and reserve some 42 kilometers of meters drilled, 22,000 samples assayed, 315 boreholes. I think what's exciting to us and very complementary to the Tharisa pit is what we find in the Great Dyke with on a 6E basis now at 4E, platinum at 42.1%, palladium, 39.5%, rhodium at 4.1% and some significant gold at 8.3%. Iridium slightly low at 1.9% and ruthenium at 4.1%. But we shouldn't forget the material copper and nickel credits that we'll generate from this project. When we look at the mining, it differs considerably to the multi-seam complexity of the Tharisa open pit. This is a single seam mining. We're targeting 3 grams per tonne on a 6E basis. And as mentioned, we'll be developing 4 pits sequentially to yield the 2.1 million tonnes per annum core rate, and that's the run of mine throughput rate for the concentrator. We will use a mining contractor strategy, and in fact, we've adjudicated that process already and in negotiations as we speak. We will keep the mineral resource management in-house and grade control oversight within the owner's team. The maximum pit depth of 100 meters I mentioned previously, but it yields a stripping ratio of 22.1% cube-to-cube. So fairly significant, but a very valuable PGM basket as illustrated on the previous slide of some $2,500 per ounce at current spot prices. You can see the ramp-up of the mining volumes. We'll be building mine stocks ahead of the crusher, very similar philosophy and principal is the Tharisa mine just to manage a buffer for continuous operations of the concentrator. Speaking about the concentrator and the processing plant, it's a standard mill-float 2 circuit, which will have a throughput of 2.1 million tonnes per annum, 175-kilo tonnes per month throughput with an annual forecast production of 150,000 ounces per annum. And that's calculated on an 82% recovery of PGMs, which is quite important because the average from the Great Dyke is nearing closer to 87%. So there's potentially upside to that number. So the mill-float 2 circuit is proven, tried and tested. There's of course or a rough milling, fine milling, primary, secondary milling to maximize the recovery of the floatable particles. And we will be deploying our technology of the high energy flotation, which we've successfully deployed at the Tharisa Mine to look at maximizing that recovery. In terms of infrastructure, we'll be sourcing 30 MVA power from the Selous substation, which is a key strategic point in Zimbabwe and is not subject to load shedding, which is key and critical because it is the main feed station for this zone of the Great Dyke and we're busy with the -- bringing the power lines to site. Bulk water solutions from the Mangwana dam as well as borehole and ground water, and all of this within proximity of the metallurgical facility. Again, very much like Tharisa, we will construct our tailings storage facility from waste rock and these are fully secure and fully contained tailing storage facility. So no risk in terms of down wall failures. And key to any project is accessibility. There is a road from Harare straight through our site and to our complex, so very easily accessible in terms of logistics. Michael, would you like to touch on the history and the future programs?

Sure. Thank you. If we look at the time line from this project to start to finish, we're going to start with the investment framework agreement that was signed between Leto and the government of Zimbabwe back in 2018. Shortly after that, the special grant was awarded for the mining. But if you fast forward to that to 2021, a very important milestone of getting the mining lease issued, which is then for the life of mine. Shortly after being granted to special grants, we started with the Phase 1 drilling, the geophysics, terrain mapping, followed thereafter by concept study. And then Phase 2 drilling also been completed, and that's part of that 40-yard kilometers that drilling is undertaken. And then the implementation study. Implementation study, of course, now leading to the decision to commence the project construction. If we look at the time line, the time line really, we've indicated the $25 million that we've allocated for the field work that's currently underway. So that's grade control and full drilling service geotechnical campaign. We're completing some of the water studies necessary. And then, of course, detailed engineering design and process both for the concentrator facility as well as bulk power supply. Procurement, we look at basically long lead items for their construction time line down below and as Phoevos mentioned earlier, we've really done the adjudication or complete adjudication for the mining contractor. That will be followed by a period of fabrication construction and a commissioning period ending Q4 2023. So again, a very quick to market time line in a low-risk project, open pittable. But just moving then on to the project itself. Now Tharisa has got a -- it really focuses on 0 harm to its employees. And I'm very pleased to report that the project has been LTI free to date, that's both the exploration and the early project activities. If you look at the impact on the regional economy, mining contributes between 10% and 14% of the Zimbabwean GDP. We're going to be employing about 400 people directly. Remember, that's just on the process and on the admin side. It's a mining contractor model. We estimate that they'll employ about 580-odd jobs for the mining contractors. We've used a very conservative multiplier for the employment factor. We used by the Chamber of Mines. They've recommended 4, so that gives you plus +3 900 indirect jobs. And then, of course, you've got the traditional jobs created to induce multipliers. We remain committed to the communities in which we operate in terms of use and skills development, adult education and training. And we will continue with our programs of internships and graduate programs going forward, and especially in this phase now supports of informal enterprise development. Tharisa as a group is committed to reducing its carbon emissions by 30% by the year 2030. And therefore, we'll be looking at a very energy-efficient plants. There's abundant renewal energy potential within Zimbabwe and recently improved regulations to allow self generation, and we'll be availing ourselves of those benefits. I'd just like to hand back to Phoevos to touch on the market overview.

