Earnings call: Pan African reveals robust 2024 final results with growth plans

In the 2024 Final Results Presentation, Pan African Resources (ticker: PAF), led by CEO Cobus Loots, reported a successful year with a 30% increase in profit and a strong dividend payout. The gold mining company has capitalised on high gold prices, producing over 186,000 ounces of gold—a 6% rise from the previous year—and is on track to exceed 200,000 ounces in 2025 with the new MTR operation. Loots emphasized the company's commitment to safety, sustainable operations, and community engagement, as well as a strategic focus on maintaining a diversified asset base.

Key Takeaways

• Pan African Resources reported a 30% profit increase with a strong dividend, despite significant capital reinvestment.
• The company produced over 186,000 ounces of gold in 2023, a 6% increase from the previous year.
• MTR operation is expected to contribute to exceeding 200,000 ounces of gold production in 2025.
• The Evander underground operation's new shaft and Fairview's high-grade ore discovery are set to boost production capacity.
• Revenue rose by 17% to $374 million, with EBITDA up 23% to $141 million, and attributable earnings increased by 30% to $79 million.
• Proposed dividend for FY 2024 is ZAR489 million, a 22% increase from the previous year.
• The company has locked in 31% of its gold production at favorable prices through a synthetic gold forward sale transaction.

Company Outlook

• Pan African aims to leverage high gold prices for long-term production growth.
• The company is nearing completion of its MTR project, with the first gold pour scheduled for October 3, 2024.
• Long-term production is expected to stabilize at around 250,000 ounces annually without the need for immediate new projects.
• Pan African remains focused on execution in key areas and is committed to socio-economic and environmental benefits from its operations.

Bearish Highlights

• Net debt increased by $84 million due to capital expenditures, primarily for the MTR project.
• Exploration in Sudan is scaled back due to ongoing conflict, with a carrying value of approximately $5-6 million.

Bullish Highlights

• The MTR project is expected to be completed under budget and ahead of schedule, with a payback period of under 3 years.
• The Evander underground and Fairview operations are expected to significantly enhance production capacity.

Misses

• The Consort operation is currently underperforming, with efforts in place to reduce costs.

Q&A Highlights

• Concerns about illegal mining at the MTR site were addressed, with positive collaboration with law enforcement reported.
• The dividend policy remains at 40% of cash flow, with a proposed 52% payout this year due to strong cash flow expectations.

Pan African Resources has demonstrated a strong financial performance and is poised for continued growth with strategic projects nearing completion. The company's focus on responsible mining practices and community engagement, alongside prudent financial management, positions it well in the South African economic landscape. With major investments in its operations and a commitment to safety and sustainability, Pan African Resources appears to be on a solid path to delivering value to its shareholders and stakeholders alike.

Full transcript - None (PAFRF) Q4 2024:

