Valterra Platinum Limited

I'm Fran Woodley, the head of investor relations at Anglo-American Platinum, and thank you for joining us today at our 2023 interim results. If I can guide you to our cautionary statement, if you could read this in full in your own time, I'd appreciate it. We will have time at the end of the session for Q&A. I'll now hand over to Natasha, our CEO, and Craig Miller, our finance director, to take you through the presentation. Thank you.

And it's our opportunity to sing for our supper, I guess. Good morning and welcome to the presentation of our 2023 interim results. Thank you for taking the time to join us here today, both in person and also virtually. I would like to acknowledge my colleagues in the room, all of our guests, and then specifically also members of our board, our chairman, Norman Bazima, and some of our board members who joined us, Temba Mkwanazi, Suresh Khanna, John Weiss, that's here today. I haven't seen Tabi Lioka. I think we expected her, and Roger Dixon. I'm sure they will join us a little bit later. Okay. Now let's start with a summary of the first half's performance and also the operating context of the first half. We are firstly pleased to report zero fatalities at own operations and our joint ventures, as well as a record low total recordable case frequency rate of 1.58, reflecting a 34% improvement year on year. Our metal in concentrate production was 1.85 million PGM ounces, and our own refined production was 1.7 million PGM ounces for the half. Our EBITDA was 13 billion rand, and we achieved an EBITDA mining margin of 42%. In this half, our operating environment continued to present several challenges. We have seen continued global market volatility, concerns around the reopening of China's economy, interest rate uncertainties, and an increase in cost environment relating to inflationary and foreign exchange movements. we continue to see a decline in the South African and Zimbabwean economies, amplifying many socio-economic challenges. Unfortunately, many of these issues are caused by crime and corruption, which impact not only our operations, but society at large. However, we do remain resilient and have navigated well through many of these challenges that are within our control, minimizing the impact on our operations, employees, and host communities. One example of this work is our management of the energy crisis. Despite increased load curtailment, we have been successful in limiting the impact on ounces lost, while progressing our large-scale renewable generation projects and further reducing our consumption to accelerate our energy independence. Our strategy and our culture work together to achieve our purpose of reimagining mining to improve people's lives. Our strategy guides our choices and our culture enables every colleague who walks through our gates on a daily basis to be fully authorised and psychologically safe to do their best work every day. There's a diversified use of our metals, which include industrial automotive technology, battery storage, food preservation, investments, and jewelry. In addition to that, we see many other emerging uses, including the development of the green hydrogen technology, which is PGM-intensive and something we are very excited about. I would like to take a moment to reflect on the delivery of our four strategic priorities. ESG is about collaborating with our host communities and our countries in which we operate to create a better future. We continue to be industry pioneers, ensuring a healthy environment, thriving communities, and being a trusted corporate leader. We are set up to be a business that goes beyond resilience with the aim to thrive through the ever-increasing rate of change we experience today. This strategic priority forms the basis of safe, stable, and capable operations, which will see us firmly placed in the first half of the cost curve for the long term. Our world-class portfolio of assets form part of an integrated value chain and we will continue to leverage these to deliver value to all of our stakeholders. We do this by looking after our resources and driving innovation, making our jobs and our organisation better. Our market development work is fundamental to ensure our products have a sustainable and positive impact on the world. We are leveraging capabilities through these activities and capture value from adjacent value chains. Simply put, our purpose and what we do matters. We have been shaping the value creation pathway of our world-class mining assets and have a deep understanding of the potential of every asset, as well as the inherent optionality that exists. This value is leveraged through our uniquely positioned integrated downstream process. We believe that we have the best PGM assets in our portfolio, creating optionality expected of a world-class business. These options are developed and continuously assessed against our capital allocation framework so that we make the right decisions at the right time. Now, just as a reminder of some of these options that we have, Our work on future of Mkhalequena will optimize value creation over the long term for this very long-term asset. It is an absolute phenomenal resource, and its polymetallic ore body will benefit from metal demand from the energy transition. A model-built spill split has unique characteristics that provides the operation with a significant strategic advantage. It is supportive of the critical mineral requirements for the hydrogen economy and will continue to play a role