Yes. So thanks, Michael. Mining contributes between 40% and 60% of foreign exchange. And as Michael mentioned, a key contributor to the GDP in Zimbabwe. So a project of this scale and this investment will have a material positive impact on the foreign exchange and foreign direct investment. As mentioned previously, the Great Dyke is the second largest geological -- PGM geological formation after the Bushveld Complex in South Africa. But it remains the third largest producer of PGMs after South Africa and Russia. And you can see the production profile in the bar chart on the top right-hand side. There has been growth, but not significant over the last 5 odd years. Now we are aware that the 3 major producers on the Great Dyke being Zimplats, Impala Platinum currently producing 580,000 ounces per annum, Unki at 190,000 ounces per annum, that's Anglo Platinum, Mimosa, the joint venture between Sibanye-Stillwater and Impala producing around 120,000 ounces. But what's encouraging is there continues to be investment in the Great Dyke as Zimplats have publicly announced the $1.8 billion investment campaign and the recommencing of one of the multiple shaft. Unki invested already in terms of the smelter complex and facility, some $48 million last year, and Mimosa are looking to expand their footprint in terms of production expansion and capacity. So outside of South Africa, the Bushveld complex, the most logical place to source PGMs is the Great Dyke. And if you speak to any 1 of the majors that are operating there, they'll tell you that it is a very friendly operating environment with a great skill set, great work ethic. And importantly, the lowest-cost PGM ounces in their portfolio, which is what we have outlined and modeled in terms of our project. I think what's very interesting to me is when we look at the Karo Tharisa combination, both projects have 20 years open pit life, if we combine the run of mine production over 7 million tonnes per annum. And when we look at an annualized production rate within the 24-month period in excess of 350,000 ounces from both operations, more than 2 million tonnes of chrome concentrate and a combined value using broker consensus on Tharisa, plus the attributable portion of the Karo NPV gets us to that $1.3 billion valuation on a project basis. So when we look at the comparison between the 2 projects, this is Karo Phase 1, and I think we need to remind ourselves that there's potential here to expand this significantly beyond the 150,000 ounce Phase 1 project. So the reserves at Karo, some 35.5 million tonnes, Tharisa open pit 94 million tonnes. But look at the grade differences. This is a high-grade deposit compared to our Tharisa mine, which is at 2.18 grams per tonne on a 4E basis compared to 1.08 grams per tonne. And then the reserve ounces 2.5 million and 3.3 million, respectively. And then we look at the Tharisa growth in PGM production within the next 18 months, targeting that 200,000 ounce. As you're aware, this year's guidance is between 165,000 and 175,000 ounces. And based on our Q1 performance, we're well on track to achieving that. Importantly, we always speak about costs and being at the lowest end of the cost curve and both projects fit squarely in that quadrant or that quartile and this is an on mine cash cost in rand per tonne milled. So it was a very exciting expansion and combination of assets for the group. Michael, do you want to touch on the economics?