Cobus Loots: Good morning to all of you, and a warm welcome to our 2024 Final Results Presentation. Thank you very much for taking time of your schedules to join us today. We will keep the presentation fairly brief with an opportunity for questions afterwards. Joining me and presenting today will be Deon Louw, our Financial Director. You're welcome to refer to our SENS or in Ace announcement and to the supplementary information available on the Pan African website, should you require detail not dealt with in today's presentation. Please note the disclaimers and information on forward-looking statements on Slide 2 and Slide 3. Pan African strategy is to position ourselves as a safe and sustainable, high-margin and long-life gold producer. I believe the last year, again, demonstrated Pan African's resilience our ability to generate attractive returns on our assets to grow in a responsible and value-accretive manner and to continue to pay a sector-leading dividend to our shareholders. In terms of dividends, we have paid almost $200 million to shareholders in the last 10 years. Today also marks the 10th instance that I am presenting the year-end results as Pan African CEO. Reflecting on the last decade, it would be fair to say, the group, on occasion experienced tumultuous times. We don't get everything right all of the time. I think that is not possible in business, and certainly not in mining. What is, however critical, is to demonstrate tangible value creation for all stakeholders over the long term. And I believe Pan African can be proud of our record in this regard. Today, we have the added tailwind of a gold price pretty much at record highs in U.S. dollar and rand terms and also a generally bullish view in the market on the metal short- and medium-term prospects. Let me assure you that the gold price windfall will not be wasted on Pan African. We are using the opportunity to invest into our assets for the long term to deliver on production growth that will benefit the group for many years to come and to continue to provide excellent returns for our shareholders. We are incredibly excited about our prospects for the next years, and I look forward to sharing some thoughts and further detail on many of our initiatives and plans in the following slides. On slide number 4, an overview of the presentation. We'll start with Pan-African Health and Safety performance, which is obviously critical in our business, and then provide an overview of the group and our operating environment, some key features from the past year, including our new exciting operation at MTR and detail on asset performance as well as our cost and capital outlook. We will then spend a couple of minutes on ESG before allowing Dion the opportunity to highlight elements of the group's financial performance for the 2024 financial year. The presentation will then conclude by outlining focus areas for the year ahead. If we then proceed to Slide number 6, our safety performance and our journey to Zero Harm. We continue to focus on safety initiatives and interventions and on maintaining an industry-leading record. We can also celebrate a number of safety milestones achieved during the last year. During our interim results, we report on the tragic fatal accident at Elikhulu earlier in the year. We are doing our utmost to ensure that the group has a safe year ahead. Slide number 8, a high-level representation of our unique portfolio of surface re-mining and underground assets. The addition of MTR or Elikhulu Mintails means that we now have three large mining complexes in South Africa, surface operations, reduce unit costs and turn legacy liabilities into profits, whilst the underground provides long life of mines, solid returns on investment as a result of a large sunk capital base and also attractive optionality, which we are bringing to account in a circumspect and considered manner, as demonstrated by our progress on the Evander underground. If there is one takeaway from this slide, is that we are growing profitable production very materially in the years ahead. We expect to be well north of 200,000 ounces of annual production in 2025 with MTR coming online. Pan African might not be the biggest gold miner, but -- and that is also opportunity. None of the majors can grow their production by 25% or more in a short space of time. This is what we will do in the next year. Slide 9, the coming year will also see us moving towards an even more balanced portfolio of low-cost and stable surface re-mining and high-grade, long-life underground assets. This asset mix should also reduce our group all-in sustaining cost profile, with both Elikhulu and Mintails, producing at an all-in sustaining cost of approximately $1,000 per ounce and the BTRP even lower. Slide 10, a bit more detail on our current asset mix. I think what is very helpful is that all of our assets now have extended lives, with the shortest life being a BTRP at 7 years, which is still quite a while. If we compare ourselves with the rest of the sector, many producers are running out of life on their assets or have to spend massive capital for future production, not the case for Pan African. We do not have to go and acquire more assets to maintain and grow production. Slide 12, our operating environment. We continuously seek ways of making our business less susceptible to adverse external impacts in South Africa. Some matters to highlight in terms of our operating environment over the year include the following: I think before the fact, there was significant concern around the South African general elections, which were held in May this year. Following the free and fair elections and the successful formation of a government of National Unity, we are definitely seeing some green shoots, so to speak, and quite a bit of optimism in terms of the South African economy. South Africa enjoyed strong foreign investment inflows over the last months. The Johannesburg Stock Exchange saw an over 5% uptick over the last 2 months, and SO bonds have also surged. The rand has been the best performer amongst the group of leading emerging market currencies against the U.S. dollar over the last month. And this trend can improve further, should we see positive reforms coming from government. Pan African is reducing our reliance on Eskom, South African electricity utility. So, more information on this in the ESG section of this presentation. Also, positively, South Africa has now experienced more than 100 days without any load shedding. In terms of title, Pan African assets have long lives with extended mining rights. The Evander's complex rights are valid until 2038 and those at Barberton until 2051. MTR's new auto-mining right is currently valid until 2029, we will obviously seek extension in due course. As far as stakeholder interaction is concerned, we invest heavily in our social license to operate. Pan African mines make a meaningful positive impact in the areas where we operate. We also announced a 5-year wage deal at Barberton this year, which will provide stability and the ability to further optimize this operation whilst limiting cost increases. Finally, from a security perspective, our efforts to safeguard our people and operations and minimize the impact of illegal mining and criminality are ongoing. I'm pleased to report that the people of [indiscernible] and Krugersdorp can already see a marked improvement in their area since we started our work at MTR. To conclude on this slide, Pan African's track record demonstrates that we can operate and grow in South Africa and do so very successfully. If we then proceed to key production costs and financial features from the year past on Slide 14, some of the highlights from 2024 include the following: we reported an improvement in overall safety rates. We produced just over 186,000 ounces of gold, an increase of more than 6% when compared with the previous year. Our team did well in terms of managing costs with a globally competitive all-in sustaining cost for the group. We are reporting an increase in profits of more than 30% with very manageable net debt levels and healthy liquidity. It is worth our noting that the U.S. dollar gold price only really started surging late in the financial year, and therefore, the full impact of the higher price should only come through in the year ahead. Gold in U.S. dollar terms is currently at approximately $2,500 per ounce versus the circa $2,080 we received in the financial year. And despite all the growth and capital reinvestment, we are able to maintain our sector-leading dividend to shareholders. Slide 15 should be an interesting one for our investors, demonstrating how nicely we have expanded margins in recent years, and this excludes any contribution from MTR. We believe that if we deliver our share price should take care of itself, and the recent while has reaffirmed this view. That being said, I think we are still in a strong position to benefit from the current gold price environment and from our own growth plans in the time ahead. If we then move on to more detail on the performance per operation, starting with Elikhulu on Slide 17. This really is a flagship asset for the group, 9 years of production remaining, producing at just over $1,000 per ounce. Our team managed to increase both production tonnes and recoveries through the mining of the Lazy Bracken tailings facility, with gold production increasing by some 9%. We look forward to another year of more than 50,000 ounces of production and clearly excellent cash flow generation and the current gold price environment. The asset generated $57 million of EBITDA in the last year. We are currently completing Phase 3 and Phase 4 of the Kinross tailings facility, the final expansion. These will be delivered on budget and on schedule in the next months. As we've said before, we are also carrying all of the learnings on building and operating Elikhulu over to MTR as we ramp up operations there. Slide number 18, BTRP, another sterling performance from our first gold tailings retreatment plant commissioned in 2013 and the lowest cost producer in the group. The BTRP management team also again deserves special mention, managing to reduce unit costs of production. I think very exciting news for the BTRP is that we have now managed to extend the life of this operation from surface re-mining only to 7 years. We will be reprocessing the Bramber tailings storage facility and other sources, again. The capital requirements for this new initiative is also relatively modest, around ZAR100 million or some $5 million for a new pump station and then a new tailing storage facility for all of the Barberton complex in due course. So, the bottom line, BTRP will continue to form an integral part of Pan African tailings retreatment story for many more years, and also allow us to develop Royal Sheba at a much slower pace. NTR on Slide number 19. Large-scale construction on site is now nearing completion, and we will be pouring first gold at this operation on the 3rd of October. Yes, the 3rd of October of this year, the project will be delivered under budget and ahead of schedule, which you will appreciate is not a common in the mining industry. We have built all of the plant and infrastructure in a little over 14 months, a testament to Pan African's ability to secure, conceptualize, fund and then execute world-class mining projects. In the current gold price environment, the payback on this $135 million initial investment should be under 3 years with a project life of more than 20 years, when we include the Soweto reserves. In terms of the Mogale cluster metals, the life is 13 years with total gold recovered more than 600,000 ounces. Additionally, the Soweto cluster consists of more than 130 million tonnes of tailings currently containing a mineral reserve of more than 0.5 million ounces of recoverable gold. This mineral reserve will extend MTR's life from 13 years to 21 years. Total gold recovered will increase to 1.1 million ounces. It's also important to note that we believe that we have enough gold reserves at the Soweto cluster to sustain a stand-alone operation, treating 1 million tonnes per month over an approximate 10-year life of mine. On Slide number 20, a picture of construction progress on site. And you can see that we are currently firmly on track in terms of the project execution time lines. Slide 21. We cannot say enough about the socioeconomic and environmental benefits of this project. Concurrent rehabilitation is in progress. We are uplifting local communities, providing much-needed economic and employment opportunities, and working with law enforcement to eradicate illegal mining. There were some skeptics on Mintails' MTR when we announced our intention to proceed with the project. I'm so pleased and we are about to prove them wrong. Slide 22. I think it's fair to say that Pan African has a record second to none, in terms of construction and operation of tailings retreatment projects. These long-life assets now form the cornerstone of our business. And I believe we have further room to grow in this space, which should be very attractive for our investors. Slide 23, the Evander underground team delivered in line with expectations, producing some 38,000 ounces for the year at an all-in sustaining cost of just over $1,300 per ounce. Now the delay in commissioning of the sub-vertical shaft for wasting has impacted us somewhat. This project will now be completed by the end of this month. We are pretty much been doubling our wasting capacity, which should allow us to play a bit of catch-up in the months ahead. I really believe this shaft with a western capacity of 40,000 tonnes per month will be a game changer for Evander. No more cumbersome conveyors, lower costs with a higher mine core factor. If we then proceed to Slide 24, dealing with Fairview, our flagship underground operation at the Barberton Mines complex. At Fairview mine, the Rossiter ore body enhanced production during the reporting period. Exploration drilling has identified a second high-grade structure, which intersects the Rossiter ore body and doubled the mineralized with, thereby increasing the volumes that can be extracted. This ore body average over 30 grams per tonne throughout the year. Additionally, downdip development at the MRC ore body on a deeper level at Fairview progressed according to plan, with top access to the high-grade 261 platform completed during May 2024. This platform grade averages 27 grams per tonne. The downdip development is being extended deeper towards a lower access of 261 as well as to the 262 platform, where exploration drilling successfully intersected the down-drop extension of the MRC. Rehabilitation of the existing ramp infrastructure from 38 level downwards is progressing according to schedule. This decline will be used to transport personnel and material to the working phases on the 3-shaft section and will further alleviate logistic pressures on 3-shaft, which will then mainly be used for rock wasting and improving logistics. Continuous operations at Fairview implemented in February 2023 resulted in a significant improvement in terms of tonnage output of tonnes increasing by 11% year-on-year from underground. Additionally, the processed grade improved from 11.7 grams to over 12 grams per tonne, a circa 4% increase year-on-year. The all-in sustaining costs for Fairview also improved from $1,546 in FY '23 to $1,434 mainly as a result of the 14% increase in gold production. The smaller underground operation at Barberton on Slide 25. At Sheba, development towards additional mineral reserve blocks on both the high-grade MRC and ZK ore bodies are progressing according to plan, with production improvements noted during the year. Development in the Sheba Fault project, Western Cross ore body is ongoing with initial mineralized intersection being exposed on a crosscut. This project is planned to eventually supplement feed sources to the BTRP plant, as well as to offsetting the treatment of low-grade surface sources at the Consort and Sheba plants. The continuous operating cycle at an even greater impact at Sheba Mine was tuned increasing by 18% year-on-year. The processed grade also improved from 4.9 grams per tonne to over 5 grams per tonne. A circa 6% increase year-over-year. In terms of Consort, following some due technical and mining difficulties, the group replaced the contract miner in order to improve production at the mine. The rehabilitation of the PC Shaft has been completed and now enables the contractor to recommence mining on the high-grade 41 to 45 level mining sections. Additional development is ongoing on the MMR shaft and the PC shaft to access reserve blocks, which will give us access to more ground to mine. On Slide number 27, section dealing with all-in sustaining cost. Almost 85% of our portfolio produced an all-in sustaining cost of $1,170 per ounce. Now Slide 28 illustrates that our cost performance continues to be very much in line and better than the average for a global sector, with most producers having experienced significant cost pressures in the last couple of years. Despite inflation, we should be able to maintain an all-in sustaining cost at between $1,350 and $1,400 per ounce in the coming financial year in U.S. dollar terms. On Slide number 30, group capital projects. We continue to invest into our assets and into growth with most of MTR's comfort capital now spent. For Evander, we expect CapEx to reduce in the next year as most of the large capital for '24 to '26 levels would have been spent. The accrued CapEx will also be fair addition in the year ahead of profiting spend fairly stable. ESG, Slide 32. I'm very proud of our achievements on this front, particularly on progress with renewable energy, water treatment and social projects. We really do make a positive difference where we operate. To elaborate further on our renewable energy road map on Slide number 33. We've completed construction of our Barberton solar facility, and we are currently ramping up generation from this plant, which should be fully ramped up in the next month. We further anticipate first power from our 40-megawatt 30-ag power purchase agreement during 2026. You can also expect other announcements on renewables from Pan African in the months ahead. Hopefully, we can add even more capacity. In terms of our student needs exploration venture, we are continuing activities on a scale-back basis. We are hoping that the wording parties can come to a resolution soon. I will now hand over to Deon, who will provide an overview of the financial results for the year.