in ICE vehicles. Now, in line with our strategic priority to maximise value from our core portfolio of assets, We are using existing infrastructure at Motutolo to extend mining into the Dibrochen resource, which has now increased the life of that asset to beyond 30 years. Unke represents one of the largest BGM deposits outside South Africa, and we continue to optimize the business for long-term value generation. We are the world's leading primary producer of BGMs, mining, refining, and marketing our products for more than 90 years with an excellent understanding of the industry and our customers' needs. Now, appropriate to the quality and life of our assets, we have a first-in-class logistics platform and global distribution network efficiently supplying BGMs across the world from a diverse and optimized supply base. Now, this is normally Craig's slide, but I'm going to talk to this today. It's all about our disciplined capital allocation. And this framework has demonstrated our ability to retain a strong balance sheet that can be maintained throughout the cycles. And through the next couple of days, you're going to hear about this again and again. Our investments are value-driven, ensuring that our assets will operate in the first half of the cost curve. We have been and will continue to prioritise the right sustaining capital investment to ensure safe, stable and capable operations for the long life of our assets. but we are committed to our base dividend of 40% of headline earnings. And we continue to deliver on this and assess our business and its optionality against this framework. This has enabled us to declare an average dividend of 75% of headline earnings over the past five years. We are one of just a few South African resource companies who have matched our returns to shareholders against the invested cash flows over the last two decades. We observe and assess the market fundamentals. Therefore, they are well understood and guide our investments. We study various long-term market outlook scenarios and our focus on making the right decisions to ensure we remain agile and resilient long into the future. Now let's review our ESG performance for this half. As commented, I'm actually really, really grateful that we have not recorded any fatalities in the last 18 months at our own managed operations. We continue to see a drop in incidents recording our lowest injury frequency rate to date. We are continuously researching and implementing new ways to improve and re-energize our ambitions towards zero harm. These progressive step change are not by chance. We drive purposeful, focused interventions and continuously reviewing our approach as technology evolves, incorporating learnings and adopting best practice. I would like to reflect on milestones that our operations have achieved. Three of our operations have recorded more than 11 years fatality-free, whilst our bundle build has shown significant safety improvement as a result of our back-to-basics safety approach and the successes of modernization of the mine. Our business relies on partnerships and collaboration with various public sector entities to operate effectively. This enables us to provide our employees and host communities with basic infrastructure needs. To minimise disruption on our operations and host communities, we have been partnering with government and business on solutions to secure energy, water, road and rail infrastructure, addressing fraud and corruption and ensuring social stability in our operating environment. The National Energy Crisis Committee, or better known as NECOM, was established as a joint working platform between government, ESCOM and business to realise the expedited implementation of the Presidential Energy Action Plan. As a company, we have been supporting working groups within NECOM to achieve energy security and minimise load shedding and load curtailment. Similarly, we have been partnering with government and business on water security to ensure that our host communities have the basic human rights of clean water supply and sanitation. We currently have 15 projects focused on water supply, refurbishment of water and sewage infrastructure and importantly, water conservation. Our most notable water project is the Willifonts Management Model Project. It is a public-private partnership between government and the mining industry which will significantly improve water security in Limpopo. Construction will continue to 2030 to deliver the full program of 200 kilometres of bulk raw water pipeline and associated infrastructure into the Far Eastern Limb. Now let's look at operational performance for this half. In December 2022, our medium-term outlook for 2023 to 2025 was adjusted to reflect new operating conditions, mainly at Moholoquena and Amandelbolt. The results of our improved Moholoquena operational geological drilling had highlighted a short to medium-term reduction in higher grade ore volumes and lowered the weighted average grade at the mine. During the first half of 2023, we have increased the quality of our geological model through increasing our line of sight of drilling and reconciliation to actual performance. This is further supported by our resource drilling to expand the mineral resource and conversion into mineral reserves. Our four-year grade is expected to be between 2.7 and 2.9 grams per tonne from here on into 2025. And therefore, Mohalo Kweena is expected to produce between a million and 1.1 million BGM ounces per annum in each of these three years. At