Valterra Platinum Limited (VAL) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to our 2024 annual results. My name is Theto Maake, Head of Investor Relations at Anglo American Platinum. Before we officially start, I would like to call our stage, our floor warden, Sandile [indiscernible], just to come and take us through housekeeping and emergency evacuation protocols. Should he finish before 11:00, I think we will wait for a minute or 2 until we can officially start on the hour being 11:00. Sandile, over to you. Thanks.

Good morning, ladies and gentlemen. Welcome to the Imbizo, and welcome to Anglo American. My name is Sandile. I am a floor warden from FireOps, and I'll be giving you a safety briefing of the building. At Anglo, we do have a sophisticated alarm system. In the event of an evacuation, visual and audible alarms will activate and we will then evacuate the building. Floor wardens like myself from FireOps will guide you to the nearest fire escapes in the event of an emergency. [Operator Instructions]

Good morning, and welcome to the presentation of our 2024 annual results. So thank you for taking the time to join us both in person and online. Let me start by acknowledging our Chairman, Norman Mbazima and Suresh Kana, members of the Anglo American Platinum Board, who are here in the room with us today as well as members of the Executive Team of Anglo Plat. So firstly, I'd like to draw your attention to the cautionary statement, which we'd appreciate if you could read in your own time. So now briefly turning to the agenda today. First, I'll touch on safety, after which I'll take you through an update on our action plan, our 2024 operational performance, after which we'll spend some time with the markets. Sayurie will then take you through the financial results and our targeted capital structure. I'll conclude our outlook and an update on our demerger from the Anglo American Group. We have allocated time for questions and answers at the end of the presentation, which Theto will facilitate. So let me start with safety. Our commitment to eliminating fatalities and achieving zero harm in the workplace is our most important priority. As previously announced, I am deeply saddened by the devastating loss of 3 of our colleagues at Amandelbult Dishaba operation during the year. Our thoughts and prayers are with their friends, families and colleagues of [indiscernible] and Basanda Langeni. We have thoroughly reviewed and strengthened our safety efforts to prevent a reoccurrence. We do believe zero harm in mining is achievable. This is demonstrated by Mogalakwena, Mototolo and Unki recording more than 12 years fatality-free mining, and with Amandelbult, who prior to these incidents had recorded 3 years fatality-free. Despite the recordable injury frequency rate rising to 1.67, there was a 2% decrease in total injuries during the year. So let me provide a short summary of some of our key performance highlights for the year. We refined 3.9 million PGM ounces, which is a 3% increase compared to the prior period. EBITDA was ZAR 20 billion, mainly impacted by the 13% decline in the PGM rand basket price. Our all-in sustaining costs of $986 per 3-ounce was 13% lower than 2023 on the back of significant cost and capital reductions, which were implemented. We ended the year with a strong balance sheet in a net cash position of ZAR 18 billion, including the customer prepayment. And the Board has declared a cumulative final and an additional cash dividend of ZAR 16.5 billion, which Sayurie will unpack later in the presentation. This has translated in a total shareholder return of ZAR 19 billion for the year. So turning to the delivery of our commitments. The cost-out program has delivered ZAR 12 billion in cost and capital savings, significantly exceeding our reduction target of ZAR 10 billion. The Section 189A restructuring has been completed with approximately 3,400 roles being reduced at the end of 2024. We've also finalized the review process of our contracting companies, resulting in the off-boarding of about 400 of these companies. These measures resulted in the 2024 cash operating unit cost of ZAR 17,540 per PGM ounce, 2% lower than the prior period and more than offsetting the 7% decline in production and the impact of inflation. Our efforts placed 3 of our 4 assets in the first half of the cost curve, and we remain committed to bring all of the assets in the first half. We placed mortimer on care and maintenance in April while reducing the work in progress inventories through the stabilization and efficiencies of the remaining smelters and our processing operations. Our performance underscores our readiness for our transformation to a stand-alone PGM company. So turning briefly to our operational performance. Total PGM production was 3.6 million ounces, 7% lower than in 2023, primarily due to Kroondal, transitioning to a 4E toll arrangement from the 1st of September as well as slightly lower volumes from our own mines. We maintained our own mine production at about 2.2 million ounces with good momentum demonstrated in the second half, reflecting the stability from our turnaround initiatives implemented during the year. Our processing assets were stable, which enabled the release of work in progress inventory built up in prior periods, bringing the refined PGM production to 3.9 million ounces. And as a result of this, sales volumes increased by 4% to 4.1 million ounces. Our 2025 operational priorities continue to focus on safe production from our own mines whilst pursuing operational excellence and progressing our initiatives such as the Mogalakwena underground and the ramp-up of Der Brochen as well as the ongoing reconfiguration of our processing assets. So looking at some of our own mines and processing operations in a bit more detail, starting with Mogalakwena performance. Total tonnes mined increased by 4% to 89 million tonnes driven by the commissioning of the P&H4800 shovel as well as improvements from our loading and hauling activities. Waste tonnes mined increased by 4% to 76 million tonnes with ore increasing to 13 million tonnes, and our stripping ratio increased marginally to 5.8%. The built-up head grade of 2.7 grams per tonne was in line with the guidance, primarily due to the blending of low-grade stockpiles. PGM production decreased by about 2% compared to the prior year, partially due to the electrical failure at the primary mill at the North concentrator. Pleasingly, Mogalakwena's all-in sustaining cost improved by 17%, reflecting the benefits of the operational excellence and cost reduction initiatives offsetting the impact of inflation. For 2025, the 4E grade is expected to remain between 2.7 and 2.9 grams per tonne. However, it's anticipated, similar to 2024, to be at the lower end during the first half of the year. The mass pull reduction project is expected to be commissioned in the year as well, and the progress we continue to make on the underground studies and exploration declines will help secure higher grades, great waste rock dump efficiencies