Caledonia Mining Corporation Plc Common Shares

So by way of introduction, I'm Mark Liamont, Caledonia's chief executive, proud of that as a CFO, as you may well know. I'd also like to take some time to introduce Victor Gapare, who's an executive director, joined the group in January following the acquisition of Bilbo. So I'd just like to give Victor an opportunity to introduce himself, please, Victor.

Thank you, Mark. My name is Victor Gapare. I worked for Anglo-American Corporation Zimbabwe for 16 years. And my last job in Anglo was director for the gold and pyrite mining division. I left Anglo-American at the beginning of 2003, after I had completed the management buyout of the gold and pyrite businesses, which I was managing at that time. From 1 January 2003, I became the chief executive officer of Bilbo's. So I have been chief executive of Bilbos until we completed the transaction with Caledonia in January 2023. Between 2009 and 2011, I was also president of the Chamber of Mines of Zimbabwe. Basically, the Chamber of Mines is the organization which represents organized mining in Zimbabwe. And it includes suppliers and service providers to the mining industry, as well as professionals in the mining industry. During the time, over the last few years, really from 2010, I led the Billboss team, which raised the first $6 million from Baker Steel Resources Trust, which is listed on the land and stock exchange. So we used that money to carry out exploration, to begin exploration at the Billboss properties. In 2013, we raised the further $10 million which helped us progress the feasibility study. Also in 2013, we also raised another $7 million debt from the Industrial Development Corporation of South Africa, which enabled us to restart our operations after we had closed them during the hyperinflation period. So basically that's a little bit about me. Thank you, Mark.

Yeah, thank you. Thank you, Victor. And then Also, Chester Goodburn, who replaced me as CFO last year. And we've got Donna Roots, who's the Chief Operating Officer, been with us for about 10 years now. Maurice Mason, Vice President of Corporate Development. Adam Chester, our General Counsel. And Camilla Horsfall, who is Vice President, Group Communications. Okay, so let's get into the meat of the presentation. Just in terms of results, highlights, production, all disclosed previously. increasing from about 58,000 ounces in 2020 to just over 80,000 ounces in 2022, which is good. We've not been helped much by the gold price. So all the increase in revenue is largely driven by higher production. Gross profit up from 46 million to 54 million to nearly 62 million. But you will notice there has been a slight compression in the gross margin from about 46% in 2020 to 43% in 2022. And that reflects the... general increase in our operating costs offset by economies of scale. And then I'll also draw your attention to the dividend, which we've increased from 33 and a half cents in 2020 to last year, we did 56 cents. But again, more information about that later. Okay, all of this we'll come into more detail later. Just a few words on safety, if I may. Very unfortunately, we had a fatality in 2022 and a further fatality in 2023. Donna may want to talk about this more, but it's fair to say that fatalities resulted from non-adherence to prescribed safety procedures. And our response to that has to be to redouble our attempts to enforce adherence to safety procedures. Clearly, fatalities are very distressing events, but we just have to work harder to try and make sure that people adopt the safe working practices that we set out. Other than that, a general safety performance compares quite well with other similar deep-level mines in the gold sector. Donald, would you like to add anything further to what I've said there?

Well, Mark, I think it's just important to also note that we were involved in increasing our labour numbers, which complicated things, and I think a good indication of we actually improved our safety record from 2021 is the fact that our disability injury frequency rate, which takes the extra number of employees into account, year-on-year improved from 0.26 to 0.23. Yeah.

But I've got to say, it does compare. If you compare us to other gold producers, and I've got to say, not many of them produce gold. information of this granularity, we actually perform quite well. So should we just move on and talk about the operations? Donna, can I ask you to talk to the next couple of slides?

Yeah, Mark. Similar to what I said about safety, we started a build-up process in basically 2015, and you can see that on the drafts, and we completed that build-up last year. So it was a steady build-up over the last seven, eight years. And hopefully this year we can get into steady state. We had record production because we had buildup. We achieved our targets of 80,000. We told the market the high end of our forecast. And now it's time to settle down and optimize and try and improve economies of scale.