Armando Bolt, the Tumela upper infrastructure and the Shaba open cost operations had come to the end of life of mine, resulting in lower mining volumes at Armando Bolt. Due to the lower mining volumes, a decision was taken at the end of last year to close the ageing and high-cost Marenski concentrator. At both Mojalaquena and Armando Bilt, we also encountered short-term operational challenges in the half that has been resolved. In total, our PGA metal and concentrate production in the first half of 2023 decreased by 7% compared to the same period in 2022. We continue to see strong production performance from our Unki and Mototolo operations. Now, despite a very complex and challenging half, we have maintained a strong contribution to mining EBITDA from all our own managed operations and achieved an overall EBITDA margin of 42%. I want to do a little bit more of a deep dive into Moghala Kwenar and Armando Bolt performance. At Mughalakwena, BGM ounces were mainly affected by the expected lower built-up head grade of about 10%. There was further production impact due to a planned primary shovel shutdown and the unplanned shut of a biobat plant in the first quarter. This was offset by higher throughput and reliability at our north concentrator in the second quarter. Let's dive a little bit deeper into grade as well. Now, I've mentioned that an updated and integrated resource and grade control model informed by increased reserve circulation drilling and diamond drilling over the past three years has provided us with an improved model for planning. The update informed the three-year guidance we provided at the end of 2022. We've built confidence in our new geological model and the reconciliation of mind or to our new model is well within acceptable ranges. It is important to note that the downgrade to guidance last year was not a function of concerns in the quality of the asset. It only pointed to the accuracy of our short- to medium-term mine planning. And as we've heard out of some of our analyst feedback, we have not lost the ore body. It's still there. I'm hoping you are still there. If you look at our resource and reserve statement, you will see that we remain confident and our guidance remains. We continue to make good progress on the six work streams of the future of Moholo Kwerna. Our work to date has focused on furthering the detail on the pathway defined as part of our resource development plan. The pathway to value and the associated investment decisions have been defined through the following steps. Firstly, we are in the process of expanding mined volumes as the pit matures and deepens to continue exposing higher-grade areas of the ore body. We have committed R4 billion to our heavy mining equipment fleet in 2022 to support the future volume growth of the open pit operation. We have made significant progress with our heritage work and in resetting relationships and continue to build a social compact with our host communities. In 2021, our heritage work identified a large number of graves at Mutlutlo in areas identified for near-term waste dumping. Our improved stakeholder relationship and diligence in following global best practice enabled us to relocate the majority of these graves in 2022 and the first half of this year, opening the required dumping space for the next 18 months. There's still a lot of work to do as mining is moving westwards towards the villages of Skimming Leroleng. Over the next decade, these villages, consisting of about 1,100 households, will be impacted by mining activities such as blasting, dust and noise. We continue to study various ways to avoid or minimise the displacement impact, including underground mining, pit redesign and improved blasting practices. Significant progress have been made with regards to the temporary relocation of the Sarita-Rita school, which will provide the necessary buffer to access all and extend the life of the open pit. We are also making good progress with the first twin exploration decline at the Sunsluit underground. Phase B of the exploration decline will commence as a continuation of Phase A in the last quarter of this year, which will allow for the underground drilling and upgrading of the resource classification whilst progressing towards the first bulk ore sample. This enables us to progress our mining studies to establish the investable case for Sunsluit Underground. The configuration of the current concentrators on mine has been optimised. Our study on the third concentrator continues to progress in line with our guidance for completion in the next 12 to 18 months. The coarse particle recovery plant has been commissioned and the full circuit performance is now being evaluated against expectations. We are also investing capital in critical infrastructure that supports the current operation and future value pathways. This includes the Blankwater 2 tilings facility, a pollution control dam, an upgrade of the ESCOM bulk infrastructure and internal road network. While the technical and social aspects are being addressed, the impact of global megatrends on demand, supply and prices of our metals remains front of mind as we progress the pathway to value and direct our disciplined capital allocation. We need to consider the full value to be unlocked, as certain work streams are integral to unlocking further value. Each step to deliver the future of Mughal Aquena is currently at different levels of confidence and holds different levels of risk. Each requires separate capital investment decisions to be