as well as minimize our haulage costs. Our strengthened relationships with the communities remain a priority, and this is demonstrated through the unlocking of land access for mining activities for the benefits of all stakeholders. So to further unpack the outcome of our pit optimization strategy, which focused on value over volume. The adjusted mine sequence will enable us to mine less waste and target a lower mining unit cost than previously planned. We intend to mine between 90 million and 120 million tonnes per annum, achieving a lowest associated stripping ratio of between 4.5 and 6.7 and a full year blended grade of between 2.7 and 3 grams per tonne over the next 2 to 3 years and then increasing back to more historic levels. We'll maintain previously guided M&C production of between 900,000 and 1 million ounces for the next 2 to 3 years, further driving a lower all-in sustaining cost which improves Mogalakwena's position on the cost curve. So turning to Amandelbult. The first -- the first year, we did see -- sorry, in the first half of the year, we did see improvements, particularly at Dishaba, driven by the crew efficiencies and the mining optimization work, which we undertook through the cost-out initiatives. Our operational activities, however, were halted at the Dishaba following the fatalities that I mentioned earlier in order to reset our safety performance. M&C production decreased by 9%, primarily resulting in those self-imposed safety stoppages. Chrome production was also affected and decreased by 8%. Approximately 36,000 ounces is attributed to the self-imposed safety stoppages. On a like-for-like basis, M&C production was 3% lower due to the continued per ground conditions at Dishaba. Amandelbult's split positions it as a cash-generating asset within our portfolio, and Amandelbult generated ZAR 3.9 billion of economic free cash flow for the year. The complex or reduction of approximately 2,200 employees were 18% of the workforce following the Section 189A restructuring. And its all-in sustaining cost improved by 11%, reflecting the benefits of the cost-saving initiatives. So going into 2025, we absolutely remain focused on improving the safety and embedding the lessons that we learned in 2024, whilst continuing to improve cash generation and delivering on our mass pool reduction and concentrator recovery optimization initiatives. We do remain confident that we have the necessary expertise and experience to mine Amandelbult, doing so safely and efficiently whilst maintaining its cash contribution to the portfolio. At Mototolo, PGM production decreased by 4% due to the challenging ground conditions at Lebowa as it reaches the end of its life. This is exacerbated by the shortage of specialized skills in the first half of the year. Despite these challenges, the introduction of a new 7-day shift cycle at the end of the first quarter partially offset this impact. Productivity improved by 3% due to the operational excellence initiatives. The Der Brochen project focused on replacing the infrastructure closures at Lebowa is in the execution phase, with production anticipated to ramp up this year. In August, we also successfully began operating the chrome plant and selling 100% of its production at market-related prices. Chrome production from Mototolo was about 52,000 tonnes, and our focus into 2025 is to maximize the yield from this plant. Turning to our processing assets. who delivered a really strong performance during the year. The built-up work-in-progress inventory from the previous years has now reduced to normal levels. The utilization of our smelters has increased to almost 80%, delivering similar volumes year-on-year despite Mortimer being placed on care and maintenance. We continue to drive further efficiencies, particularly as we commission some of the mass pull reduction initiatives as well as improved recoveries. We achieved record full year nickel production of just under 26,000 tonnes, 18% higher than the previous year, and copper production increased by 24% compared to 2023. This was once again largely due to the improvement in our operating performance and the stability that we've implemented. Our focus on asset integrity and the processing of built-out furnace matte from the prior years was a key driver in the performance. So going forward, we expect refined production to be broadly in line with the M&C production. However, this is, as always, subject to any load curtailment. We'll continue driving processing stability as well as progressing the studies to convert Mortimer to a slag cleaning duty. So turning now to the markets in which we operate. The automotive industry, as you know, is the single largest consumer of PGMs, accounting for roughly 2/3 of PGM demand. Catalyzed vehicle sales, a key determinant of demand -- sorry, catalyzed vehicle sales, a key determinant of demand, were steady in 2024, as hybrids, which do contain PGM catalytic converters are winning market share in comparison to 2023. Globally, light vehicle sales continue to grow in 2024, up about 2% -- up 2%, although be it slower than 2023, when pent-up demand was strong, but still a robust performance compared to initial market forecast. The share of battery electric vehicle sales rose at a relatively modest pace. This was in line with our midyear estimate, although undershooting forecasts made at the beginning of last year. Many of the consumers have expressed a preference for plug-in hybrids and similar vehicles that contain both batteries and engines, therefore, still requiring PGM catalysts. As we've highlighted previously, there are many global indicators pointing to a greater demand of internal combustion engines and various forms of hybrid vehicles over an extended period. Many of the largest automakers, over the recent months, have been changing their drivetrain strategies in response to consumer demands in tune with what we've been saying for some time. The slower pace of adoption as well as the scaling back of BEV commitments by some OEMs has seen auto analysts downgrade their long-term expectations for BEVs. A year ago, analysts, on average, expected about a 40% share of BEVs by 2030. Now that average is below 35% and falling below our long-held expectation. Both platinum and palladium exchange-traded funds saw sizable inflows in 2024, their best performance in many years, showing an improved market sentiment and therefore, improved demand in the PGM sector. So turning to our estimates of demand and supply. These are similar to what we expected at majeure, although platinum is in a slightly larger deficit than palladium's deficit as a result of the higher Russian production and slightly weaker automotive demand, which also affected rhodium. But looking ahead, platinum should remain in a substantial deficit, palladium should shift towards a surplus by 2026, but at a slower pace than we had expected due to the slower BEV roll that I mentioned, and rhodium should also remain in a deficit for longer. I'll now hand you across to Sayurie to take you through the financials.