Deon Louw: Thank you, Cobus. From Slide 36, you will notice the positive impact of the increased gold production and gold price of a full financial year's revenue, which increased by 17% to $374 million relative to the prior financial year. Production costs were well contained with all-in sustaining cost increases by only 3.4% in dollar terms, assisted by the average random exchange rate depreciation of 5.3% year-on-year. The tailwinds of an increasing U.S. dollar gold price and depreciating rand during the year delivered EBITDA by 23% to $141 million relative to the prior year. Attributable earnings increased by 30% to $79 million and earnings per share commensurately as no new shares were issued in the year. The 9% decline in operating cash flow to $91 million is due to an increase in income tax and royalties paid of $8 million and finance costs of $5 million. It also needs to be born in mind that the prior U.S. cash flows were also boosted by the upfront receipt of ZAR400 million, approximately $22 million from the sophistic gold forward sale transaction. We spent ZAR166 million in capital during the year, the bulk of it on the MTR project, and grew $71 million on our debt facilities, resulting in a predictable increase in net debt by $84 million to $106 million. Slide 37 demonstrates the extent to the group's available single debt facilities and funding of the MTR project. As mentioned in the past, our funding approach to projects of Elikhulu and MTR [indiscernible] in nature, is to fully fund the projects upfront capital with the debt redemption profile opted to its cash flow profile, leaving the rest of the group's cash flows largely unencumbered for other capital expenditure programs and returning cash to shareholders. Our core facilities comprised the RCF of $54 million and GBF of $8 million. The bar chart on the right of this slide shows the composition of the two senior debt facilities of $113 million dedicated to MTR's construction, which together with the $22 million received from the simplistic gold forward sale transaction fully funded the project's development costs without having to raise equity. Dividend also is a growing loan of $90 million dedicated to the funding of our renewable energy plants. This facility, which we can effectively June also provides for an embedded equipment option of $40 million for future funding requirements of this nature. On 15th June 2024, the senior facilities were fully drawn as expenditure of MTR peaks and to reduce the risk of a severe dip line in the rand gold price, will edit into a number of gold price hedges that will lock in the rand proceeds on 49% of the lower end of the group's 2025 financial year's guided ounces. The effect of these edges is that 18% of the 2025 financial year's production is locked in at a fixed price of $1,942 an ounce in terms of the Synthetic gold forward sale transaction and 31% locked in at a floor price of $2,147 an ounce and a cap price of $2,995 an ounce assuming an exchange rate of ZAR18.19 to the dollar. The synthetic gold forward sale transaction expires in February 2025 and a zero cost collars by 15th June 2025 were after the group is unhedged. It is however, likely that we'll continue to make use of short-term ranges on this nature, especially zero-cost collars to lock in cash margins and reduce short-term financial risk while participating in the upside to the level of the capital price. Slide 38 illustrates the magnitude of the quarterly principal and interest redemptions of the group's similar debt to June 2029, when all existing senior debt is extinguished. Until June 2025, [indiscernible] with only quarterly principal storms of a renewable energy facility being payable. But from September 2025, the early facilities redemptions commenced. And in December 2025, the 3-year bond with a nominal value of ZAR585 million, approximately $32 million which is the large spike in debt reductions in June 2026 comprises the $54 million bullet reduction on the RCF. Mintail's updated cash flow projections markup lets a buyback period of approximately 2 years post commissioning of the original electronic at [indiscernible]. What's astounding, it is likely that the RCF will again be extended as has been the case in the past as it constitutes a key component of our core financing facilities. We also have numerous approaches from financial institutions to anticipate to refinance of the in term of bond issue should further capital expenditure funding required in due course. Signal debt is expected to pick at approximately ZAR3.5 billion approximately $190 million towards the end of this calendar year, resulting in a debt-to-equity ratio of approximately 52%, still well within the senior debt covenant of one to one. Slide 39 tracks the group's historical dividend yields and yield of the proposed dividend of ZAR489 million or approximately $26.8 million for the 2024 financial year. The proposed 2024 financial year dividend is a payout ratio of approximately 53% of cash flow, as defined by the dividend policy and is an increase of 22% in rand terms and 26.5% in dollar terms relative to the prior year. With the share price doubling year-on-year, the dividend yield has declined to 3.6% relative to the 5.9% of the prior year when the closing share price was ZAR3.3 or 12.5p per share. On the basis that the proposed 2024 financial year dividend is approved by shareholders and paid in December with total dividends paid to shareholders during the first decades is $193 million. Finally, Slide 40 shows a return on the group's shareholder funds for the 2024 financial year, relative to a gold mining peer group. Return on equity and cash flow per share are two of the key parameters for measuring the success of our value grade and try and to inform our circumspect approach to capital allocation decisions and M&A. After a decline in the group's return on equity in the prior financial year, it has now increased to 25% for this financial year and post the imminent commissioning of MTR, we should again see it enter the aspirational range of 25% to 30% as MTR contributes higher margin answers to the group. Thank you.