Yeah, it is fair to say, if you look carefully at the production, quarterly production numbers in the lower graph, you would notice there is in general Quarter one is lower than quarter two. And so production tends to progress as the year progresses. And we'll probably see the same pattern again this year with lower production in Q1 and then peaking in production in Q4. OK, so that's all of operations. All I'd say is that the grades remain consistent at about 3.36 grams a ton. The recoveries remain consistent at 93.9 percent. The real driver of growth has been tons milled. As Donna says, our objective now is to stabilise production at between 75 and 80,000 ounces a year. And then having done that, see what we can do to what we call optimise it. So look at ways where we can do what we do, but just do it more efficiently and therefore control our costs. OK, should we should we move on? The solar projects. It was something that we started out in 2020. That was clearly delayed by COVID, by delays in the manufacture of the panels in China and then the shipping of the panels. It was finally commissioned in November last year. All the way through that period, I'm afraid the grid deteriorated. And so particularly in the course of 2022, we found ourselves spending more money on capital equipment to protect the our own equipment from voltage spikes. And also we have to spend more money on diesel and maintaining generators. That is worst in October. So immediately before we commissioned the solar plant, we were using about 720,000 litres of diesel a month. You know, the diesel cost about $1.50 a litre. That's considerable. But by January this year, as a result of the commissioning of the solar plant, and also it's going to be said as a result of improvements in the grid and grid supply. In January, we only used, I think, about 18,000 litres of diesel, a very substantial reduction in our diesel consumption. Now, I am comparing peak with trough, but even so, if you take the average consumption in the course of 2020 with a reasonable expectation of an average diesel usage going forwards, we will expect to see a reduction in diesel consumption And also the benefit of solar compared to just an average cost of electricity supply, that works out at about $35 per ounce produced, so approximately 5% of the on-mine cost. Fair to say we funded the whole solar project, which cost about $14 million, using equity, which we raised in 2020 in New York, and then the excess we funded ourselves from cash. Just it's inappropriate really for the business of that nature, a solar business, not to be ungeared. And so we are now completing an exercise to raise a bond in Zimbabwe by the vehicle that owns solar. And we're looking to get about seven, seven and a half million dollars in by the end of March. I think, Chester, correct me if you're wrong, I think we've got about four and a half in at the moment. And we're probably expecting another couple of million dollars in towards the end of sometime this week. I don't know if Chet is on the line, but is that correct? That's right, Mark.

We see four and a half, two and a half, which we expect should be in by the end of this week.

Again, there's nothing, we don't really specifically discuss politics, but it is interesting to compare the way that the Zimbabwean authorities have responded to the same electricity crisis that also exists in South Africa. And so whereas the South African government appears to have done very little to help facilitate or encourage large industrial users to put in place their own IPPs. By contrast, the Zimbabwean authorities were very proactive in terms of encouraging and facilitating and fast-tracking the approval process for things like our solar project and facilitating the movement of the equipment across the border. And then another development which is current is through an initiative called the Intensive Energy User Group, IEUG, which has been established under the auspices of the President himself, will now hopefully move into a situation where Blanquette can enter into an agreement to import power directly from Zambia and Mozambique, which may have certain cost advantages but will further reduce our reliance on the grid. Again, that's a development that would be unconscionable or unexpected in South Africa. So it's just interesting to compare in practical terms the way that the Zimbabwean authorities have tried to help people find a solution to the same problem that exists in South Africa. Okay, shall we move on and talk about some other bits? I think we're going to talk about Bilbo's now. So could I ask Victor to run us through a few slides on Bilbo's, please?

Thank you, Mark. As I already said, Bilbo's house is the gold mining assets which used to belong to Anglo-American Corporation in Zimbabwe. Anglo mined oxides and treated the ore through the Hiplitch technology, pretty much recovering. In fact, between the time they opened the mines to the time we finished mining the oxides, they'd mined about, we've produced about nine tons of gold from the Bilbo's assets. Anglo had also started exploration for the sulfides, which is what you find below the oxides. and they drilled about 17,000 meters and established an inferred resource of just under 500,000 ounces. They stopped the exploration when they were getting out of the gold mining business all over the world, and that's the time when we bought the assets in 2003. Between 2010 and 2018, we drilled a further 80,000 meters and established a resource of just under or just over 3 million ounces. We also contracted DRA to actually carry out a definitive feasibility study on that resource. At the end of the feasibility study, please can you move to the next slide? At the end of the feasibility study, which we which was completed, I dare I expect the mine with a life of mine of 10 years with a planned average production rate of 2.4 million tons per year and a planned average mill feed of 2.3 grams per ton. That kind of grade for an open pit deposit is actually quite a good grade. We are expecting a life of mine gold production of just under 1.7 million ounces per and an average life of mine production of 167,000 ounces per year. Actually, at peak, we'll produce 200,000 ounces per year. The peak funding requirement for this project is $250 million. This is at end of 2021 prices. The project economics, basically at a gold price of $1,650 per ounce, The project is a post-tax NPV of $323 million, a post-tax IRR of 33.4%, and an all-in sustaining cost of $826 per ounce. So if you just use the current gold prices, maybe if you upgraded that to about $1,800, you can actually see the impact on the bottom line, basically. In the meantime, when we were doing the exploration for the feasibility for the sulfides, we actually also established some remnant oxides, which we have started mining. That picture on the right there is actually the current mining, which is taking place at Bilbos. We expect to produce about 12,000 to 17,000 ounces per year from the current site operations. And that project is a life of about two to three years. So at that rate, we should be able to harvest over the three-year period, maybe somewhere between 20 and 30 million U.S. dollars as free cash from this operation. Okay. What about Bilbo's? Sorry, Motapa. Thank you, Mark. Again, Motapa is a property which is contiguous to the Bilbo's assets. Actually, in the 1990s, Anglo entered into a joint venture with the original owners of Motapa and actually mined the oxides from the Motapa claims. They also started drilling for sulfides because the idea was that with the sulfides which were expected at Bilbo's and the sulfides at Motapa, we should be able to establish a mine with reasonable scale by Zimbabwe standards. However, Anglo also stopped any work on this when they were getting out of gold. at the end of the 90s. So the current Billbos team actually worked on the Motapa project because some of the mining which was taking place there, the oxides, some of them were being transported to the Billbos Heapleage operations. The current plan is actually to put in some money, start exploration, hopefully get some oxides because we do know where the targets, we have some targets for oxides. Maybe if we establish the oxides, complement the oxides which are being mined at Bilbo's and actually hopefully improve the cash flow from that operation. But long term, the idea is to actually carry out exploration for the sulphides because we believe if you combine the sulphides at Mutapa and the sulphides at Bilbo's, you can actually get a mining scale with economies of scale in this area.

