Thungela Resources Limited

Good morning, ladies and gentlemen, and welcome to the Tungela Annual Results Presentation. All participants will be in listen-only mode. There will be an opportunity to ask questions later during the conference. If you should need assistance during the call, please signal an operator by pressing star then zero. Please note that this call is being recorded. I would now like to turn the conference over to Ryan Africa, Head of Investor Relations. Please go ahead, sir.

Thank you very much. Good day, everyone, and welcome to Tungela's 2023 Annual Results Presentation. I'm Brian Africa, Head of Investor Relations for Tungela, and I'd like to take a couple of minutes to introduce today's agenda and to explain how the day will end. But first, allow me to draw your attention to a couple of disclaimers ahead of today's presentation. While you take a moment to read through the messages from our lawyers, let me take this opportunity to share that today's call is the last one that I will host as Edge Investor Relations for Tungela. Since our listing on the JSE and LSE, I've had the privilege of leading the Investor Relations function. It's been incredibly rewarding to work with a world-class team of sell-side analysts and highly sophisticated and knowledgeable mining investors on the buy side. I want to express my sincere gratitude for your insightful questions, constructive feedback, and continued trust throughout this journey. I'll be moving into a new role within Tungela, but I want to assure you that my commitment to our investors remains as strong as ever. You're also in excellent hands moving forward. Hugo Nunes, our new head of investor relations, and Shreshni Singh, our manager, will be taking the reins. Now, let's dive into today's agenda. Our CEO, Julian Lovel, will share together his 2023 highlights and will also provide an update on the execution of our strategic priorities. Our CFO, Dion Smith, will then talk through the operational financial performance for 2023, as well as provide an update and guidance. And after this, July will conclude the presentation. This will be followed by a Q&A session of approximately one hour to give those on the call and webinar the opportunity to ask questions. We will then close the call at approximately 1.45. Turning to Q&A. For those wishing to ask questions directly, we ask that you please join the session using the conference call facility provided, as we can only take direct questions through this facility. In order to ask a question during the Q&A session, please dial star 1 on your keypad, and this will register your intention to ask a question. Once the Q&A session starts, the operator will then open your line and ask you to go ahead with your question. For those joining via the webinar, you'll have the opportunity to submit questions via text, which will then be read out during the Q&A session. Before I hand over to July, I must draw your attention to two important features of this presentation. Firstly, all ESG information in today's presentation, including information on safety, relates only to the South African operations. We are in the process of aligning NSHEAM to our ESG reporting system and standards, and ESG information relating to NSHEAM will be included in the next annual reporting cycle. Secondly, unless otherwise indicated in the presentation, operational financial figures related to Ensham are based on Tugella's interest in Ensham for the four-month period between the acquisition date of 31 August 2023 and the end of the year. For more detail on the treatment of Ensham in our reporting suite, I encourage you to refer to page 68 of the annual financial statements released this morning. Now, please allow me to hand over to our CEO, Jolijn Lover, to take us through Tugella's annual results for 2023.