Cobus Loots: Thank you very much, Deon. If we conclude on Slide 41, Pan African continues to be focused on delivery and execution. Key areas for us in the next year include the following: we will continue our proactive journey to zero-harm. We will successfully execute into our capital projects, including a very exciting MTR development, that will increase and sustain our future gold production profile at approximately 250,000 ounces per year. We will continue optimization and improvement initiatives to increase gold production as per our guidance and to further reduce costs. We look forward to progressing our ESG initiatives and our focus on maintaining our social license to operate, while also expanding our renewable energy footprint and rehabilitating old areas for the benefit of our communities. We will maintain our focus on generating sustainable shareholder returns, creating value for all stakeholders. And finally, we will continue to explore value-accretive options for further growth in a very circumspect manner as always. I would like to end my presentation by extending my thanks and appreciation to Deon Louw, who is retiring for some very well-deserved R&R. Deon will, however, remain available as a consultant to the group. Deon and I have known each other for more than 20 years and have worked together Pan African for more than a decade, is acumen, experience and advice greatly assisted and position Pan African where we find ourselves today. Deon, you are a fantastic colleague and a friend, and we wish you all the best for the future. I would also like to congratulate Marileen Kok, our new Financial Director, the promotion is well deserved. Thank you very much for your time this morning. We look forward to continue mining for the future in the year ahead.