Sure. Thank you. If you look at the economics, and I and Phoevos already presented these numbers, but I do believe they're important enough to reemphasize. So really strong, robust project economics. A project post-tax NPV at a 12.9% discount rate, just over $770 million, and that's a spot pricing, resulting in a yielding internal rate of return of 47.6% and return on invested capital of 47%. If you look at the funding, the peak funding requirement is some $310 million. We are in advanced discussions on finalizing external funding with a strong focus here on export import financing in terms of importation of the capital plants for the construction of the concentrators and that will give benefits such as both political and commercial risk insurance for the fund as participating in the project. I think in terms of sensibility, we had to look at the capital intensity, capital intensity of $1,800 per ounce versus an average for start up projects in South Africa of just under $2,000 per ounce. So it compares very favorably in terms of capital intensity. And where are we spending the money? Just to highlight some of those, the concentrated just under $130 million and infrastructure, just under $65 million in terms of that spend.

Yes. So if we look at our current experience in Zimbabwe, you may recall that we own Salene Chrome, a wholly owned subsidiary, and we've developed and commissioned a chrome project adjacent to the Karo concessions on the outcrop of the chrome seams on the Great Dyke. We have a team on site that have commenced the contractor mining model with a chrome spiral plant that has been commissioned on site. We've benefited from the special economic zone incentives, and we've tested particularly the importation, the duty-free importation of goods and that has worked successfully. So really, the intent of Salene complementing our current chrome book from Tharisa with some very high-grade, high-quality chrome concentrate, but importantly, getting boots on the ground and them getting that experience, operational experience on a much smaller scale, a much lighter CapEx profile, but being within the proximity of the Karo project gives us a great sense of logistics and opportunities and challenges. So really pleased that we're able to start the journey in Zimbabwe with the Salene Chrome. I think also to mitigate a number of metallurgical challenges and opportunities. We've constructed a pilot PGM concentrator, and that really allows us to start with some early operations. It's a 1 ton per hour plant. It's very, very small, but it gives us the opportunity to optimize metallurgically in terms of reagent mixes, flocculent, mixes and so forth in terms of the PGM process. Importantly, in our Phase 1 CapEx, we've included a pilot smelter on site. And again, this is to prove the viability of beneficiation of these PGM ounces in Zimbabwe. It is the intention for us to go downstream with -- from the outset. But with the knowledge from both pilot projects, as mentioned here. So this allows us really to get prepared for the operations on-site camp sites and really gives us that base from which to grow into the Karo project. We've selected industry best partners. There's a list of the names that we've been working with that have been involved in the various resource reserve declarations, engineering, power studies, environmental studies, water studies, et cetera, you name it. And we continue to work with these blue chip companies, and we have a very strong working relationship with them. Importantly, these meet international standards and meet the requirement of various funders and their particular standards that they apply to investment in projects. So if we just take a step back and focus on the Tharisa strategy. And we've got these 6 pillars that we referred to. The first being the expansion and rollout of our business sustainably. And I think this really talks to the expansion by developing a second large-scale PGM mine open pittable low risk, as mentioned previously. This project gives us the potential to grow beyond the 150,000 ounces beyond the 20 years. It gives us flexibility in accelerating the open pit mine. And with Salene Chrome giving us some of the operational experience on ground, we're looking at investing in innovative thinking, the fast tracking of development time lines. I think that's part of our strength, the agility and the ability to move quickly with the concentrators that we've sent out, plus the test work that we're doing in our pilots melted our beneficiation site here in South Africa, replicating that in Zimbabwe. Part of our strategy was always to look at diversification, and this ticks that box for us from a geography point of view as well as a complementary basket of products. While we're in PGMs and chrome, they're different, the concentrations are different. And importantly, we get access to base metals, which we have limited access to right now in the form of copper and nickel. The financial metrics speak for themselves. And one of our key objective is to become the investment of choice in our sector. And hopefully, as we roll out the project, we will become exactly that. And then to speak to our mission statement to responsibly enrich the lives of our stakeholders. This has an impact investment at its best. We can see the impact of a very small project like Salene Chrome in Zimbabwe employment, the multiplier effect that it has on the environment on the community and the goodwill that it brings and the support not only from a governmental level but on the ground regionally as well. And we've seen those benefits at Tharisa as well, where we've been able to create 3,000 sustainable jobs and that impact it's had on the broader community is quite material. Then looking forward in terms of PGMs and the demand supply side of the equation, we certainly think supply is challenged and will be constrained for a number of years for various factors, at least of which is the South African PGM industry is getting deeper as we speak and replacement ounces are becoming more and more valuable. And we've seen the scramble and the fight for resources and the premiums of the command. So I think having this resource in our portfolio really provides us with that growth opportunity at a very low cost and a low entry point. So with that in mind, it's been a great pleasure sharing this exciting development with you all. And I believe I will hand over now to Paul and Ilja for Q&A, this is a 3D model of the mill-float circuit. You can see the 2 mills on the flotation circuits in the PGM concentrator in Zimbabwe. So thank you again all for your time.