Okay. Sorry to interject. Just before we move on to the financials. By itself, Bilbo is a very attractive asset. It's relatively large, it's relatively high grade, and we acquired it at a very competitive price. The work we're doing on the on our own feasibility study isn't just to revalidate the feasibility study done by Victor and his team to reflect the current environment. We're also looking to see whether it's possible to do that on a phased, to do that project on a phased basis with a view to minimising equity dilution. So there's always going to be a balancing act between achieving growth and minimizing dilution. So we're solving for the best net present value per share, not the potentially highest NPV of the project. So I think that's quite important. But Bilbo's together with Matapa really is potentially a very, very attractive asset. And the nice thing is that we've got the same geological team at Bilbo's who successfully identified the resource base at Bilbo's, and they can transfer their skills and experience and using pretty much the same infrastructure that they've already got at Bilbo's to go and start looking across the road at Matapa. And that's one of the reasons why we wanted to accelerate that process by having the modest equity raise that we completed last week, but I'll come on to that a bit later. So frankly, Bilbo's and Matapa together is an outstanding asset package. I think, should we just move on and talk about the financials? Chester, are you able to just give us a couple of minutes on each slide, please?

Thank you, Mark. 2022 financial results very much reflects the success story of the 80,000-ounce target we set ourselves at Blanket Mine. And it also sets us up for our future growth phase of our newly acquired mining assets, as Victor earlier explained. When looking at the revenues, I'm pleased to see that it's increased, the increase in ounces at Blanket Mine. And later on, we'll also see in the cash flows, they can increase in cash generation because of that. Production costs during this growth phase is remaining in check. You'll see that this occurred during a period where our peers had significant increase in inflationary costs, but let's talk about production a bit later. Our G&A has increased, but for positive reasons. We've increased costs and expenditures on our advisory services costs to acquire Matapa and Bilbo's, and we've also increased our salaries and wages bill of our senior staff members to set ourselves up for this new future growth phase at Caledonia. Our profit after tax includes non-cash items, such as 7 million of deferred tax expenditures. In our tax expenses, we've also got foreign exchange losses that are unrealized, also non-cash, and this might fill Howie's question on why the EPS is different to the adjusted EPS of 220 cents per share. Also included in that is impairment expenses of $8 million that we've incurred on areas above 750 meters that are mined out and currently not in our life of mine plan. Could move over to production costs, please. Our production costs are looking good. cost decreased on a per ounce basis due to the increase in our ounces. It went down from 742 to 735. And with this, we've increased our wages and salaries in absolute terms. That's due to higher bonuses paid in Zimbabwe for our online staff due to the higher production ounces that we've achieved. Consumables, that increased due to inflationary pressures and unforeseen maintenance. And I'd also like to highlight electricity expenses that's come down due to the solar plant that's connected to the blanket mine grid in November. Also, it shows a decrease due to transformers that we've installed at the blanket mine, improving our power factor and also reducing our kilowatt hour usage. We'll move on to the next slide. At GNA, admin costs were higher due to advisory services fees to obtain the Bulbos and Nthapa assets, as explained earlier. And you can also see the salary expenses that has increased to help us to unlock the value at Nthapa and Bulbos Mine. We'll move on to the next slide, please. Taxation, most of our tax is paid in Zimbabwe to the Zimbabwean government. It's got a pretty large non-cash component of approximately 7 million. And it's very difficult to reconcile this back to our U.S. dollar-based profits as the taxation calc is formed in some dollars. Moving on to cash flows. I'm pleased to see the net cash from operating activities increasing by 12 million due to the increased answers. We've balanced the reinvestment of all those cash flows worth returning money to our shareholders, pointing that we can realize cash returns from Mozambican assets and reinvest that in initiatives such as the solar plant and the new mining assets that we obtained. Moving over to the state and financial position. You can see here that our non-current assets increased, and that's due to investments in CentralShop, Bulbos, Mutapa, and the solar plant. Our cash has come down due to this, but what is important to note is that our balance sheet remains conservatively geared, and that enables us to obtain potential funding to unlock the future growth growth phase. In summary, cash generation was up in 2022. A good balance was achieved in reinvesting cash generation in new assets while distributing cash to our shareholders. And it's also very exciting to see that our balance sheet is in a good position to enable us to unlock our future opportunities.