Thank you very much, Ryan, and good day to everyone on the call. I'm pleased to share Tungela's 2023 annual financial results with the market today. We've delivered a solid set of results against the backdrop of a challenging operating environment, notably weaker core prices and continued poor rail performance on the part of TFR. Safety is our first value. As previously reported, our colleague Mr. Bruce Matlangu tragically passed away in February 2023. Our thoughts are with his family and colleagues. While our total recordable case frequency rate is consistent with last year, the loss of a colleague is a stark reminder that we cannot waver in our commitment to operating a business free from fatalities and injuries. Operationally, we demonstrated exceptional agility in responding to the constrained rail environment and recorded 13.1 million tons of export saleable production and 12.8 million tons of export equity sales. Tungela successfully navigated the dual challenges of rail constraints in South Africa and weaker coal prices globally. And today we report solid results with the profit for the period of 5 billion rand, including a contribution of 148 million from the ancient business. We generated 6.8 billion rand in adjusted operating free cash flow, which resulted in a net cash position of 10.2 billion rand at year end. These results and a solid liquid position allow us to declare a final ordinary cash dividend of R1.4 billion, or R10 per share. This takes the total dividend declared for 2023 to R20 per share, or R2.8 billion in aggregate. In addition, the Board has approved a share buyback of up to R500 million, Taking this into account, Tungela is returning up to 49% of adjusted operating free cash flow for the full year to shareholders. Previously, we shared with you our four strategic pillars. We've now created safety as a standalone pillar, as we remain unconditional and single-minded about being a fatality-free business. In terms of driving our ESG aspirations, we continue to spike on social through contributions of 312 million to the Sisongke Employee Trust and Nkulo Community Trust. We've also committed 160 million rand over the next five years to an education initiative in the province of Mpumalanga, which will improve the quality of education for learners in 45 non-fee schools in our host communities. It is also pleasing to report that the remediation of the impacts of the 2022 Chrome Dry environmental incident have progressed very well. In terms of maximizing value, we continue to make good progress on our Elders and Zebulon North Shaft projects in South Africa, both on track and on budget, with Elders having delivered first core a couple of weeks ago. and this is ahead of schedule. The successful execution of these projects built a momentum for a more competitive, longer life portfolio. We've also been disciplined in our focus to improve productivity and cost performance across all our operations. We implemented productivity initiatives at several operations, as well as work to take costs out of the business. The fact that our unit costs in 2023 came in at the lower end of guidance, notwithstanding the lower production denominator, is testament to the good work we are doing in managing the cost profile of the business. Moving to the next pillar, the acquisition of Aynsham last year is an important milestone on our pathway to diversification. Since assuming operational control, we've already been able to step up productivity quite significantly and work is underway to define how we can maximize the full potential of the Ansham resource. Recently, we also announced the establishment of Tungela Marketing International in Dubai, which brings us closer to our markets and is an important step to derive full margin from our call. Disciplined capital allocation remains key to our equity story, and the return of $3.3 billion represents 49% of adjusted operating free cash flow, well in excess of the minimum of 30% per the dividend policy. This demonstrates our commitment to returning surplus cash to shareholders. The successful execution of our strategic priorities is testament to Tungela's ambition to build a sustainable, long-life business across multiple geographies, paving the way for the group to capitalize on the robust long-term fundamentals supporting coal globally. As we reported at the release of our results in March last year, we said we lost Mr. Bruce McClung in February 2023, following complications due to an injury he sustained in December 2022. We continue to strengthen our safety controls and our culture and have instituted measures from the executive level through to the front line to live up to the promise that everyone goes on safely every day. Among these is continued focus on our three safety pillars, integration of safety metrics and behaviors into employee performance contracts. and an enhanced focus on critical controls. The total recordable case frequency rate remained flat compared to last year, and we continue our intense focus on learning from incidents to avoid repeats. As I explained earlier, maximizing value from existing assets is crucial to the future competitiveness of our business. The board approved the Elders project last year, production of which will replace volumes from Kudub as that mine nears the end of its life. Elders is the first major project approved and executed by Tungela. When we de-merged, we said that we want to look at capital projects through a Tungela lens, and elders will be delivered at a relatively lower capital intensity. The project is on budget and on time and is lost-time injury-free. To date, we have spent 1.2 billion rand on the project, predominantly on surface infrastructure and the development of the portal into the coal reserve. Approximately 800 million rand of CAPEX will be spent in 2024. The mine is expected to produce approximately 4 million tonnes of run-of-mine coal per annum when it reaches steady state at the end of 2025. The Zibolo North Shaft Extension Project was approved by the board in June 2023, extending the life of our flagship Zibolo operation through to 2038. Construction is commenced and the project is progressing well. We anticipate completion of the project in 2026. The mine is expected to produce 8 million tons of run-of-mine coal per annum at steady state. As of 31 December 2023, we had spent 590 million rand on the project. We are expecting to spend 950 million rand in 2024 and a further 870 million in 2025. The acquisition of a controlling interest in the ancient mine in Australia marked a significant milestone on our journey to geographic diversification. as it expands Tungela's presence beyond South Africa. This mitigates our reliance on a single operating geography and opens up new and diversified markets, notably Japan and Malaysia, and has the added benefit of exposure to the Newcastle Coal Prize. NSHEAM is benefiting from our operational expertise as it extracts coal using mechanized underground board and pillar mining methods, and these are similar to those used in our South African coal operations. Since assuming operational control on 1 September 2023, our focus has been on improving productivity. And I'm pleased to report that performance has improved an annualized run rate of 3.2 million up from 2.7 million tons at the acquisition date. And this is where we were at the end of the year. We believe this opportunity to further improve to approximately 3.6 million tons through the introduction of an additional production section in 2024. And that improvement, from what we bought, which is 3 million tons, to the 3.6 million tons, as you can guess, represents 20% productivity improvement for minimal CapEx. The acquisition resulted in a material increase in our core resource base, with the addition of approximately 1 billion tons in resources. And as I flagged earlier, we've already started looking at opportunities for productivity improvements, cost reduction, and potential brownfield opportunities to unlock the full value of the resource. The integration of Ensham into the group continues to progress very well. In anticipation of the expiration of the marketing agreement with Anglo-American Marketing, We've set up our own marketing capabilities in Tungela Marketing International, which has already commenced with some of the marketing functions. Our export marketing team based in Dubai will be responsible for overseeing marketing functions for the South African and Australian assets, and they've been providing marketing services to Ensham since the completion of the acquisition. The establishment of our own marketing entity reinforces our commitment to capturing the full margin of our products and positioning Tengela as an international business. So let me turn to the topical one, which is Transnet. And rail performance continues to be a focus for management time and effort. Last year, TFR railed a total of 47.9 million tons for the industry, a 5% decline from 2022. Since the start of the deterioration in rail performance in 2021, the coal industry through RBCT has sought to assist Transnet in resolving the issues plaguing rail in South Africa. 2023 has seen a reset in industry's relationship with Transnet, and the new Transnet leadership has demonstrated a renewed commitment to collaboration. industry has assisted with the deployment of additional security on the core line and is currently assisting TFR in the procurement of critical spares from alternative suppliers whilst the impasse between Transnet and CRRC continues. The cost of these spares and security deployment is recovered by the core exporting parties through the mutual cooperation agreement signed between TFR and RBCT Further collaborative efforts will address critical systems such as signaling, again further improving overall performance. Although recent TFR performance has stabilized, it remains susceptible to significant security and breakdown disruptions. As a result, we've agreed to extend the existing long-term rail agreement by one year to 31 March 2025 to allow TFR to demonstrate sufficient stability before the contract is renegotiated. A positive signal, though, is that we have seen an improvement in the rail performance in the first quarter of this year, notwithstanding a significant derailment in January. The demonstrated performance for the most recent six weeks is up to 50.3 million tons per annum run rate, and that is an improvement to levels last seen in 2022. We are confident that the steps that industry and TFR are taking should see rail performance continue to stabilize and improve. With that, let me now hand over to our CFO, Dion Smith, to take us through the detailed operational and financial performance. Dion.