Thank you, Craig, and good morning, everyone. I am pleased to be reporting a resilient set of financial results for 2024 showcasing our deliberate and decisive action plan in response to a challenging economic environment, characterized by weaker PGM prices. To summarize our performance for 2024. We achieved revenue of ZAR 109 billion for the year, 13% down from 2023, primarily due to a 13% decrease in the rand PGM basket price. Our sales volumes, on the other hand, increased by 4%, partially offsetting the impact of lower PGM prices. The implementation of the cost out initiatives delivered ZAR 12 billion of total cost and capital savings, exceeding our target of ZAR 10 billion. ZAR 7 billion was delivered from operating and overhead cost reductions, resulting in a 12% decrease in cost of sales. Our decisiveness in reducing costs resulted in an EBITDA of ZAR 20 billion and a robust mining margin of 27%. The all-in sustaining cost for the year was $986 per 3E ounce sold, well below our target of $1,050 per 3E ounces and a decrease of 13% against 2023. We generated cash from operations of ZAR 30 billion and incurred ZAR 15 billion of sustaining capital expenditure, resulting in ZAR 15 billion of sustaining free cash flow. We ended the year in a net cash position of ZAR 18 billion. Now let me unpack our cost performance for the year. We exceeded our cost-out initiative targets by delivering ZAR 7.3 billion of operational cost reductions, more than offsetting the impact of inflation. These cost reductions were achieved through various initiatives and decisive actions, including the following: the successful execution of our operational restructuring, supply chain efficiencies, consumption reduction for key consumables such as diesel and explosives and a disciplined approach to study work, reduced use of third parties and more focused market development expenditure. Looking ahead, we expect to maintain the 2024 cost run rates into 2025 to offset inflation and deliver operational savings of approximately ZAR 4 billion against the 2024 cost base. Our cash operating unit cost performance was aligned to market guidance and declined 2% from 2023 to ZAR 17,540 per PGM ounce. This was achieved despite the reduction in online production and inflationary impacts. The all-in sustaining cost for the year was $986 per 3E ounces sold, well below our target. In 2025, the planned cost savings of a further ZAR 4 billion is expected to result in a cash operating unit cost of between ZAR 17,500 and ZAR 18,500 per PGM ounce, and an all-in sustaining cost of between $970 and $1,000 per 3E ounces sold. We delivered a resilient EBITDA performance against the backdrop of a declining PGM price environment, with a PGM basket price of $1,468 per PGM ounce, the lowest since 2019. This, coupled with the strengthening of the rand, reduced EBITDA by ZAR 7.4 billion. 2024 inflation of 5% had a further negative impact on earnings of around ZAR 2.6 billion. These uncontrollable reductions were offset by 4% higher sales volumes and the cost reductions of ZAR 7.3 billion. Earnings were negatively impacted by once-off restructuring costs of about ZAR 2 billion, of which ZAR 1.3 billion related to the operational restructuring and ZAR 700 million to the demerger. The loss on associates of ZAR 1.5 billion related mainly to movement in the company's investment in AP Ventures. Capital spend amounted to ZAR 18.5 billion, a decrease of 9% from 2023. Stay in business capital expenditure was ZAR 6.4 billion, and this was mainly incurred on the capital maintenance program to maintain asset integrity, Mogalakwena heavy mining equipment maintenance and the extension of tailings facilities. The cost-out initiatives enabled sustainable reductions in SIB of around ZAR 5 billion through the reprioritization of projects and reducing the utilization of external specialists. Capitalized waste stripping increased to ZAR 5 billion from ZAR 4.2 billion in 2023, driven by revised mine plans at Mogalakwena, resulting in higher short-term waste volumes recognized. Life extension capital increased to ZAR 4.1 billion, which was mainly incurred on the HME fleet at Mogalakwena and ramping up development at Der Brochen. Breakthrough project capital remained broadly flat at ZAR 1.7 billion, focusing on the Mogalakwena footprint reduction project and the RBMR copper debottlenecking project. Mogalakwena underground project capital of ZAR 1.3 billion was incurred on the development of the Mogalakwena Sandsloot twin declines. Total capital expenditure in 2025 is expected to remain in line with 2024 spend of between ZAR 17.8 billion and ZAR 18.5 billion, reflecting our continued approach to prioritize disciplined spend. Our own mines delivered ZAR 19 billion of EBITDA, the overall mining margin of 27%, was supported by our 4 online assets with the Mogalakwena EBITDA margin of 38% and an average of around 20% for the remaining assets. This further translated into all our mines being cash flow generative for 2024. Looking at our balance sheet. Cash generated from operations in the year was utilized to fund ZAR 15.5 billion of sustaining capital, ZAR 3.1 billion on discretionary capital, and we paid ZAR 5.4 billion of dividends to shareholders, comprising of the final 2023 dividend and interim 2024 dividend. We have a strong and flexible balance sheet with net cash of ZAR 17.6 billion, an increase of ZAR 2.2 billion from December 2023. Net cash, excluding the customer prepayment, was ZAR 5.7 billion. Now turning to our capital structure as a stand-alone company. We have been largely reliant on Anglo American from a balance sheet and capital structure perspective historically. And in our view, our balance sheet is currently underlevered. The demerger provides us with a unique opportunity to construct a new and tailored-capital structure, optimized for life as an independent PGM producer. In assessing the optimal construction of our independent balance sheet and the appropriate levels of leverage through the cycle, we have factored in, our world-class resource endowment, continued investment into our operations and assets, confidence in the recent delivery of operational excellence, which has secured an all-in sustaining cost of below $1,000 per 3E ounce, and 3 of our 4 assets already in H1 of the cost curve. The above gives us confidence in our ability to continue generating positive cash flows and maintain a strong, resilient balance sheet while executing on our strategy throughout a range of possible PGM market scenarios, including one where there is continued price weakness. Going forward, we expect our leverage ratio will remain below 1x through the cycle, supported by strong stand-alone liquidity. The Board has declared a final 2024 dividend of ZAR 3 per share or ZAR 800 million, equivalent to a 40% payout of headline earnings and in line with our capital allocation framework. The Board has also approved an additional cash dividend of ZAR 59 per share, or ZAR 15.7 billion, which is considered to be the most efficient and simplest method of achieving the capital structure realignment prior to the demerger, supported by the excess cash on the balance sheet. The company has successfully undertaken additional dividends historically as and when circumstances have warranted. And we believe that this will be an attractive form of capital return to all shareholders. Our disciplined capital allocation framework will remain unchanged, returning excess cash to shareholders as appropriate. It is anchored on investing in sustaining capital, our commitment to a base dividend of 40% of headline earnings, and finally, considering discretionary capital options for upgrades and growth at the appropriate time. As discussed, in determining a fit-for-purpose independent balance sheet, we have declared a ZAR 15.7 billion additional cash dividend, post which the company retains a ZAR 1.1 billion net cash position, including the customer prepayment on a pro forma basis. This translates to an ZAR 11 billion net debt position, excluding the customer prepayment, which equates to around 0.5x net debt to EBITDA. We have had positive and extensive engagements with both local and international lender banks who have expressed strong interest to support the stand-alone business. We are well progressed on our local financing process with our U.S. dollar process not far behind. We are confident of achieving our targeted committed debt liquidity levels, and the indicative pricing levels we have seen to date are within our expectations. I now hand you back to Craig to take you through the rest of the presentation.