Thank you, Chester. Okay, then. Just a few words on the fundraise that we did last week in conjunction with the announcement of the 2022 results. So we raised about $10 million in London and we're currently, and that was through an accelerated book build. That was primarily to allow us to fast track we'll get going on some of these new properties that we've acquired. So in particular, the feasibility study at Bilbo's, kickstart the exploration project at Matapa, where we're hopeful not just the long-term objective of finding significant sulfides, but maybe also the potential to find some near-term oxide material that we could turn into cash quite quickly. We'd like to, we need to establish what we call a shared services centre in Bulawayo, which will allow us to begin to realise the synergies of having Blanket towards the south of Bulawayo and Matapa and Bilbo to the north of Bulawayo by having a shared facility providing things like financial accounting, HR, technical services and a procurement and goods receiving facility so that we can actually try and realise some synergies there. And then finally, just initiate some exploration work at Marley Green. It won't be lost on you that our net cash position at the end of December was about $1.5 million. And it's fair to say that whilst Blanket is highly cash generative, we have effectively been using Blanket as a piggy bank. to fund strategic activities that don't relate to blankets. So in particular, the initial purchase price for the matarpam, the fees that we've incurred, which are quite substantial because the complexity of the transactions on matarpam and billbows, And then historically, looking backwards further, the acquisitions that we made of Marley Green, and also when we looked at things like Connemara North and Glen Hume. So we did a modest raise. We're looking for about 10 million in the UK. Why we chose the UK is we wanted to do something relatively quick. To do something in the States would have taken quite a bit longer because the SEC registration requirements And also, it's fair to say that we wanted to give the UK a chance to see if it works or not. We've spent a lot of time and effort over the past years marketing in the UK, and we wanted to see whether there actually was just test the strength and depth of demand from institution investors in the UK. And I'm pleased to see that we got... three new institutional investors on the register who are mining specialists and will hopefully, they recognize the vision going forwards and hopefully will provide further support for us as we go forwards. It was done at a difficult time when our share price shot up early in the week of marketing and then stabilized. So the issue price was about a 3% discount to the 20-day VWAP. And that's where we are on the fundraise. The Zimbabwe raise, approximately $3 million, is still open. And that is to allow time for Zimbabwean institutions to get their liquidity in place so that they can participate. The nature of the investment climate in Zimbabwe is that whereas institutions have appetite to invest in us, but don't always have the money available at the right time. And so they need a bit more time to be able to sort of shuffle things around and subscribe. So that's the fundraising. Can we just turn to the dividends? This is old news, really. We paid a dividend for 10 years or so. Initially, it was denominated in Canadian dollars when we were a Canadian company until 2016. But it was about seven US cents per share per quarter. And then in early 2020, we started, as we were getting closer to the end of the central shaft project, and we were more comfortable with our cash flows, we felt able to loosen the purse strings a bit. And so we started increasing the dividend by about one cent per quarter. We paused in March, April 2020 to just allow us time to see what the effect of COVID was on the business. But once we'd done that, we then felt comfortable to continue the rate of increase. But by the time we got to January last year, it became apparent to us that we knew we were going to be moving to a situation where we were going to get our hands on new assets, and that would put us into a position of becoming more of a growth company with a requirement for capital. And so in that situation, we felt it was just disingenuous to continue to increase the dividend further. So the dividend policy, to put it simplistically, is our dividend policy is to pay a dividend. Our intention is to maintain the dividend at current levels, about 14 cents per share per quarter, keep it at that level, and then as and when we bring new projects on the stream and they become cash generative then to resume dividend increases. So for the foreseeable future, I wouldn't expect to see any increase in the dividend. Having said that though, barring any unforeseen eventuality, I wouldn't expect the dividend to be reduced. Should we move forward and look forward for... This is extracted from an R&S report out in January. So gold production for Bilbo's is, and this is from the oxides, is approximately 15,000 ounces for the year. We say between 12 and a half and 17,000. A blanket between 75,000 and 80,000 ounces. So that would be for the year, anything between 87,000 and 97,000 ounces. Online costs. Now we split the online costs. We need to be a little bit careful about how we explain this because the online costs of blankets, having... looks to be in the order of what, $7.70 to $8.50 an ounce. And that's quite a wide range because it is fair to say that we are experiencing some input inflation and it's difficult for us to predict where that will end up. But at Bilbo's, the online cost at Bilbo's will be considerably higher because that is a low-grade oxide project. Cash generative, but much higher cost in terms of the cost per ounce. And so Blending those together, the online cost of Bilbo's of, what, $1,200 to $1,320, plus the online cost of Blanket of, what, $770 to $850, gives a blended group online cost per ounce of about $900 to $1,000 an ounce. And that is clearly largely skewed by the effect of the Bilbo's oxides. It's also fair to say that the online cost per ounce of Blanket of $770 to $850 doesn't reflect the benefit, the $35 an ounce I referred to earlier, doesn't reflect the benefit of the solar plant, because the solar plant is owned by Caledonia, not by Blanket, and we own 64% of Blanket. So the idea is that we, Caledonia, sell power from the solar project to Blanket at a price which reflects Blanket's long-term average cost of electricity, which means that the minority investors in Blanket are neither advantaged nor disadvantaged. by the solar project, and the benefit of the $35 an ounce is reflected at group level in the all-in sustaining cost, which is between, what, $11.50 and $12.50. If you were to reverse out from the all-in sustaining cost the effect of the online cost at blanket, the all-in sustaining cost excluding blanket would be in the order of about $1,000 an ounce, which is about, you know, just 1% or 2% higher than the cost that we incurred in 2022. So I just think it's important to put the projections for our costs in context with the short-term effect of the Bilbo's Oxide project. CapEx for this year is gonna be about $31 million on a group level. 28 million of that is a blanket. Of that 28, about 10 million is gonna be spent on a new tailings facility. The old tailings facility is now pretty close to its maximum capacity, and we will need a new facility which will set the business up for the next tens of years, but we need to get that up and running before the end of this year. Then there's going to be another $10 million or so spent on deep-level capital development at Blanket Mines, which is the effect of the horizontal development from the central shaft at very low levels to allow us to continue production and also gives us platforms to resume our deep level exploration. So I think that is a relatively quick counter through the formal presentation. We can open that to questions.