made at the right time and in line with our capital allocation framework to protect and strengthen our balance sheet. Now let's look at Armando Bolt. At Armando Bolt, we have seen a marked improvement in safety, and this is a critical success factor for the future of Armando Bolt. Our modernization program at the mine utilizes new technologies to continuously improve safety, mine productivity, and simplify operational logistics. This has been a journey, and a positive one, and we will continue to focus on the delivery of the program to enhance the work environment and to improve operating conditions. Continued port ground conditions are desirable, A requirement for higher rates of redevelopment and short-term operational challenges at Tumela with underground rail maintenance stoppages impacted second quarter performance. The redevelopment requirements impacted development buffers at Dushaba. we have brought in additional labour skills mix to restore our mining buffers and provide flexibility to roll out the full benefits of cycle mining across the operations in a sustainable manner. Now let's walk through the E-Mindable complex and its future in a little bit more detail. And it will consist of three main areas. Firstly, the modernization of the existing mining areas that has started to deliver safety and efficiency improvements. The start of the middle lager through the open pit operation. And lastly, mining studies to shape the future of middle lager and to Mela 1 subshaft. we are focusing on continuing the rollout of modernization cycle elements. We are staggering implementation to manage change and truly embed the modernized mining cycle. This has enabled us to start to capture value through a safer and higher productivity mining cycle and lowering cost. We are finalising the permitting process and expect to start production at Middellagte with an open-cast mine at the end of this year. Production will ramp up to a maximum expected rate of between 110,000 and 180,000 tonnes per month. Furthermore, there are three studies currently underway that will provide optionality for either life extension or growth of the complex. The future of our mine-to-build studies objectives are to define the optimal mining strategy, volume, and timing of various new mining areas and applied mining systems that could be both modernized conventional, mechanized mining, and or hybrid opportunities within the portfolio. The journey we've been undertaking to trial fully mechanized solution in 15 East has proven valuable to understand the successes and current limitations of mechanization for Armando Bolt. These learnings form part of the studies as we map out our optimal pathway for the future of our mandelbolts. Depicted here on this slide is just a comparison on size and technology of the extra low-profile fleet that we are trialling, with the fleet that we are trialling on your right-hand side and the more conventional low-profile equipment on your left-hand side. The life and stability of our processing assets must match the life of our mining operations. This is recognized and form an integral part of our strategy and shapes our maintenance and capital allocation decision making. You will recall that at Polokwane smelter, our ramp up was completed at the end of January this year and we had also planned extended maintenance at our waterfall smelter as part of our asset integrity work. The first half of the year is generally a higher maintenance period for our processing operations, where we see various parts of the processing value chain entering plant shots. In addition, our processing operations have been impacted by load curtailment. Despite that, we saw our own refined production at 1.7 million ounces for the first half, with smelter utilisation increasing steadily over the six months and Polokwane running at more than 90% utilisation in the second quarter. Overall, the utilisation levels across the smelters have risen to normalised levels and our processing operations are running well. Depicted here on your right hand side is a digital representation of the structures of waterfall smelter. Our digital modelling enables us to better understand the risk in stress zones, high erosion exposure, localised heat sources and general stresses and strains in structures. By proactively managing risk through appropriate monitoring and predictive maintenance, we are able to make the right long-term decisions for our assets' stability and longevity. Now, despite being impacted by 42 days of load curtailment in this half thus far, our mining operations have not been impacted. We have had minimal lost ounces and the deferred ounce impact was 66,400 PGM ounces between all stocks and concentrate for the half. We have seen the curtailment impact increasing during the winter months. We are part of an intensive energy user group which ensures that we have clear indications of what the state of the grid is. This allows us to make predictions around our own operations and plan accordingly. The models we've built allow us to match our operational response by overlying maintenance days over curtailment days. In the event of extended load curtailment, we have a clear business continuity plan in place to ensure that if required, we can firstly bring our people to safety and our operations to a safe, controlled stop, ready for a restart. we also have near-medium and long-term renewable self-generation solutions in place. I will now hand over to Craig to take us through the financial and market performance.