Thanks, Sayurie. So as we look forward to becoming an independent fit-for-purpose company, the key dates from here on our journey are as follows: firstly, we'll host the Capital Markets Day on the 24th of March, with our prospectus release date being early April, and Anglo American's Annual General Meeting taking place on the 30th of April, at which its shareholders will vote on the demerger. We remain on track for an orderly separation from Anglo American and transitioning to the new company from June, which will be listed both on the Johannesburg Stock Exchange as well as carrying a secondary listing on the London Stock Exchange. . And consistent with the commitment to deliver a responsible demerger, Anglo American intends to retain a 19.9% shareholding in Anglo American Platinum in order to further help manage the flowback by reducing the absolute size of the shareholding that will be demerged. Anglo American will no longer have any representation on the Anglo Platinum Board post demerger, and intends to exit its residual shareholding responsibly, over time and subject to the customary lockup provisions. The demerger has also presented an opportunity to review the skills, expertise and the experience as well as ways of working to ensure that we have a fit-for-purpose organization structure as a stand-alone company. We've taken this opportunity to concentrate on simplicity, clarity and operational efficiency with a focus on strong expertise in mining and processing with clear governance structures in place. This work is well advanced and should be completed prior to the demerger. So in terms of the executive team, which will lead this company going forward, Willie Theron has been appointed the Executive Head of Mining Operations, Agit Singh is the Executive Head of Processing operations, Sayurie Naidoo is the Chief Financial Officer, Yvonne Mfolo has been appointed as Executive Head of Corporate Affairs and Sustainability, Virginia Tyobeka is our Executive Head of People and Organization, Martin Poggiolini has been appointed as Executive Head of Corporate Development, and Hilton Ingram has been appointed in the combined role of the Executive Head of Marketing and Market Development. We have a portfolio of world-class assets, underpinned by an extensive PGM resource base and an opportunity as a stand-alone company to extract long-term value for all our stakeholders in a disciplined way. Our strategy remains clear, now and post demerger, and can be articulated in five key priorities all of which are measurable as we attain to achieve our objectives. Our core focus is advancing safety and health with the aim of achieving zero harm, pursuing operational excellence which will result in expanding our cash flow margins. We also continue to invest in our portfolio as we deem appropriate as we sustain profitability and target revenue growth from our world-class resource endowment, with a strong focus on generating value over volume. We'll look towards a simplified and strengthened organization as we attract, retain and bolster key leadership positions to deliver a sustainable and competitive advantage. And through active market development, we'll look to continue to drive demand for the products we produce. We will integrate sustainability into everything we do by playing a leadership role to protect and create value focused on climate and energy, ethical value chains as well as local communities. So in conclusion, we started a 2024 to set the business up for a sustainable future and have started to see the benefits of this work materialize. We've rightsized our business to deliver on our strategy through the completion of the operational restructuring. We focused on improving our operational performance across the value chain, recognizing that there is still more work to be done. The improvements in our processing operations have enabled a solid performance owing to their stability and reliability. And at Mogalakwena, the pit optimization work is yielding positive momentum and the underground studies and exploration decline developments are progressing to support the long-term value creation from this asset, and we're on track with our demerger from Anglo American to become a stand-alone PGM leader. This positions us very firmly for an exciting future. So I think that concludes our presentation. So thank you once again for joining us. I'll hand you across to Theto, who will facilitate the questions and answers.

Thank you, Craig. Good afternoon, once again, everyone. I think we will now move over to the Q&As, starting first with those in the room, at least that is not changing. And then we'll ask our moderator [indiscernible] to facilitate the ones on the conference call, then I'll come back with those on the webcast. [Operator Instructions] Then to our Exco as well as Board members, if any questions are delegated to you, may I request that you stand up and face the cameras at the back to be able to respond to those. So coming back to the room, may I just check anyone with hands and remembering to ask your name and the company you're representing.

It's Chris Nicholson from RMB Morgan Stanley. My question primarily revolves around cash generation and the dividend payment. So 3 parts, but hopefully, they all link. In the release, you note you've generated attributable free cash flow of ZAR 7.5 billion this year. So that's after all CapEx, not economic, also the growth CapEx. Could I just check with you how much the destock? So you destocked about 500,000 ounces contributed to that. I see the inventory movement to ZAR 6.7 billion. So it pretty much looks like most of it. Second question, do you have much visibility on that customer prepayments and whether it will be renewed? And then finally, just to put that together, so the way I'm seeing it is, haven't really generated much cash. We're not that confident at this stage or have much visibility on the customer prepayment is renewed. Yet you've got and declared ZAR 16.5 billion of dividends. How does that square with having a strong balance sheet into the demerger? It looks to me from the outside, like that would be a decision that's been driven by your parent rather than by Anglo Platinum?

Okay. Let me take that. So in terms of our -- the working capital benefit of the destocking, that is around the ZAR 6 billion in terms of -- so that we've reduced all our stocks to normalized levels at this point. Looking at -- so that's from an inventory perspective. In terms of the customer prepayment, so that continues until 2027 when the customer prepayments unwinds. At that point, we will look to engage with our customer to determine whether we extend that. In terms of the third question on the capital structure. So in terms of -- we ended the year with ZAR 18 billion of cash. So once we pay out this dividend of ZAR 16.5 billion, we're still in a cash position of ZAR 1.1 billion, excluding the customer prepayment, that's about ZAR 10.8 billion of net debt. In terms of the work that we've done to date to set up our business, all our assets are cash generative and that spot prices will be cash generative for 2025. And this is after we've paid our sustaining CapEx as well as our discretionary CapEx as well as our base dividend. So we believe that we will be below the 0.5x leverage or around 0.5x leverage, excluding the customer prepayment cash and will be in a cash neutral position including the customer prepayment cash. So we do believe that our balance sheet is strong and resilient and will be able to cater for the ZAR 16.5 billion additional dividend.

