Exxaro Resources Limited

Good morning, ladies and gentlemen. May we please get started? May I ask someone to close the doors at the back, please? Thank you for joining us in the room. I also would like to welcome those that are joining us online, whether you're joining us from LinkedIn or joining us from our webcast and our corpus call. My name is Sonwabi Zemzinyati. I am the Acting Chief Investor Relations and Liaison Officer here at Exaro. and I'm honored to be facilitating today's interim financial results. First off, let me start with our safety briefing here at The Connection, as is our culture here at Exaro. Please note that we have not planned any emergency drilling today. If the alarm is activated, please remain calm and exit the building using the emergency exit doors. The assembly point is located in front of the building where the roll call will be conducted. We will all remain at the assembly point until instructions are issued to re-enter the building. In the event of this situation, please note that visitors should always be accompanied by their host. For our ablation facilities, when you step outside the auditorium to your right, you will find our restrooms. In case of load shedding, which we do not envisage, we've had a good run so far, We have generators on site, which will kick in in three minutes, starting with the emergency lights, plugs, and then the Wi-Fi. Thank you for your attention. On the agenda today, our presentations will come from our CEO, giving us a group performance overview. We will then hear from our Chief Call Operations Officer on the call performance results. We will then be followed by our group financial performance from our FD, and lastly, the outlook will be led again when the CEO comes back to present. On that note, let me hand over to the CEO to kick us off.

A-planes take off against the wind. Adversity reveals diamonds. and else we say leaders are made by hard effort, not born. This is the wisdom from several poets and writers I start with today. Thank you, Sonua, and good morning, ladies and gentlemen. Thank you for your presence here today, and welcome to those joining us on the line. A warm welcome to the fellow board members in attendance today. and recognizing the chairman who is here, Mr. Jeffrey Kerner. I'm also pleased to see the members of the Pensioners Club. I only see two at this stage. One has already been seated, and one just came in just half a minute ago. So thank you for your continued support and presence. We are really grateful. looking at geopolitical events that had shaped the operating context for the first half of this year. After a slow start, global economic growth prospects have improved. However, with 49% of the world's population heading to the polls in this year, including our export markets, a wait-and-see attitude continues to prevail. further complicated by the ongoing conflicts in Russia and the Middle East. In South Africa, the recent results from the elections and subsequent creation of the Government of National Unity have driven positive sentiment towards this country. But uncertainty still lingers in respect of policy execution. Inflation rates have continued to trend downwards, allowing central banks to consider cutting interest rates. We expect the Federal Reserve, the European Central Bank, the Bank of England, and South African Reserve Bank, among others, to start lowering official or policy interest rates during the remainder of this year. The initial policy rate cuts will mark the end of the most aggressive rate-hiking cycle in four decades. With inflation rates retreating and interest rate cuts imminent, the global economy is expected to maintain its momentum throughout the end of this year. However, it is worth noting that although South Africa's CPI has been trending downwards, the mining CPI in this first half was higher than in the second half of last year. on the back of elevated electricity prices, which reflects the NASA's increase of 12.7%, which was effective in April, which is really also complemented by high cost of lending and trade financing due to elevated coke and refined petroleum costs due to the increase in brand crude prices. As Rian elaborates, you will see the impact this has had on our business. Let's now turn our attention specifically to how these markets have impacted the commodities that we're trading in. Following a weak start to the year due to subdued demand in Asia and Europe and lower natural gas prices, thermal coal prices recovered in the second quarter of this half, on the back of tightening sanctions on Russia, the Middle East tensions, disruptions in the U.S. of export calls to India, and then obviously the real issues that we experience here at home in the South African main export corridor to RBCT. Iron ore prices saw a steady decline from January to March as the sentiment was impacted by the fading optimism and uncertainty surrounding the China steel demand. Prices recovered slightly in April and May on the back of the improved demand of steel, both inside and outside of China. However, these gains were short-lived. As we look at the new minerals, in particular copper and manganese, we have been looking at these prices and monitoring the progression of these fundamentals. In the first half, copper remained quite strong as a result of improving investor sentiment and optimism around potential global economic growth, which has obviously been expected, and then manganese prices also rebounded significantly due to supply-side constraint, reassuring us that our strategy is on the right track. We have provided further detail in the backup slides in this regard. So please do look at those graphs. Now looking at the home front, we are pleased to report that TFR and industry collaboration have improved. As such, we remain cautiously optimistic for the second half of the year that TFR will perform at the 50 million tons per annum which are levels which are guided by them and will continue to respond with agility. We saw an increase in the cold domestic sales in the second quarter of this year. And this is due to the higher equipment availability at the waterbed power stations. However, this only partly offset the weak demand we saw in the first quarter. And you'll recall this is a problem that we're coming with within you know, the previous year. However, as you can see from the bottom graph, and we want to apologize for the color confusion that you may have in your handbook, but we've since corrected. If I'm correct, I think we have. So if you look at this graph, you can see growth of our export sales on the back of alternative means of evacuating our product offshore. Now, moving on to our operating performance, we're very pleased to report that this week we have achieved two consecutive years of zero fatalities across all our operations. And must I remind you that this had been a break from a long period of five years