Shall we deal with some of the written questions first, Mark? There's a few. And then if anybody else has questions, they can just raise their hand and we can deal with those as they go. The first one, two questions from Howie regarding earnings. Well, partially, I think Chester's already answered that in terms of the difference between adjusted earnings and and cash earnings in terms of, you know, did we earn $2.20 or $1.36? I think Chess has really dealt with that in terms of adjusting out the non-cash items. The second part of the question is, how do you justify the sale of stock for six times earnings and a relatively expensive cost of equity? Mark, I don't know if you want to take that one.

Yeah, as I've said, it was a very modest raise. It was... It was done to test the strength and depth of the London market. It was to make good the treasury that we raided late last year to fund strategic acquisitions. It's got to be fair. We can't determine the rate at which transactions come along. And ideally, we would certainly have done the Matapa deal a bit later, but the opportunity presented itself. And the internal rate of return on the main Bilbo's project is substantially higher than, you know, it washes its face. So it's not something we'll choose to do every day of the week, but we're comfortable with having done it.

Thanks, Mark. Some questions on costs. A question on what percentage are costs expected to increase in 2023? There is a slide, slide 20, which is on our website, which details cost guidance. for the on-mine costs and the oil and sustaining for the group and per asset. So shareholders can look there if they're looking for costs. Chester, I don't know if you have any comments on cost increase and what we're expecting this year on budget. I mean, we have already given guidance. I don't know if we can say much more than that.

So I think that cost balance numbers will increase due to the oxides that would add cash to our coffers. and perhaps skew the numbers a bit, but at the blanket level, we're looking at a four to 10% increase, and we've got some savings that are not in there by the soda plant efficiencies.

Yeah, so we are seeing a reduction Just to amplify what Chester's saying, the benefit of solar isn't reflected in the online cost. The benefit of solar is reflected in the all-in sustaining cost for reasons I've just explained. And having said that, the solar is displacing what was previously a much elevated use of diesel. And so by displacing diesel, we are going to hopefully see a lower electricity charge of blanket than we had done previously. Labour, we pay our labour in US dollars. So I think we'd probably see modest inflation in our labour rates. The way the Chamber works now is the Chamber of Mines and the collective bargaining system, I think there are quarterly wage renegotiation. So I don't expect too much damage there. Where we are in the same position, I think, as all other gold producers is the inflationary effect on inputs like steel, explosives, and what have you. And then we've got to rely on our quite efficient procurement business based in South Africa to be able to get the best price. So consumables only reflect a third of our costs. The other third of labour, we've got hopefully subdued inflation, and then the remaining third electricity, we may even see a cost reduction. But in terms of the all-in-sustaining cost, as I just explained, if you strip out the effect of the high-cost operations of metoperoxides, we're looking for the all-in-sustaining cost to increase from, you know, just below $1,000 to approximately $1,000 an ounce. That's excluding, that's if you strip out the effect of the bildo's oxide. So some cost increase, but I don't think you'd have to get alarmed about it. Thanks, Mark. Sorry, a question about the effect, the tax. I'm very pleased that Chester can talk about the tax rate. A tax rate, as the previous CFO, I don't think Chester made the point clearly enough. The bulk of the tax we pay is tax in Zimbabwe. And the Zimbabwean tax computations are done on the basis of local currency denominated accounts. We actually report our accounts in U.S. dollars. And so if you try and reconcile the U.S. dollar tax charge back to something that makes sense to you, it won't work because the actual underlying calculation is done on the basis of different, of a completely different currency, which means you've got very different realized exchange gains and exchange losses. I'm very happy to hand that over to Chester for further clarification, if you can, Chester.