Gerhard Engelbrecht from Absa CIB. Just two questions. One is around the cost savings. Can you maybe give us -- I see the biggest chunk of the cost savings come from consumables. Can you give us an idea how much of that is price and how much of that is efficiency? I guess I'm trying to figure out when the prices move against you, how much of that is sustainable. And then secondly, you guide to a strip ratio of 4.5% to 6.7% at Mogalakwena. Can you maybe give us just a little bit of an indication of when you're going to achieve what 6.7% is quite high? And what are the -- what's the time line in terms of your strip ratio in your forecast period?

You want to do the -- I'll quickly pick up the strip ratio.

So in terms of our costs, so on the ZAR 7 billion, so about the people reduction aspect of that was about ZAR 1 billion. We then had overtime reductions and contracted reduction. So that's another ZAR 600 million or so. The other aspect was inflationary rejection. So we have renegotiated a lot of our procurement contracts, and that was about ZAR 0.5 billion. In terms of consumables management, about ZAR 1.1 billion of that was in terms of efficiency-related management, so consumption management on diesel as a result of the Mogalakwena replan, our chemicals, tires, et cetera. And then we've also looked at supply chain spend management is about ZAR 800 million. So that's looking at some of our tail spend, an alternative part sourcing, et cetera. The last part of that was sundry expenses, so about ZAR 2.5 billion related to our corporate costs, some of our market development expenditure and study costs. So after the ZAR 7 billion from a consumable perspective, about ZAR 1 billion of that was your consumption-related reductions.

Just in terms of the question around the stripping at Mogalakwena. So stripping will increase in 2025 to around about 6.5%, and then it will decline thereafter down to around about the 4% for the next few years, and then it will step up again at the end of the decade. So that's sort of roughly sort of timing.

2025 is almost like a peak.

2025 is a peak for the next few years. And you'll see that coming through in the guidance that we've given with regards to waste capital for 2025.

Nkateko Mathonsi from Investec Bank. I have a follow-up question on the free cash generation, especially looking at Amandelbult. The free cash from Amandelbult seems to be totally related to chrome revenue, which is about ZAR 3.9 billion, and that increase to the free cash that was generated at Amandelbult. So my question is, how are you looking at an operation considering that chrome prices came under pressure? I do not know where chrome prices go from these levels, but it would seem that, that operation is highly dependent on chrome price. So how are you looking at that operation going forward, especially from a free cash generation perspective? It was actually the highest free cash generator compared to all the other operations. And then my second question also relates to your balance sheet that has at this point in time a weakened. And how are you looking at Mogalakwena CapEx, should basket price actually not improve? Or maybe I should ask it this way. How are you looking at your CapEx in general? What flexibilities do you have within your CapEx? Should the basket price remain challenging for the next 2, 3 years? The last question is actually on the 19.9% retained by Anglo. You said there is a customary local provision. I don't know what that means. So if maybe you can share a little bit more.

Okay. Thanks, Nkateko. So if I can, I think, yes, certainly Amandelbult has benefited from the higher chrome prices that were realized in 2024. We'll come back to you with the exact same split because I have -- I have a different number in my head, but we'll go with -- but certainly, based on current spot prices, Amandelbult should be able to generate similar levels of cash in 2025 and thereafter. And that's really on the back of some of the operational efficiency work that we've done, realizing the full year benefits of the restructuring that we implemented in 2024. That will support Amandelbult going forward. . Clearly, we've got further work to be done, particularly as we drive improvements in safety and operational discipline. But as I mentioned, I'm really comfortable and confident that we've got the right expertise and skills to be able to take that forward. But yes, acknowledging we've got work to be done at Amandelbult. But given it's pro split, given its contribution to the portfolio, generating that level of cash is an important component of our portfolio going forward. And in terms of the balance sheet and Sayurie, I'll try and then jump in where I go horribly wrong. But in terms of the capital profile, I mean, I think we've been very, very clear in terms of where we see the opportunities for Anglo Platinum going forward. And that's very much linked back into investing into the business. I mean that's focused not only on sustaining capital and ensuring the asset's integrity and reliability of our entire value chain but also then progressing some of the longer-term options that we have. So we'll continue to invest in Der Brochen in terms of ramping up production from Mototolo, in terms of sustaining its production profile. And we'll continue to invest in the underground at Mogalakwena. And we're going to complete those studies. The pre-feasibility study should finish around about the middle of this year. We're going to feasibility study thereafter. Hopefully, with the decision to be taken at the end of 2026, into early 2027, and then we'll sort of ramp up production, particularly from Sandsloot over that period of time. But back to what we've -- who we are as a company and what doesn't change for us going forward. We'll maintain that capital discipline. So projects need to deliver value, and we're not going to drive value over volume. That's very, very clear. So if a project meets the hurdles and meets the criteria that we set for delivery, then we'd look to execute that project. Based on the evaluation that we've done and based on the sort of the market outlook, et cetera, we're comfortable with this level of gearing and certainly targeting below 1x debt to EBITDA through the cycle. And then in terms of Anglo American retaining its 19.9% stake. It would be customary if you have the certain provisions placed in terms of lockup in terms of exactly when those shares will be sold. And that's a process that we're engaged with Anglo at the moment. But that's entirely similar to I think what's been done in other transactions that the Anglo American Group has been involved in and other demergers from other corporates. But I think the one thing is what Sayurie said, associated with that. It certainly helps sort of deal with some of the flow back initially upon demerger. And doing that and doing -- and the sell-down post demerger in an orderly manner will certainly, I think, help address some of the concerns that people have with respect to a full demerger come due.