A - Hethen Hira: Thank you very much again for taking time. In terms of questions, we will first go to the conference call and see if we have any query or questions from the conference call, and then we'll go to the webcast.

Operator: First question comes from Cody Hayden of Berenberg. Please go ahead.

Cody Hayden: Good morning. Thank you for taking my question. And congratulations on the results. First, I have two questions. First, on the Evander underground expansion project, can you speak a bit more to the delays and how confident you are the Evander 8 Shaft project won't be further delayed beyond September? And then second, on costs. Can you get any insight into your inflation assumptions? And with MTR, can you bring costs lower further as well as with some of the renewable energy deployment?

Cobus Loots: Thanks, Cody. Yes. So definitely, the delay in the commissioning of sub-vertical shaft at Evander has set us back somewhat. But it's a temporary delay. I think generally, the team has done well in terms of managing. And yes, we're pretty confident that we are sort of weeks away now from commissioning. Fortunately, your project is progressing much better now. And that's just sort of the nature of underground operations. It's sometimes a bit more difficult, and that was the case here. So -- we -- as we've said, I mean, we expect to make up. There's a lot of gold sitting underground in the decline sections, which we'll be ramping and then doubling the hoisting capacity, obviously, will have a massive impact on the operation. In terms of inflation, we sort of -- when we do our budgets, we look quite carefully at all of the cost drivers. And then so we have a good understanding of sort of escalations, et cetera. So, I think we're fairly comfortable in terms of managing inflation, [indiscernible] in terms of the budgets because of the effect that we're running Elikhulu, we understand the cost structure and what it entails. So, we think we're quite comfortable with our guidance in terms of Mintel's costs. And then yes, definitely, renewable energy projects have a quite significant impact on the group. I mean we see the savings that we are currently banking at Evander on the first 10 megawatts. And obviously, Barberton is coming in should be steady state in terms of production -- solar production in the next month. So, as we expand this footprint, definitely, I think it will stand a good group and good stead.