Yeah, I think I'll leave the fact that it's calculated in some dollars. I think you explained that well, Mark. Also something. would be non-cash items that we don't get a deduction for, like impairment expenses of approximately $8 million. You don't see the benefit of that in the profit before tax. Unrealized foreign exchange losses, that's also deducted before tax. And you'll note that deferred taxes is a very big component of our tax expense. That's a non-cash item, approximately $7 million.

Yeah, we also... There's other two areas of inefficiencies in our tax structure. The first is withholding tax. And that's withholding tax as we move money around the group. So in particular, we incur withholding tax on the management fees paid from Zimbabwe to South Africa. And then further, we incur withholding tax on the distribution of dividends from Zimbabwe up to the UK. And then the second area of... Now, we are looking to... And so we also end up paying tax in South Africa on intercompany profits made in South Africa. And the tax in South Africa on the intercompany profits is primarily from a procurement business. So to try and minimize that, we are setting up a procurement business focused on Bilbo's. So we'll service just Bilbo's based in Dubai so that we will, it's a lower tax regime than in South Africa. We can't move the existing procurement business from South Africa to Dubai, because that would be a deemed disposal, which would give rise to South African CGT. The other area of tax sort of inefficiency is the fact that the top company is based in Jersey, where the tax rate is zero. And so it means that expenses incurred in Jersey don't have any tax relief. So I think all of those things together explain why our headline tax rate is quite high. Having said that, the underlying tax regime in Zimbabwe is A, very stable, and B, is quite sympathetic, in particular because you get 100% capital allowances in Zimbabwe for capital expenditure in the year in which it's incurred. So that's the tax rate. There's a question here about EPS. We don't give EPS guidance. We used to. And it just became an absolute nightmare because there's so many variable factors that we cannot control. So things like foreign exchange gains, foreign exchange losses. A few years ago, you had the export credit incentive scheme, which saw us being paid a premium. It just became, we ended up chasing our tail in terms of trying to reconcile and explain stuff over which we had no control. So we give guidance as to production, costs, capex, And you can make your own view on the gold price. And then everything after that, frankly, you'd have to take your own view. We found ourselves just getting into ever-decreasing circles on that, I'm afraid. Question on the interest rate on the bond. Look, Andrew Cook asked a question on the interest rate expected on the bond. Chester can provide details of that, but I would caution you that we're talking about, you know, the financial, we're not talking about Wall Street, we're talking more about sort of Robert Mugabe Avenue. And the sophistication of the Zimbabwe capital markets is not as advanced as it would be elsewhere. And so, you know, there is appetite for green bonds outside Zimbabwe, but this is a purely domestic issue. And I don't think it's particularly tinged green. And the reason we're not offering those bonds internationally is that then we would be expected to provide guarantees as to future ability to externalize capital. And we're not in the business of backstopping future government policy over which we've got no control. But, Chester, do you want to talk more about the terms of the bond rise?

Yeah. It's 9.9% per annum. We pay interest twice a year, and the tenor of the bond is three years. Our availability of options were limited, and green bonds, as Mark said, were not available in-country.

Okay. A question regarding mining conferences. I mean, which mining conferences are we planning to attend? And you will notice... you will notice from the analysis of G&A that the investor relations cost has increased quite substantially. I'm trying to find the right numbers, but it's in here somewhere. And that reflects a return to face-to-face conferencing instead of video conferencing. Now, I would just make the general point that we have to do these things, but they are very, very expensive. And we are trying to be much more selective in terms of which conferences we go to and which ones we pass on, because some, frankly, are very good and some, frankly, are less good. Camilla, can you give guidance as to which ones we're currently planning to do? I just can't remember offhand.

In London and Europe, we are probably going to do the London one-to-one in November. I don't think we're going to do the Precious Metals Summit, though, in Zurich. So at the moment, it's just the London one-to-one.

which is also then also that's just in europe and uk isn't it we're also going to the denver gold show which we found very good denver and and be the creek as well and then the one in june yeah i think it's fair to say that we we don't we don't some of these uk european based events are a little bit anemic uh compared to the the us events and And whilst it's not particularly expensive for us to get to Europe, the registration fees for these things are quite expensive. And you just got to be sort of circumspect about where you spend your money. The capex estimate for 2023 we've already set out is just over $30 million, of which I think from memory about 28 is a blanket. The bulk of that comprises the first phase of the tailings facility and continued capital development. then the difference between the capex of blank and group capex will be the capital expenditure on the billbows. The grade. Dana, would you want to talk about the grade? The grade apparently coming down? The grade expectation to come down?