Whether there's any other questions in the room? If not, I'm going to move over to our moderator, [ Denis ]. [ Denis ], any questions on the conference call?

We have a few questions. The first question we have, comes from Jason Fairclough of Bank of America.

Two quick ones for me. First one is on the LSE listing, second one is on the portfolio. Firstly, just in terms of the listing, I think you say in the release today that the London listing will start around the time of the demerger. I was just wondering why are you waiting so long? I mean, would it make sense to maybe have to start to trade sooner? Second one here just on the portfolio. I guess, do we see a future for all of the current mine at Anglo Platinum today? Or is it possible that some of these mines might be better owned and operated by somebody else?

Yes. Thanks, Jason. Thanks very much for the question. So with respect to the demerger, just sort of the time frames that are required in terms of the submission of documentation, the approval of that documentation, various shareholder approvals, et cetera, it's unlikely that we'll be able to bring forward the secondary listing earlier than the middle of the year. And we've looked at that quite extensively, and this is the most optimized timeline that we have. In terms of the portfolio of assets, clearly, we've looked -- we've been through what our strategy will be as a stand-alone company going forward. The assets that we have within our portfolio clearly have a role to play in how we look to deliver on that strategy. And so I think there's still further value that we can extract from the portfolio of assets that we have. But as you would expect, we'll continue to evaluate that over the years to come. But for now, our predominant focus remains on extracting the value that we can from the assets that we have and delivering on our commitments that we've made to the stakeholders.

The next question we have comes from William Dalby of Berenburg.

First question is, how much demerger expense expected in '25? And to what extent is the Anglo Group contributing to covering those expenses? And then just second question, the mass pull reduction strategies you set out in the '24 action plan. I'm wondering if you could maybe unpack a bit more how that's been implemented and perhaps maybe quantify the value you expect it to add to the business as a whole?

I'll take the cost question.

And I'll ask you just to comment on the mass pull reduction.

Okay. So in terms of the ZAR 700 million that we've incurred in 2024, about ZAR 400 million of that relates to the restructuring that we've done at the corporate office as we stand up our structures as a stand-alone entity as we become a more agile organization. The ZAR 300 million related to advisory costs that we've incurred to date. I think over the next 2 years, we expect to incur further costs related to the LSE listing as well as regulatory requirements as well as further advisory costs from a legal perspective from a banking perspective. In terms of separation costs, we do expect that there will be some separation costs for example, disentangling our IT systems as well as rebranding. We are still in discussions with Anglo American in terms of those costs and how we will be splitting those, and we'll have more clarity at our Capital Markets Day, where we can share the quantum of that.

So I'll take the question on the mass pull The work has been progressing really well at Mogalakwena. The Jameson cells largely in place, and we will be commissioning that in the next few weeks, and we expect to see the benefits on mass pull realized in parts. Firstly, this year, we'd see probably a reduction down to about 3%. And in the out years we'd see that going down to about 2.7%. The benefit of that is quite significant, particularly from a transportation point of view, around low volumes, higher grade material, and obviously a positive impact of that on our smelting operations from a specific energy consumption point of view. So we're progressing very well and quite confident that the technology is on track and will deliver what it needs to deliver. At Amandelbult, we had a couple of setbacks last year, but that's largely back on track. The re-cleaner circuit has been implemented. Our recoveries in the last quarter of the year back up at [indiscernible] and our mass pulls are trending definitely in the right direction, and we expect to see those benefits coming through as well in H1 of this year. Really good work done at Mototolo, pretty much achieved the targets we set ourselves over there. So good progress. So overall, the progress on the mass pull project is going very well. Obviously, if you look at the numbers, in terms of tonnes smelted, versus the number of smelters that we actually had in operation with [indiscernible]. We had better utilization, a 9% drop in the volume of tonnes processed and only a 2% reduction in the answer. So it shows that our strategy is actually working. And we'll see that full benefit coming through between 2025 and 2026.

The next question we have comes from Ephrem Ravi of Citigroup.

So 2 more questions [indiscernible] with Anglo on the exact cost allocation for [indiscernible] and things like that. But on an ongoing basis, do you expect the allocation from the head office, which you would obviously see more than offsetting the incremental ongoing costs, things like secondary listing, IT, et cetera? Is that kind of your working assumption when you're thinking about the demerger? Secondly, in terms of going forward and separation, would there be any kind of non-compete clauses with Anglo? For example, if there is a copper mine in South Africa that comes up, would you have sort of right of refusal loss, something like that?

Thanks, Ephrem. Thanks for the questions. First of all, just very briefly. I mean, certainly, as I articulated in terms of the way we're looking at the organization going forward, is to be a much more agile, streamlined company. And I do think that will create opportunities for us to be able to reduce our costs into the longer term. And so I do think that in time, you should see some sort of benefits coming through from lower costs associated with some of the corporate activities that we have. But that will come in time once we exit some of the transitional service arrangements and we do some of the reconfiguration -- sorry, complete some of the reconfiguration that we started at the end of last year. So the short answer is yes, but it will take a little bit of time for that to come through. And then in terms of the non-compete and in other commodities, I think as I've articulated in terms of our strategy, we're a PGM producer. We own the PGM assets in South Africa. That's where our focus will be. And I'm sure that Anglo American will continue to invest its capital where it is the highest value returns for its shareholders.

The next question is from Allsop of UBS.

A few quick questions. First of all, could you give us a sense as to what proportion of the PGM industry do you recognize as cash flow negative at spot prices today and obviously saying, well, your assets are free cash flow positive. But what proportion of the industry as a whole, do you think free cash flow negative? Maybe as well, just to clarify with the refined -- total refined, including third-party tolling. How that is progresses since you've closed 1 of your 3 smelters, what does that total refined including third-party progress from and to? And when do these contracts come up for renewal? Because obviously, one of the important changes is this focus on profitability with processing third-party ore. So when could we see kind of sometimes coming into the markets and better margins on that processing of third-party ore, first couple of questions?