Thank you very much, Natasha. Good morning, everyone. I'll take you through the financial results for the first half of the year, considering the operating environment which Natasha has just spoken about. The company generated revenue in the first half of about R65 billion and EBITDA of R13 billion, with a strong EBITDA mining margin of 42%. This was achieved despite a 29% decrease in the dollar PGM basket price. Our return on capital employed of 30% reflects our continued focus on efficient use of capital. The company's balance sheet is strong with net cash of 24 billion rand, including the customer prepayment. And in line with our disciplined capital allocation framework, the board declared an interim dividend of 3 billion rand, or 12 rand per share, which equates to 40% payout of headline earnings. As we know, 2021 and 22, we realized exceptionally high PGM prices. Prices have now reduced, and consequently, we realized the 13 billion rand of EBITDA, which is similar to what we achieved in 2019. However, our EBITDA is down 69% on the first half of 2022. The 29% lower dollar BGM basket price was partially offset by a weaker RAND, which had a combined impact of about R20 billion. This includes the impact of the lower valuation of concentrate inventory, which the impact of that was about R8 billion. In addition, the anticipated lower sales volumes from our own operations contributed an R8 billion reduction, while higher mining and processing costs due to the inflationary pressure reduced EBITDA by a further R2 billion. EBITDA from our mining operations was R18 billion in the period. In terms of cash cost per PGM ounce, these increased to R18,076, up 13% on the second half of 2022. The increase is predominantly due to the lower planned volumes and the impact of load curtailment and the weaker end. In the first half, we did experience above CPI increases in electricity and consumables, but we have seen escalation stabilizing with prices of commodities such as diesel, explosives, and steel reducing from the high levels that were recorded in the second half of last year. So taking into account the current economic and operating environment, we are implementing a sustainable cost reduction program to firmly position our assets in the lowest half of the cost curve. The focus areas are on both cost and operating efficiencies. These actions, together with the expected higher volumes from our mining assets in the second half of the year, gives us confidence to maintain our unit cost guidance at the upper end of the range of between R16,800 and R17,800 per PGM ounce. Net working capital increased by approximately a billion rand. Metal inventory declined by 7 billion rand, mainly due to the 8 billion rand reduction as a result of the valuation of the purchase of concentrate inventory due to the lower PGM prices, which were experienced in the first half of 2023, compared to what we experienced in the last six months of 2022. This was partially offset by higher work-in-progress inventory due to the Polokwani smelter rebuild, which resulted in a lock-up of concentrate stock, as well as the Eskom load curtailment impact of 66,000 ounces, which Ms. Hush has referred to. As previously guided, we expect the build-up and work-in-progress to be released during the course of this year and into 2024. The purchase of concentrate creditor and the customer prepayment also reduced due to the lower PGM prices, and this led to the net increase in working capital. Our year-to-date capital expenditure is 8.2 billion rand, and our full-year guidance has been revised lower to around 22 billion rand. In terms of the categories of spend in the first half, we've continued to invest in asset integrity and maintenance, completing the slag cleaning, furnace, and the Polokwani smelter rebuild. We also advanced the batchesing at Falcorp and invested in our tailings storage facilities to achieve conformance to the global industry standard for tailings management. we have and continue to review our capital expenditure, optimising spend across the portfolio. So in the second half of the year, we will receive some heavy mining equipment at Michalakwena. We'll continue the maintenance programmes to support safe, stable and capable operations, as well as progressing the more to taller De Broghen Life Extension project and the underground twin exploration decline at Michalakwena. So turning to cash and returns to shareholders. During the period, the company generated solid cash from operations of about 17 billion rand. We paid taxes and royalties of 3 billion to the Fiscus and invested 8 billion in CapEx. And once again, in line with our disciplined capital allocation approach, the board has approved the interim dividend of 3 billion rand or 12 rand per share. So if we now move over to the markets. The PGM basket price has fallen in 2023. However, it's still higher than it was