Mark, if you look at our measured and indicated resource, which is what we've got high confidence in, the grade is not coming down sharply. So I don't know where this is coming from. And then if you look at our inferred resource, with the latest update we did, the grade did come down, but it's also because of the higher gold price and the cutoff grade that came down. So a lot of low-grade resources were added, which would skew the picture. So the grade is going to be stable going forward, coming down slightly because of the higher gold price, but there's no serious grade issues that we see.

Yeah. Chester, would you like to address this question of the significance of the impairment of the assets above 750 metres? Will we be closing access to that area? And will that have any impact on resources and reserves? Would you like to address that? Sure.

Yeah, commercially, it bears no significance. It's a non-cash item. It was areas of capital development above 750 metres, not in our life and mine plan. We were thinking that, you know, we might be able to... explore a bit more above 750 metres, that would be a bonus. But being able to justify that, we wrote those areas off. But it's got no effect on value. It was never in the life mine plan, never in our plan cash flows.

But it is fair to say that we do still intend to go exploring above 750 metres. We just not got round to it because of Yeah, because of logistical constraints and that we've focused on production. Also, we've had some capacity constraints in terms of the personnel, our exploration personnel. If we do go exploring there and if we find more material, you'll find that those impaired assets are de-impaired. We've got a question. I don't know if you can see the question, Victor, but quite a detailed question about the... the oxide heap leach process. Victor, are you able to provide more context on that, Victor?

Thank you, Mark. Dana, you can come in if you want. Basically, our deal was we've got two crushing plants, one at Isabella and one at Mackay's. At the end of the day, what we are doing is really mining remnant ore. What we have put in the plan is probably to achieve an oil crushing rate of around 40,000 tons per plant, basically, mining from those two locations. We are expecting a production of maybe around 40, 45 kgs per month, basically.

Yeah, and the variation in the production is largely because of anticipated variations in the grade that we're going to be putting on there. But I think it's fair to say that one of the questions is, how much material is already on the heap leach that can be leached? My understanding is that heap leach is pretty much exhausted. It's been leached so many times.

Actually, yeah. So, Mark, when you look at it, you know, as we mine, we place the new ore on top of the old ore. And you continuously leach that ore. So, basically, that ore has been leached a lot of times. But you still have remnant gold there, which is probably locked up in maybe some boulders. which, when we, when Anglo started the heap leach operations, they didn't crush the ore. But when we have tried to crush that ore, the problem is always that you get the sands, the fine material, which then results in problems in terms of leaching cycles.

Yeah, but I've got to say, this oxide thing, it's... Well, it's a little bit more than red herring, but I don't want people to get obsessed about it because the real focus of Bilbo's as at Matapa is the larger sulfide project. So the oxide heat leach project at Bilbo's will produce, Victor said, about 45 kilos a month. So just multiply by 30 gives you an approximate conversion.

Mark, if I can come in there. We are building up to about 2,000 ounces by the end of the year. And as you said, it mustn't be seen as a red herring. It's an interim arrangement because we've got some oxides that we've got to go through anyway to do the sulfites. It's sort of an early start of the sulfite project, but it's also just helping us to cover the cost and cover the cost of the feasibility study until we really start a project.