Thanks. And so just in terms of the processing of third-party materials. So we refined about 3.9 million of our own material. So that's our own product plus about -- yes, sorry, yes, with 2.9 million ounces, majority our own material and some from third parties. The tolling arrangement that we have with Sibania that comes to the end of its contractual term at the end of 2026. You've seen some of the movement of the processing of kroondal under POC arrangement moving to a toll arrangement, that also comes to the end in 2026. And then you will see some of this under material, which we currently do under a POC that moves to a tolling arrangement in 2026 as well. And so all of those things -- sorry, pick up on 2025, and so those things are under flex and also under movement. And we've been very, very clear that our position around this is value over volume, and we'll continue to ensure that we've got -- that we utilize our facilities in order to realize that value from our assets. And given what we've outlined from Mogalakwena and the opportunity around there, we can certainly use the capacity that we have and also linked back to the opportunity for us to repurpose converted slag and reduce some of the working capital that we have.

And maybe just to add in terms of the numbers. So the 3.9 was from our own mines, but from a tolling perspective it's about 600,000 ounces. So that takes us to about 4.5 million ounces. And going forward, that mix changes. So the tolling because of Siyanda moves to about 900,000 ounces.

So Myles, could you please remind me of your first question.

It was what proportion of the industry's cash flow...

Yes. Sorry. Thank you. So look, I think I've seen various estimates sort of ranging from -- round about 30% to 40% is cash flow negative. I mean clearly, we're all in a reporting cycle at the moment, and we'll have to see what that looks like when everybody else has reported.

You agree with that 30% to 40% is broadly what you would expect from your knowledge of your competitors?

I may have a view around what that is. I think, Myles, for us, I mean, I think there's clearly -- we've done a significant amount of work in terms of readjusting our cost profile. And some others have also done some work in that particular space and others haven't. So it will be interesting to see once they release their results, where exactly they are and how sustainable that is going forward.

Any other questions from -- I will take one last one and then move over to the webcast.

I have a couple of questions. My first question is on our medium-term strategy. How is it likely to change post the completion of demerger? And can we expect some diversification away from PGMs? And my second question is on Mogalakwena underground...

We are struggling to hear you. Not sure to be whether it's our connection there...

Sorry, sorry, let me repeat my questions. So my first question is on your medium-term strategy? And how it is likely to change post the completion of demerger? Can we expect some diversification away from PGMs? And my second question is on Mogalakwena underground. Can we expect a clarity in terms of grades, cost, CapEx, et cetera?

Okay. Thanks very much for the questions. So in terms of our strategy for the -- from here on now and post demerger, as I've said, I mean, we are a PGM producer. That's who we are today. I mean I think there's certainly a value that we can extract as a PGM producer into the future, and we can extract that value from the portfolio of assets that we have. And so our focus is really around extracting the values from the PGMs that we have within the portfolio. And we're not at this stage looking at any other commodities or other jurisdictions, but really focusing on both -- on all the assets and the entire value chain in terms of how we achieve the results that we are looking to achieve. In terms of the Mogalakwena underground, that continues to progress, as I said. It's in pre-feasibility study at this stage. And we'll move into feasibility stage at the second half of the year. And as we get more details, then we'd look to provide you with that update in terms of the volumes, the potential grades and also -- and the associated costs and capital. But it will be preliminary based on the state of the information that we have. But certainly, the results that we've seen from the drilling and some of the work that we've done so far to date, we're really, really encouraged by just -- and just reemphasizes the quality of the resource base at Mogalakwena. And certainly, the grade and certainly the benefit that we will have from the polymetallic nature of that ore body. And I think through the way we'd look to mine it, I'm confident that we'll be able to extract the value that we should from this resource base.

So perhaps let me move to the webcast and then I'll come back to the last question on the conference call. So Craig, your first one is from Rene NovaCapital. One comment and 2 questions. So the first comment is very nice, all-in sustaining costs decrease and exit dividends. So that is more complementary. And then his questions. One is what is the probability of U.S. imposing sanctions on PGM exports from South Africa? And then the second question is on safety. Just quickly find it. So his question on safety is following the fatalities at Dishaba, will you be looking at cutting back at the more dangerous areas for mining at Dishaba?

Okay. Thanks, Rene, for the questions. In terms of sanctions being imposed on PGMs from South Africa. Look, I think I'm not entirely sure what that necessarily achieves and given sort of the necessity of PGMs being used in the automotive sector and the automotive sector is a key component of the U.S. economy and the U.S. way of life. So I mean, I think just generally, sort of the outlook for PGMs remains really robust. I'm not overly concerned around some of the geopolitical machinations, which are taking place at the moment. What we really need to be focused on is what are we doing within the business. But I think some of this will settle down and really then support ongoing automotive demand and consequently, demand for PGMs. In terms of the safety at the Amandelbult. Look, I mean, actually, we've -- the 3 fatalities at Amandelbult were really, really tragic and something that we've taken really to heart and certainly continuing to look at in terms of how we learned from those lessons, what can we do differently. Some of the actions that we took at the end of last year in terms of the self-imposed stoppages, really getting back to the basics and getting back to safe mining. So it absolutely remains a core for us in terms of -- and the modernization of Amandelbult, so looking through support, looking at lighting, looking at other forms in terms of how we can move material underground, but more importantly, just ensuring absolute compliance with our standards and our procedures will help us eliminate the fatalities that we've seen. But -- and we'll continue to take a very pragmatic and robust approach such that we're not putting people in harm's way as we undertake the mining.

Okay, understood. And then the next question is from David Fraser from Perry Green, 2 questions from him, so one is on Thungela. So he says when Thungela demerge, they refer to looking at costs from Thungela versus Anglo lens. So the question is, have you already been through this process? Given the notice and have you -- do you perceive there are more cost savings to come? So that is the first one. I think that's it from him for now.

In terms of -- I mean, as I mentioned from a cost perspective, we're still looking at our separation costs. And as Craig mentioned, from an end stage perspective, we do see some benefit from being a more agile organization that will come through, and that really impacts our corporate overlay. From an operational perspective, I mentioned the ZAR 4 billion additional cost savings that we're targeting in 2025. So that's purely related, and that's irrespective of the demerger.