Operator: At this stage, we have no further questions from the lines.

Unidentified Company Representative: Shall we even go to the webcast?

Hethen Hira: We've got a question from [indiscernible] from Truffle Asset Management. Thanks for the opportunity. Can you guide us on CapEx for FY '26, please? As Mintel's project CapEx falls off and forward sales runoff, and should be generating a lot of free cash flow. What are your plans with the cash?

Cobus Loots: Yes. So, it's correct. I mean if we -- certainly, the gold price holds -- I mean, we should be in for some very good times. It's also important to note that, I mean, this is the last year, FY '25, where we'll be spending so much money on the Evander underground. So, you have Mintails with the capital being done in the next couple of months. You have the Evander underground with the spend pretty much complete by the end of this year. Barberton is fairly stable. So, your CapEx should go down. Also, Elikhulu, the capital is very fairly pedestrian in this next year and then it sort of ramps up again. So generally, I mean, in terms of the gearing, we can expect the group to dig year also, I mean, in the last year, the gold price received was $2,080 and is currently sitting at above $2,500 per ounce. So obviously, that's going to come through. So yes, I mean, I think generally, Pan African has been quite good in terms of capital allocation, and that will continue to be circumspect and balance growth, reinvestment in our assets with cash returns to shareholders in the form of dividends. And that's -- that was what we've done in the past, and there's no reason to change that going forward.

Hethen Hira: The next question is would you use the gold price windfall to accelerate the debt repayment, and that's from Arnold Van Graan at Nedbank.

Deon Louw: Yes and no. We'd obviously like to, at the same point in time, accelerate our dividends. So, shareholders participate in the upside of the gold price. So, it's not mutually exclusive one or the other. We have demonstrated in the past that we can do both by paying the debt on Elikhulu back to the bankers well before its 4-year term. I think we've paid it back in 3 years. So yes, if our projections are correct on Mintails, we should pay the debt back in roughly 2.5 years. But at the same point in time, we want to balance that with increased returns in the form of cash to our shareholders.

Hethen Hira: Thanks very much, Deon. We've got a question from [indiscernible] at Investec Bank. Please can you give us color on the cash generation by operation.

Deon Louw: It's probably best to look at the segment analysis. But your two primary cash generation -- generators at this point in time, pre-Mintails commissioning is obviously Barberton, and Barberton generated an EBITDA of roughly $63 million relative to Evander's as a complex, $86 million. So that's really the gist of your cash generation at this point in time within the group and roughly the split between the two.

Hethen Hira: Thanks Deon. We've got a question from Lisa Stan at News 24. Please could you provide more color on the illegal minor issue around MTR? Have you encountered resistance or challenges related to [indiscernible] how exactly or practically are you managing to mitigate the threat? What kind of security do you have in place there?

Cobus Loots: Lisa, yes. So, we don't want to elaborate too much about what we're doing in terms of detailed security measures, but suffice to say that we have -- the security is a major focus for us in that area. Generally, I have to say our experience in terms of constructing MTR has been very positive. We've had a great impact in terms of the communities and cleaning up the site, working with law enforcement to reduce the issue of illegal miners. I mean we always say the safest place to keep your gold is actually in the tailing facilities. I mean it's not [indiscernible] or illegal -- do not have the ability to process 0.3 grams per tonne, so they're sort of focused on old foot plant footprints and outcrop areas. But generally, I think the fact that we managed to construct and will now operate MTR -- mining. It shows you can get major projects done in a very short space of time. And yes, I mean, our approach has been certainly fair to say multifaceted in terms of working with communities, with other stakeholders, regulators and all interested parties. And it's really been a fantastic success for us.

Hethen Hira: Related question from Arnold Van Graan. Could you please elaborate on your experience with working with reinforcement? Have you seen positive developments on this front?

Cobus Loots: I think so. I think there is definitely a willingness from law enforcement to make a difference and to cooperate. And I mean that's a good model to work with law enforcement for the benefit of all of the legitimate stakeholders, and that's what we're doing pretty much at Barberton and MTR at this point.

Hethen Hira: We've got [indiscernible] from SBG Securities. Could you please expand on the BTRP Sheba Fault project? Are there any technical reasons for slowing down development? How does this impact CapEx over the next 3 years? Does this mean a different project or resource will be prioritized?