Fantastic. Phoevos, Michael, thank you indeed for the update. Congratulations on the announcement today. [Operator Instructions] I would like to remind you that recording this presentation, along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. As Phoevos rightly said earlier, we've had a number of questions come through. [Operator Instructions]

Certainly, thank you for handing that over. I'm going to try and group these questions. I've been looking through them, I'm going to try and group them. The most important one from an operating point of view. We've got quite a few questions around how do mining costs relate, where do we stand on operating costs? Where do we stand on processing costs? And let me just look at some -- can you look at that sort of on a per ounce basis, on a per tonne basis? And what are we looking at from a G&A perspective? So quite a broad range on the operating costs which I'll hand over, and then I'll get on to the other financial questions. Phoevos?

So while we've generated the model in terms of the operating costs, we're not sharing the exact detail at this point in time as cost per ounce. Safe to say that we're in the lowest cost quartile, and we can take reference from other producers on the Great Dyke. We will be providing more detail on that in due course. The beauty of this deposit being an open pit, the mining cost is low by comparison. And we also have a higher grade throughput when compared to the Tharisa project. So on an operating cost per tonne milled, you can see here, slightly higher than Tharisa, and this is really a function of the higher stripping ratio that we're seeing at 22 cube. But there is opportunity to optimize this. So this is the initial implementation study, who are our reserve engineers and professional engineers to clear the reserve of busy running little optimizations on an optimized mine plan. So we're looking at ways of fine-tuning the mine plan and the costs around that. But safe to say that we are certainly positioned in that lower cost component. Without sharing the exact details from the model, which will be shared in due course. Ilja, I don't know if you want to comment from your side, fairly general answer to that?

No, I think you've addressed the issue, and we certainly have been committed to providing those answers. Safe to say that we've run the models backwards and forwards on the mining costs. I think importantly, which we may have addressed in the presentation is that we are looking initially at outsourcing the mining to a mining contractor and those discussions are advanced on the mining contractor that we are looking at has certainly got experience in the industry. So we're not too stressed around the numbers that we've put forward from a mining cost point of view. I think in line with this, there's quite a few questions around where do we stand? Let me group them into 3. One is what are we looking at from a sustaining capital point of view over the life of mine? That's the one. Secondly, from the current capital is the development capital tax deductible. And then being in line with that, given that we will pay royalties in Zimbabwe, what are the royalties over the project for quite a broad range and with regards to taxes and capital.

Michael, do you want to deal with that?

Sure. I'm going to come back on quite a few of these in terms of detail because we're not sharing the details of the market as a whole on some of those items. But yes, there are mining royalties and normal course as published by the government of Zimbabwe and we will continue to do those. So if you have a look at it, especially economic zones, national project status typically don't preclude the payments of those royalties. That's in terms of the existing legislation. So that's the one. I'm just reading through some of the other ones we've got you where he asked about the project economics. Of course, we've run sensitivities throughout this. We've looked at both historic commodity prices. We've looked at long-term price and analyst forecasts. And in almost all of those scenarios, we exceed the minimum requirements of Tharisa, which is a minimum return of 25% on the IRR. So I think the robust -- the economics are very robust, if you stress test, particularly regarding the pricing scenarios going forward. What proportion of $210 million of CapEx we expect to come from Tharisa's resources? If we have a look at typical funding model, and I'll talk about really typically, you'd expect to have 60-40 on a debt-to-equity ratio for a project. So we'd be looking at being required to source that 40% of the total $310 million from our internally generated sources of available facilities to ourselves going forward. So all the discussions of the financiers to date pretty much in line with standard project financing type of debt requirements. So you mentioned quite a few there, which ones of those have left out?