And then the next one is [indiscernible]. So has the impact of 2020 from [indiscernible]. Has the impact of 2024 restructuring on earnings over? Or will we -- could we expect some more impact of 2025? First question. So one is restructuring on earnings over? Or can we expect more? The second question is your targeted leverage ratio of 0.4x. Is this excluding prepayment? Then the third one is on Amandelbult. Is there any possibility? I think this has been answered already on M&A with Naidoo.

Okay. Do you want to take the restructure?

On the restructuring, so part of that restructuring cost, about ZAR 1.1 billion of that was related to the operational restructuring that we incurred at the beginning of -- we undertook at the beginning of the year and some related expenditure on that. And as I mentioned, there were some costs relating to the demerger, and that will become more clearer towards the middle half of this year in terms of what their cost would look like. So yes, there will be further restructuring costs, but the quantum of that we're still looking at.

Second.

Under 0.4x net debt, so I mentioned 0.5x net debt leverage ratio, and that is on a pro forma basis if we exclude the customer prepayment cash, so we had ZAR 5.7 billion cash, excluding the customer prepayment. If you then pay the ZAR 16.5 billion dividend, that takes us to about 0.5x net debt to EBITDA.

And our philosophy is roughly sort of below the 1x debt-to-EBITDA through the cycle, and that's how we've looked at the pricing balance sheet. In terms of your question around Amandelbult, I think I have answered it. Amandelbult in the portfolio is clearly a generator of cash, and we've got further opportunities to be able to extract further value from that, and that's where our focus is.

Understood. Just taking the last question on the conference call. Is it Adrian from Standard Bank. I've got a very long question from here. Is it Adrian, can I then move over to the conference call.

The question we have comes from Adrian Hammond of SBG.

Congrats on the performance, given the year-on-year improvement [indiscernible] was really, really good and hopefully can continue with that. But I just want to circle around to the demerger, the aim is waiting first demerger, where do you see that assuming 19.9% is retained by parents and is that19.9%, and overhang do you think?

So thanks, Adrian. Thanks for the comment. Look, I think the 19.9% certainly helps deal with some of the flow back that would have anticipated as part of the demerger. I expect that there will be an orderly reduction of that 19.9% over time. And I think that will certainly once again be done in a disciplined way. I think more importantly for us is we need to -- when looking forward and if you take the quality of the assets that we have, the work that we have underway in terms of driving the operational performance, sort of the outlook for PGM prices, and then the work that we've done in terms of restructuring the business to where we are today, I think that does set ourselves up for a very, very good future and an attractive value proposition. And then it's on that basis that I think will get a significant amount of interest and some really happy shareholders going forward. And maintaining the capital allocation framework that we have going forward, I think certainly sets us apart from the rest in the PGM industry.

And just on the way [indiscernible] would want to position ahead of the demergers, so have you done any work on the way to post demerger?

And the indexing, I think I need to come back to you, Adrian. Sorry, there has been work done. I think we just need to -- just make sure that it's updated.

[indiscernible] in the room, but I'd love to hear his comments on what opportunities in mining he is seeing? I mean in those early days, but he knows a little less is pretty well.

Yes, Willy is in the room. So I'm very happy to put him on the spot.

Thank you for the question, Adrian. I have been able to go into a few operations I've been at Mogalakwena. I've been at the Amandelbult operation, those shafts. And I think given the portfolio that Craig has alluded to, there's always some opportunities that we can still match. So I think one thing is that the assets are some good nick. The engineering aspect of those assets in good nick, and the work that has been done thus far, as we lease it those assets up to really extract the value going forward. I think the aspect of the demerger is really exciting in terms of agility that can come with it. And then I think that's where a lot of value can still definitely be extracted on those assets. I think decision-making is going to be a lot more agile. And generally from what I've seen from the Anglo Platinum employees, there's solid people working for Anglo Platinum. There's good skills working for Anglo Platinum, and this will give them the opportunity to really bring that to the fold. And also generally, I still need to go and see some of the other operations, but definitely the ones that I've seen thus far is I'm very excited to be part of this company and very excited to the possibilities that this will unlock. Thanks, Willy.

Thank you so much Craig. So I'm just going to read out 2 last questions for the day. First one comes from [indiscernible] from Nedbank Private Wealth. So Edward PGM price does Mogalakwena become financially unstable -- unsustainable apologies. In terms of the basket price, how far are we off from the worst case scenario. For example, will a 15% additional decline in the basket get us to the worst case scenario?

So I think it's a really interesting question. I mean, we've set seen the decline in PGM prices are still 13% lower than where they were in 2023, but relatively stable last year. We've obviously done the work in terms of reducing Mogalakwena's cost by 17%. And I think if prices decline by that level, a significant proportion of the industry will be in some serious trouble. And just given where Mogalakwena is on the cost curve, how sustainable that level of pricing will necessarily be, I'm not sure. But we'll need to take the sort of the appropriate action if we see that, that's a long-term sustainable price. And then we'll take the appropriate action as we did in 2024 to ensure the sustainability of the business and ensuring that we create the value that we think is really there. So I think, certainly, just based on the fundamentals, from a PGM perspective for both platinum and palladium and rhodium. I certainly don't see that as a long-term price outlook, but I'm not saying that it can't happen in the short term.

Last question for the day. Are you in a position to do any share buybacks?

So in terms of the capital allocation framework, which Sayurie spoke about earlier, very clear for us, generate the cash, invest back into sustaining CapEx, pay an earnings-based dividend of 40% and any additional cash, which remains will reinvest it back into the business in terms of the growth projects that we have provided they meet the requisite returns. And if they don't, then that extra cash will be distributed back to the shareholders. It will either be distributed back to the shareholders in the form of a dividend or will consider a buyback, and it all depends on the circumstances at that time. And that capital allocation framework has not changed and will not change post the demerger.

Thank you, Craig. Ladies and gentlemen, that brings us to the end of our 2024 annual results. Thank you once again for joining us in person as well as online. So many of you will be seeing you on the road for the next 2, 3 weeks. So thank you so much.