Cobus Loots: Well, I think -- I mean it's a great win for us, the fact that we have managed to now extend the life of the BTRP, which was our first tailings retreatment business in gold from 2 years to 7 years with very limited capital, about ZAR100 million for the pump station. And then we have to also construct a new Barberton tailings facility probably FY '27, '28. So, I mean the BTRP has been a stock performer. Obviously, costs will go up as we then reprocess both limited capital and very good returns. And there's nothing wrong with the Royal Sheba project. It's quite simply a question of capital allocation and capital priorities. Many other places this deposit would have been developed 3 grams per tonne with a lot of prospectivity still. But I think that just speaks to the Pan African portfolio and the extent to the optionality, actually, we actually have and that means we have to rank projects because, again, we have to balance all of the sort of -- all the calls on capital.

Hethen Hira: Thanks for this question, I think, for Deon. What is the dividend policy as a percentage of cash flow or profit for this dividend and the coming years? Would Pan African considered by annual dividends? And that question is from Kevin King.

Deon Louw: The dividend policy is unchanged from last year, but still 40% of cash flow as defined by the policy, which is after capital, which has not been funded, essentially discretionary cash flow ratable to the company. So, this year, we -- given the circumstances, the imminent commissioning of the Mintails project, the group's cash flows, obviously, the gold price that Cobus referred to, we felt it's appropriate to be a little bit more aggressive and we have recommended a 52% payout of discretionary cash flow as is defined. But yes, going forward, we think 40% is healthy. As it relates to the interim dividend, it's something we'll consider on an ongoing basis, especially once we are comfortable with the cash flow generation from Mintails then we have a third complex cash flow Geologica complex, and it's an easier decision to make at that any time.

Hethen Hira: Thanks a lot, Deon. Rene Hochreiter from Nova Capital or Severina Research. Now it says excellent results and congrats to you and Deon for a remarkable 10 years growing the business. Please, can you give us the CapEx guidance for FY '25 and as many years as possible thereafter?

Cobus Loots: Sure. There's a detailed slide. Thank you for those comments. There's a detailed slide in the presentation. So -- we're spending the last of Mintails' capital this year in the next couple of months actually. And then also pretty much the last big slug in terms of Evander underground. And then from FY '26, the capital will reduce with obviously, Mintails will very limited capital likely a bit more as we now sort of look to go sort of start constructing remining facilities [indiscernible] Evander underground capital will come down quite a lot because as I said, major capital is done and then Barberton is pretty stable. So, I mean I do think that differentiates Pan African from many of our peers where you just have seen these capital build escalate and become larger and larger for guys to maintain production. And it's not the case for us. I think we're quite fortunate from that perspective.

Hethen Hira: A follow-up question from Rene is, what do you estimate your additional percentage costs over and above cash cost of security for reducing the impact of illegal miners?

Cobus Loots: More or less, it's in our cash cost already. So, it's quite a we don't foresee that sort of security cost to escalate by anything more than inflation in the years to come. I think we have that situation pretty much under control. Our teams do an excellent job and really the drive from our side is to use more technology-based solutions to combat illegal mining, and we're seeing that being very effective and actually also means that we can save costs. So, security costs are very much into our cash costs. So, I would not expect any huge surprises going forward from that perspective.

Hethen Hira: A few questions from [indiscernible]. Firstly, on Mintails, what Mintails volumes are you currently expecting for 2025? Did you not say in a recent report that Mintails can now reduce 60,000 ounces per annum at $900 all-in sustaining and integrating the Soweto cluster, at $2,200 gold price, you said the payback was less than 2 years, not less than 3 years. Please confirm.

Cobus Loots: Yes. Well, look, I mean, whether it be 2 or 3 years. I mean I think we're trying to be a little bit conservative there, give ourselves a bit of headroom. I mean this is a new operation that is starting out. But I mean, where it's 2.5 or 3 years, I just think it's been an excellent success for us. So, in terms of the production, on a steady-state basis, full year production, probably about 55-odd ounces a year. So, 55,000, 60,000 ounces. Obviously, we're ramping up now with first gold being smelted in October. And then we've guided that we will be steady state by December. Hopefully, we can get there a bit sooner. The teams on the job -- on the ground are doing an excellent job. And the Soweto cluster is quite interesting. I mean, in itself, it could justify the construction of a new facility or a stand-alone facility, as we've said, producing sort of 8 million tonnes per month. We have significant resources and reserves in Soweto. So, the fact that we now have that footprint that gives us a lot of optionality in that area. So certainly, what we've said in the past holds true. But I mean, we're not going to sort of pressurize ourselves into a sort of a 2-year payback. I think if we achieve a 2.5 year or 3-year payback on $2.5 billion or $135 million of upfront capital. It really is an excellent achievement.

Hethen Hira: In terms of consult, it seems that consort production fell to less than 6,000 ounces, implying well less than 15 kilograms per month of gold. Consort costs might be 2,500 to 3,000 all-in sustaining. What is the hope not to dramatically reduce costs here?

Cobus Loots: I mean it's fair to say, Ed, that the consort, I mean if we look at what we've done at Barberton, continuous operations really have benefited both Fairview and Sheba. Consort is a bit of a cash. It's the only operation in our group that from an operating perspective is negative and it's not great. But we continue to believe into the future console. I mean we're doing what we can. If we did not believe that there was certainly the ability to turn it around, we would close the mine. If you look at the history of Consort, it is unfortunately been boom and bust. You have 2, 3 bad years, and then you have sort of 1 or 2 excellent years that sort of make up for the more difficult period. So yes, I mean, the gold is down there. We've had to do a lot of development now on that the PC shaft and development is done, so we should be able to get into better ground and ensure that console performs better going forward.