Yes.

We'll have to give some more detail on that. The real focus is there is a provision. It's the standard provision made for mining companies. Remembering, of course, that is a mining fleet that is not our fleet. So we're just looking at sustaining CapEx on the plant itself. The current focus, of course, is on building the plant over this next 2-year period.

Quite a broad range of questions with regards to project implementation, and let me try and group them together. One is on the regulatory side. Quite a few questions with regards to what regulatory approvals do we still need with regards to beginning the project? And in line with that, how comfortable are we with the program start and the time line to first production that we are looking at?

Yes. So the project has started. We have commenced detailed engineering. We have teams on site in Zim. And we're confident that we will start breaking ground at least on the mining side with early pits development of this calendar year, in line with the program. Early procurement has started on long lead items. We've got out of tender for mills as an example typically being the longest lead item motors, et cetera. And I think what's important there is making sure we secure and lock in the prices to avoid some of the potential inflationary issues that we may see creeping into the cost of raw materials in the future. So yes, we're on track. In terms of the approvals, we've got the most important one, which is the mining lease. So we can start mining tomorrow. The ESIA has been finalized for final approval, but we consulted the whole way through. We don't foresee any issues on that front, and that's really for full-scale mining and the footprint. So everything is in hand, and we've had the benefit of starting really in October last year with those early works program. Programs that Michael outlined earlier. And so this allows us now to kickstart the more capital-intensive component of the project, which is putting deposits on and long lead items signing the mining contracts, et cetera. So yes, we don't see any real issue with commencing the project. Now whether there are certain delays around weather issues and so forth one can't tell. But I think we've given ourselves ample time to complete the construction within this 24-month period.

Okay. The 2 questions that shoot across the Q&A. One is, again, on electricity supply, if you can just outline again where we stand on electricity and how we plan to ensure that we have consistent supply. And on the other end of the spectrum is what discussions have you had with regards to offtake of the PGM concentrate?

Sure. So as mentioned, we will be drawing 50 MVA for Phase 1 from the Selous power station in existing past substation on the national grid in Zimbabwe, located in Selous, 40-odd kilometers north from the concentrator site. So we've got approval and part of the EIA is running the power lines and included in that CapEx infrastructure, CapEx cost is running the power lines that substation in Selous to our project substation where we can draw the power. I think what's key about the Selous substation is a key critical supply of electricity in the country. So it is not subject to the load shedding that the country is well known for. And it supplies smelters and it supplies the industrial complex on the Great Dyke. And as we know, we shouldn't interrupt smelting processes for various reasons, most importantly, safety. So that was a key negotiation and a key contract secured through that substation. In terms of offtake of PGMs, yes, we have existing relationships, and we have been discussing opportunities with multiple parties and multiple outlets. And unfortunately, due to the confidentiality around it, we cannot disclose where we are with that at this stage. But there's certainly no shortage of appetite for additional PGM ounces. Bearing in mind that it is our intention you construct a smelter to handle this full volume. So at the very least, we would get to a converter that in Zim, and then we'll look at downstream beneficiation in terms of BMR, PMR. But we're running it sequentially, and the pilot smelter is part of the process to get us to that investment decision to process these ounces. And also, it depends on whether we look at expanding the second phase and the scope around that and next thing in terms of downstream beneficiation.

Something more on the people side, a question around what consultation was done with regards to the people on land and local community, what consultation have we done and obviously in the context of the ESIA? And secondly, what kind of arrangements are we looking at with regards to the mining staff? Are we looking at bringing them in from outline layers or areas are we looking at bringing them from local areas? Are we looking at constructing an entire mining campaign?

Yes. So in terms of engagement, there's been extensive engagement with the district leaders as well as the communities, farmers and inhabitants on the [indiscernible]. And without exception, everybody is extremely support of any opportunity for employment and upliftment of the community, bearing in mind that this will create an economic hub of support services from A to Z in terms of what a new project in a remote district can provide. In terms of the second part of the question, Ilja?

Which we got around to staffing and how we're dealing with staffing in site mining.