It should make about a million dollars a month, perhaps for, say, two and a half years, based on what the resource, the oxides that we know exist. But please, I don't want people to start sort of thinking that we spent effectively $65 million on a project that is producing at best sort of, you know, one and a half thousand ounces a month, 2,000 ounces a month. That's not the case. That is actually unexpected cash flow. that we hadn't factored in into our evaluations. A question about any plans to improve the liquidity of the shares on the VFX. Our shares may have traded once on the Victoria Falls Stock Exchange. I don't know what we can do about it. We got down to our brokers to make it work. You can't create liquidity without the existing owners selling. We need to get the existing owners to sell, but they don't want to sell. And they seem to be wanting to accumulate positions. So I'm not sure what we can do about that. But I've got to say, it's not something that particularly keeps me awake at night. Our position in Zimbabwe is such that we have institutional investors who want to buy our shares as and when they have liquidity that's available. Okay, so a question here is the government policy on forage retentions. So previously, the government policy is that, previously the government policy was that if you had incremental production, as we do, we've got incremental production, we've increased production from, what, 57,000 ounces in 2020 to about 81,000 ounces last year. And under the previous, under the rules that applied previously, that incremental production, if you were listed on the Victoria Falls Stock Exchange, you've got 100% of the revenues arising on the incremental production in US dollars and the balance in local currency. And so on that basis, we went off and listed on the Victoria Falls Exchange. The rules have now changed. So under the previous regime, our blended average split of currency you know, local currency to US dollars was about 72% in US dollars and the balance in local currency. Under the regime that was announced a month or so ago, in respect of existing operations, that's now moved to 75% in US dollars and 25% in local currency. So it has improved very slightly. And it's also fair to say that we do not accumulate a pile of Zimbabwe dollars for which we've got no purpose. If anything, at any point in time, we are typically overdrawn in Zimbabwe dollars. Okay, so that's the first question I'd like to address. We believe that we have the change in the regulations, which then effectively unwound that relaxation such that if you moved from the Zimbabwe Stock Exchange, which is a local currency denominated exchange, To the Vic Falls Exchange, which is a US dollar exchange, people were doing that even though they're domestic companies with a view to trying to get increased revenues in US dollars. Our understanding still is that for the Bilbo's project, we will continue, we will get 100% of the revenues in US dollars. So whilst the change in policy may have taken the shine a little bit off the Victoria Falls Exchange, we don't believe it affects our position going forward. So I can't comment on other people's aspirations and why other people might want to listen to the Victoria Falls Exchange. That's their business and not our business. What I'm saying is that insofar as it affects us, the policy change, as far as we are aware, does not affect us. A question about to what extent AR Maine has been mined out. I understand this is a large ore body, conducive to trackless mining. What is the predominant mining method going forward for the next couple of years? That's the question. Donna, could you answer that?

Yeah, our main is basically mined out. There's low-grade stuff there. And so our main won't extend, and it doesn't really future in future production. Yes, it was a large ore body up to 30 metres wide, and we used long-haul stoping in our main body. Going forward, as far as mining methods are concerned, it will stay a hybrid method. We sort of got a rule of thumb. When stoping widths are below 4.5 meters, we're doing unarranged stoping. And if it's wider than that, we are looking at long-haul stoping. It doesn't always mean it's suitable for long-haul stoping. But generally, between four and a half to six and a half meters, we start changing over to long-haul sloping. And it varies. Ourself is predominantly long-haul sloping. Blanket or body, it's a combination. Right in the middle where the juicy stuff is, that's long-haul sloping. On the edges, it's underhand sloping. And then you see the similar... sort of hybrid methods going to Eroica and Limo. Limo is predominantly unranged stoping and then at Eroica we also have some wider areas where we have a combination of long-haul stoping and unranged stoping.

A question as to why are the forecast guidance range for blanket lower than the 2020 achieved? The guidance range that we put out, I think, for blanket in 2022 was, I think, 72 to 80. This year it's 75 to 80. Blanket is a steady state operation. We see little prospect to increase production above 80,000 ounces. So it's a realistic assessment as the blanket should be able to do between 75 and 80. Whether it's the bottom end of that or the top end will just depend on the ordinary vagaries of mining, as I'm sure the person who asked the question understands. Chester, there's a question about the increase in the overdraft. Do you want to talk about the overdrafts in Zimbabwe?

We wanted some debt funding in our business. We were conservatively geared or ungeared to a large extent. We're looking for some debt funding. Overdrafts were available in-country. It's not a a big market in Zimbabwe to obtain term loans and long-term debt. So we utilised overdrafts to fund some short-term funding gaps at Blanket, and it should be repaid by the latter part of this year.

I think the other thing is dollar-denominated overdrafts in Zimbabwe have only relatively recently become available. Is that correct, Chester?

That's right. So dollar-denominated debt, that's few and far between. And I think, you know, we were in a fortunate position to get it in-country, and we utilized that to plug the short-term gap.

Yeah, and then the other thing to understand is that in the course of any month, our cash typically can be quite lumpy. You know, you've got the cash should hopefully build up over the course of the month as you get deliveries and you get paid for those deliveries. And then there's a big outflow at the end of the month as you pay your creditors and you pay your workers. But it is quite lumpy. And it just helps to smooth our treasury and our cash management if we can extract cash by way of dividend payments and other payments. It just helps to smooth things out. But one of our other objectives, strategic objectives, is to what I just used the phrase, make ourselves relevant. And part of that is having local shareholders through the VicForce exchange listing and having meaningful relationships with banks in that we borrow money off them. So that everyone has got some sort of skin in the game and some participation in the future growth. But the availability of debt funding in Zim is pretty limited and it's very short term. I don't see any further questions. We're just on the hour. That's not me trying to cut this off at the hour, but genuinely I can see no further questions. Just give it a minute. Okay. So no further questions. Thank you all for your participation. It's the end of March, so you'll be looking for Q1 results coming out in mid-May. But I think to characterise the way we see 2023, after a fairly exciting time in 2022, we would hope to see 2023 as a period of stabilisation and consolidation, which may sound quite boring, but actually is not a bad thing to do in this environment. So with that, I thank you all very much for your attendance.