Hethen Hira: Also, from Ed, what is the long-term aspiration for all-in sustaining costs at Evander? Has your increased output towards long-term target of 65,000 ounces per annum in after 2026?

Cobus Loots: Yes. I think we calculated that you're probably looking at about long-term $1,300 to $1,400 all-in sustaining for the Evander underground, which compares very well to the rest of the global sector. So that would be we would like to get to.

Hethen Hira: Lastly, from Ed. As net debt falls rapidly this year and becomes net cash in 2026. Can you promise investors that returns to shareholders in the form of dividends and buybacks at less than 5 PE based on your guidance will now take precedent over CapEx that has reached a historic record?

Cobus Loots: Well, the CapEx reached an historic record for the right reasons. I mean, we invested 2.5 -- $135 million into a massive project for the benefit of shareholders over the next 20 years. So that's CapEx for the right reasons. If you look at our return on equity, I think we can rival pretty much anybody in the sector as far as our returns are concerned, and that demonstrates the ability to allocate capital in the correct manner, I think, and that will continue. So yes, certainly, dividends will continue and any capital allocation will be done in a very [indiscernible] manner. If you look at the cost of -- let's call it the opportunity cost or the structure we put in place to fund Mintails without any call on shareholders. That opportunity cost in the last year was in the order of ZAR200 million. So, if that wasn't there, then don't even this year with all of the capital would have been quite a bit higher.

Hethen Hira: Question from Jackson Martina. Given the current prices of gold, how much of a priority is given to the Sudanese exploration project? And when can the development feasibility be expected to conclude?

Cobus Loots: So, I mean, it's fair to say that, I mean, we -- Sudan at this point, I mean, exploration is continuing, but at a scale back -- on a scaled back basis, the war, obviously, is ongoing and it's a humanitarian crisis in the country. And we can't see ourselves investing large amounts of money until the situation stabilizes. So, it's unfortunate. Geologically, it's incredibly prospective but I mean, our exposure of the group is really limited. I think the carrying value of the Sudanese venture is in order of $5 million or $6 million on our balance sheet. So, it's not a huge exposure. And it doesn't make sense for us to invest hugely until the political environment stabilizes.

Hethen Hira: Arnold Van Graan from Nedbank again. Well done on the results and progress at Mintails. What's next to plan of Mintails in terms of growth for projects?

Cobus Loots: I think the nice thing for us, Arnold, is that we don't really have to go do a much more as we've mentioned, there's such a lot of opportunity in our own portfolio. And unlike many of the other producers, we don't have our production falling off of tiff anytime soon. I mean, we calculate we can sort of maintain the 250,000-odd ounces for many years. So yes, I mean, again, it comes down to assessing opportunities and making sure that whatever we do we can generate appropriate returns for shareholders. And I think that's a good position for us to be in.

Hethen Hira: And Arnold follows up with -- please share your views on M&A and geographical diversification. Are you looking at assets? Or do you have enough internal trust -- comfortable, sorry, are you comfortable with South African exposure?

Cobus Loots: Well, I guess we have to be comfortable with South Africa, given that all of our assets are here. Obviously, all of us know that there seems to be quite a bit more positivity around the country following the national elections and some progress it appears to be -- the country prepares to be making. And we have a long-demonstrated track record of operating successfully so we don't have to go and look elsewhere, just for the sake of diversification. It comes down to a specific opportunity. And again, if we can see the returns that we have demonstrated we can generate on investments. So that's what it really comes down to. And obviously, at sort of the sort of gold price, which is elevated, but still with, I think, a lot of positivity and potentially some tailwinds -- you have to be very circumspect. You can't run models on $2,500 indefinitely and make investment decisions on that basis.

Hethen Hira: Last question. Congratulations on the positive results and project execution. This is from SBG Securities and [indiscernible] could you please expand on your investment in PC MG? How does this fit into your long-term strategy?

Cobus Loots: Yes, it's -- again, I mean, we have a number of tailwinds. It's quite exciting for us. It's a very good time. PC MG is a strategic stake in what we think is a prospective gold and copper area in Australia, and it's not big in any way. So, it's not a strategic focus or a large focus for us at this point. Again, we have so many things to do in our own portfolio, and that's really the focus in the next one.

Hethen Hira: And the last comment from Arnold at Nedbank. Deon, thank you for all your help and assistance over the years. I enjoyed our debates. All the best for the future.

Deon Louw: Thank you.

Hethen Hira: Thanks very much, Arnold. And I think we have one question on the conference call line.

Operator: Last question was asked and answered. Thank you.

Cobus Loots: Well, thank you again to everybody for making time and if there is anything else you know where to find us. Have a great day. Thank you.

Deon Louw: Thank you.

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