Yes. So we've built a site camp for our existing staff at Salene, and we're intending on doing a similar site establishment for our staff on site on a rotation basis. So yes, we will be building accommodation on site.

All right. Two questions. I'll let you breathe a little bit. I'll get to Michael first. The question is around on the capital side, Michael. Will the capital be spent equally? How are you looking at spending the $250 million of CapEx over the next 2 years? And then Phoevos, I'll get back to you on some of the other questions. And Michael, also, again, in line with that, what tax allowances do we have for the capital and when do we start paying tax?

All right. So the first one is on the capital profile. We do have a detailed S curve of the capital profile. It's not spent smoothly over the 2-year period. We can perhaps share with that with you in more detail later when you go into some of the project economics and a further future presentation on that particular profile. It's a relatively low spend to start with and has a very steep curve as you press along lead items and then you get to the construction program. So it's really probably a typical capital spend program. That was the first one. The next one was on the capital, yes, you get a deduction for the capital. We are in a 0 tax paying environment in terms of special economic zone and we'll negotiate further tax benefits and tax holidays going forward on the national project status. So I'm just trying to find that question again, Ilja.

No, that was something that came through independently. I'm balancing a couple of questions here. So what really is can you claim tax allowance for CapEx from when you start paying tax?

Okay. Yes, we can claim for the tax. Yes, we have a tax holiday and special terms economic zone until 2029, and expect us to negotiate a favorable tax rate going thereof in terms of national project status.

All right, Phoevos. There are some questions being raised around evaluation that we did. Have we done sensitivity? What prices did we use for the calculations? And why did we use the prices that we have and how robust is the financial model generally?

Yes. So the model is robust. We used spot prices for March. And it was really just an indication of the valuation at this point in time. It is not sensitive to CapEx, highly insensitive. It is sensitive to PGM prices. as is any project, it is sensitive to recovery and output. So what one would expect? There was a question on the discount rate. Michael, I think, touched on that. It's a blend between equity and debt rates, the 12.9%, a little bit higher than what we see in South Africa. It does take into account some country risk, and that has been calculated using the normal beaters and metrics on that front. So yes, we will be sharing more detail on later presentation around the cost structure because really it was about -- it was down to the costs per PGM ounce. The pricing is margin, but ultimately, it's about that cost and the ability to withstand the volatility and the cyclicality of the PGM basket price.

Michael, a question for you. What led to the decision of funding the initial $27 million to increase our stake by share pricing as opposed to use of existing cash resources or debt?

Right. A very good question. If we have a look at the structure reform and auction, the structure of debt includes a, let's call it, a healthier significant discount to valuation metrics that we agreed back in 2018. And if we move forward to the discussions we had with -- later as the seller, they really believe in the project. They believe there's a lot of project upside. And therefore, a share placement to them enables them to participate going forward in the upside of this project, which they'll effectively, because of the funding arrangements we had, would have been sold at a discount. So that's really the reason behind it. And the other reason as to why our preference to issue shares. And this is almost the first time. I think it's the first time we've issued shares for a transaction in our history is really to also conserve our cash to be able to fund the -- our share of the CapEx spend of this project going forward. So really in summary, two, it allows me selling vendors to participate in the upside of this project going forward, and they believe in the project. And the other one is to ensure that we have the -- not ensure, but to support the cash that we have to fund the project.

Phoevos, back to you. There's a question around the life of mine strip ratio of 22-1. Can you give some more details on that? Is there a large pre-strip is the way stripping evenly distributed throughout the life of mine?

So it being a sequential open pit mine, there are 4 pits as we mentioned. So each mine has a different profile in terms of the dip on the one hand, and then secondly, in terms of the strike link. So it will vary. And part of the optimization study that being undertaken with the mine plan right now is to look at balancing that strip between short-dated and long dated. This resource outcrops to surface, but we will only start mining from 25 meters below surface. And the reason for that is we are avoiding the oxidized zone on the metallurgical test work we've done, the recoveries are very on the main sulphide zone, whether it's oxidized and fiber. And we hit competent or fresh ore at 25 meters below surface. So there will be some pre-stripping to get access to the 25 meters. And then we're on reef and then we would pre-strip and then access the reef. Now again, the economics today have sort of dictated that we have a high wall of 100 meters. This may change over time. I mean some of the first studies that came out had a 200-meter wall. So we've scaled back considerably in terms of the open pit profiles. But it's subject to optimization and adaptation as we develop from the first open pit through to the fourth open pit.