pre-COVID. Most of the adjustment has come about due to the normalizing of the rhodium price. And across the three maiden PGMs, the basket is now well balanced. The minor PGMs, iridium and ruthenium, continue to make sizable contributions. Global light vehicle production, the metric most related to PGM demand, continues to recover from the pandemic shock. So far this year, output has been 13% higher than the same period last year. And while we expect the growth to slow, given higher interest rates, concerns over a recession now seem exaggerated, and a full year increase of between 6% and 7% is likely. Within this, although BEVs continue to take market share, ice vehicle production volumes are also expanding. Looking further ahead, industry forecasters expect continued growth in light vehicle production, but at a much slower pace than historically relative to GDP. While there are logical arguments as to why the world might become less car-aligned, strong growth in many emerging markets points the other way. If car production were to return to the pre-COVID trend, automotive PG and demand could surprise on the upside in the coming years. In 2023, we saw platinum price swing in line with the changing supply concerns, which saw a wave of investment and then disinvestment. Fluctuations in the US dollar have also been important. The underlying story, however, is positive. Automotive demand continues to rise as palladium substitution program that began a few years ago are realized. Industrial demand is also robust. And in line with our year-end forecast, we continue to see platinum in a deficit in the coming years, supporting its price. The palladium price has steadily weakened over the year. Concerns over Russian supply post the invasion of the Ukraine have eased as Russian flows have recovered to pre-invasion levels. With the automotive palladium purchasing subdued, speculators have bet heavily against palladium, taking the short position to a record high. If underlying automotive production remains strong, the short position raises the prospect of a short covering price rally. While we believe palladium is in deficit this year, we forecast a surplus in the next few years. Rhodium has been weak this year, with the price falling to a four-year low. One reason for this has been the disposals by the fiberglass industry. A switch to richer platinum alloys has been ongoing for several years, but this has been masked by a rapid expansion of plant capacity. That seems to have stalled in 2021, meaning the ongoing switch has now led to a buildup of surplus rhodium stock. With the industry under some financial pressure, rhodium sales have followed. It's uncertain when this will end, though various factors suggest that we're near the end of that process rather than at the beginning. Underlying rhodium demand remains robust. A steady spread of real-world emissions testing will continue to support rhodium autocatalyst loadings in the coming years. And as such, while the rhodium is in surplus due to stock disposals, it remains a really modest one. So I'd like to spend some time talking about hydrogen. I know we've spoken a lot about it over the years, and you're probably wondering why. After all, the sector is currently a very small proportion of total PGM demand. Put simply, it's because it matters. It matters for our planet, but it matters for the future of PGMs. We all know the potential for PGMs from PEM electrolysers to make green hydrogen and PEM fuel cells to convert hydrogen to electricity. As this slide illustrates, PGMs are used or have the potential to be used in a whole host of other hydrogen applications, from production and conversion through transportation and storage to end use. we're certainly seeing the momentum build in the hydrogen economy. There have been over 1,000 hydrogen project proposals announced globally for full or partial deployment by 2030. Direct investments of $320 billion have been made into hydrogen projects announced through to 2030, of which approximately 10% have passed the final investment decision stages. We, as Anglo-Platinum, continue to invest in the development of a diverse range of existing and new opportunity areas for our metals. Our opportunity areas tap into key global trends, such as decarbonization of difficult-to-abate industries and mobility. And for example, in Germany, our H2 Moves Berlin, our fuel cell electric vehicle demonstration partnership with Toyota Germany and the Safe Driver Group now has more than 100 Toyota Mirai deployed as taxis on the streets of the German capital. Initiatives like these are helping the uptake of fuel cell electric vehicles by aligning end-user demand with the supply of vehicles and infrastructure access, and by influencing new audiences via proactive marketing and education activities. I'll now hand you back to Natasha to take you through the strategic performance.