Quite a few questions coming through with regards to -- we spoke a lot about the PGMs. How do we look at recovering the cobalt and nickel and copper? What's the strategy around that?

Yes. So we've been doing extensive test work with various institutions, universities around base metal refining. And we are looking at, let's call it, a different approach to recovering the base metals than conventional [indiscernible] that we've seen deployed. And so yes, it is our intention to recover the couple -- copper and nickel and hopefully, the cobalt. We do have positive results for it even though the concentrations are very small, the value is fairly significant. So it is the R&D team part of the process flow is the PMR BMR in post the PGM smelting. The PGM smelting is known technology. It's been done relatively easily across the Great Dyke in South Africa. And there's not much cutting-edge technology there, where there may be some new processes and new thinking is on the downstream hydromet worker. And we're busy as we speak now, with some extensive pilot test programs. But these will be longer dated. So beyond within this 2-year period, we'll get certainty around the processes and then look at pilot, BMR pilot PMR linked to that pilot smelter. So very, very similar process to what we've done at Tharisa, where we've incrementally looked at the value stream in the downstream value opportunities.

Sorry, I'm conscious of time in our timetable. I know there's a couple of questions, and I will endeavor to answer them as soon as they come through from investor meet. But there's 1 important question still outstanding is there's a couple of them flowing across here. And in regards to the ownership structure, could you explain the ownership structure again? Who has a free carry, who does not have a free carry? And there's a second part of that question, the 11% that Generation has to potentially increase their stake, what valuations are being used for that? And how would that be exercisable?

Okay. Perhaps I can address that question. This was up to slide again. I hope there we go. Right. If we have a look at that threshold, I walk our way through it. Tharisa owns 66.3%, Karo Mining Holdings, a separate intermediate holding company running across Zimbabwe, a separate Zimbabwean holding company and then the 85% flowing into Karo platinum. The 15% Generation Minerals, that is a free carry throughout the life of the mine. So there is no dilution of that or it's not converted to a normal shareholding on the exercise of the option. The option itself is one where they've got to pay cash for. So Generation Minerals would pay cash for that option to the extent they exercise it. I did see a question to say it's based on the current NPV of the project and to the extent that we've derisked that, we've spent the capital and so forth, is there any adjustment to that price? The answer to that is no. The option is exercisable at the NPV of the project as of today's date, irrespective of the developments and the progress made. And that's really part of the negotiations we enter with government. To give some of the background to this, historically, the platinum industry required a high level of indigenization. The Zimbabwean government said we are open for business, removed most of those restrictions. And this is a favorable outcome for us from those discussions where they're having that 50% free carry, but still wish to be able to participate in the project going forward, but on a paying basis. So that's the background to that particular change to the 15% and the auction. Yes, I sort of checked all those questions in one.

Yes. I think we've gone through the understanding of the structure. If you give us any closing remarks, and then I'll hand back to the organizers.

Thank you, Ilja. And just again, to thank everyone for their time and attention today. This really marks the milestone for Tharisa with our next flagship project being developed and real intent in terms of impact investing in a great geological formation known as the Great Dyke. Throughout my experiences and travels to Zimbabwe, we've been welcomed by our partners, the Zimbabwean government, and they've really created an enabling environment for us to get to this point, for us to be able to make an informed investment decision to build the next major PGM mine on the Great Dyke in Zimbabwe. So we're extremely excited. We will be building out the team and sharing some of those members with you in due course that we'll be running on the ground with this project and seeing it to its success and continued production and operations. So with that, I'd like to thank you again and wish you all well.

That's fantastic. Phoevos, Michael, Ilja, thank you indeed for updating today on the great news that you've had. Could I please ask investors not to close the session as you'll be automatically redirected for your views and aspirations post this meeting. If you could please complete that would let me take a few moments. On behalf of the management team of Tharisa plc, we'd like to thank you very much for attending today's presentation. That concludes today's session. Thank you, and good afternoon to you all.