we had experienced before then. So now this is another trajectory, two years down the line. We're very happy to see this happening again. in the organization. As the chief safety officer in the organization, I recognize our team's focus on the five keys of safety and continue to encourage them to conduct robust root cause analysis for all incidents so that we don't experience repeats. And we also want to see demonstration daily from our teams of hashtag safety always commitments. And we expect to see this across the organization, underground, on surface, in this office every day. We do strive for zero harm. Our call operations team under HABI's leadership has consistently demonstrated resiliency. in navigating a dynamic operating environment. However, due to the low demand, mainly in the first quarter, as I've mentioned as well, coupled with several logical challenges, logistical challenges we have seen, we have experienced 12.7% decline in coal production, from 22 million tons to about 19 million tons in this first half. HABI will give more color in this regard. So now, given these logistical constraints that we've experienced, it is important to remember what I've mentioned the last time, that the design construct of the core business is optimized to perform at 50 million tons, with 8 to 12 million tons per annum of airports by rail to RBCT. So there is, however, a threshold below which even your most stringent of course containment will be rendered ineffective. So now let's look at where we are. Compared to the current operating levels of 42.5 million tons, which is 7.5 million tons below optimal levels, with stockpiles exporting 5 to 6 million tons per annum, Some are railed through RBCT, and we've got growing volume going to alternative ports, which are railed both by truck and also a little bit of railing. So think about that. It has actually fundamentally changed the construct and continues to put pressure on the cost management and cash costs that I think Mellis and team, obviously Khabib being there, has been really cornered under pressure, making it very difficult for us to cushion against the impact of inflation, as we have demonstrated over a couple of years. So you will then see the increase of 23.3% between the two halves in terms of our unit cost from 5.06 to 624 rounds per ton. which is mainly driven by our lower domestic offtake at our hot to collect mine, coupled with distribution costs, because we have railed more and exported more than we have in the previous half. So thanks to our early value strategy and our market to resource optimization approach, which we've worked on over years as well, which is beginning to deliver value, And the team has continued to respond with agility and efficiency to opportunities in the export markets. And I think Saki will tell a good story. This is the most busiest team and uncertain team and frustrated team in this building and in this company because they do not know what is going to happen tomorrow. They may have a train, but something may have changed in the market. So you really need to be very sharp. from an intelligence point of view. So proven by our export sales, which we've already mentioned that we've increased by 22% to 3.3 million tons in the first half. And I think they deserve a round of applause, ladies and gents. Really. So, and as I said with this, any value strategy then allowed us to realize that A good price, you know, 95% against the API4 index, which is in line with our set target we've already communicated with you. Yes, it is 2% below our record high of 97%, which we've achieved in the second half of 2023. But we continue to work hard. Now, turning to our energy business, the Synergy operations have delivered 339 gigawatts hour of wind energy, which is a decrease of 13 and a half percent. This business has strong wind seasonality that we see, whereby the first half of the year is always weaker than the second half, even though if you look at the two halves, and you see that if you compare the 2024 to 2023, we can see that there's been an increase of 1.2 percent in wind energy delivered, but this variation of first half to second half is what we experience. Now coming to our financial performance and looking at our group EBITDA, which decreased by 10.5% to 5 billion rands, mainly due to our low export prices and lower sales volumes in the domestic market, which we've experienced in this first half. Specifically on the coal EBITDA, a margin which was quite stable at 28%, whilst the energy EBIT margin decreased really slightly due to the previously mentioned seasonality that we've talked about already. We achieved headline earnings per share of R15.28, down 31.7%, including a contribution for SIAC interests, due to the drivers which copies will elaborate on a bit later. On return to capital employed, it is at 27%. This achievement is not only attributable to the high basket price performance, but also our discipline strategy execution and operations efficiency programs that have ensured the resilience of the business. So in light of this performance and taking into account our growth aspirations in addition to the uncertainty of our operating environment, it is my pleasure to announce the interim dividend as declared by the board of R7.96 per share, which copies will unpack later. Isn't that good? So But I must confess, I used to think that we don't have this number on the slides. That's how I used to do my little tricks before and try not to give the number. And I realized that actually all the time the number has always been on the slide. So it just shows. So let's go forward. As a purpose-driven organization, the sustainable impact of our business is at the core of our strategy. We are happy to share just a few examples of how we are creating a lasting impact for beyond our core mining value chain. Exaro contributed just over a billion rands in our social impact direct investment over the first half of the year. And a larger portion of this is from the coal operations that you would imagine and 60 million rands coming from our synergy business. We use this investment to empower our SMEs through capacity development, and revenue opportunity creation. Out of the 177 suppliers that were registered in the first half of the year, over 60% are now doing business with Exara, while over 6,000 individuals benefited from our supply enterprise development and our enterprise development programs, which is really quite good. So during the first half, we had 47 small enterprise owners from our host communities who graduated from Gibbs Exaro Contractor Development Program. We're really proud of this program because what it does, it further empowers contractors with businesses, with business skills, entrepreneurial skills, amongst others, to improve the viability and profitability of these businesses in their surrounding economies. Furthermore, with biodiversity preservation, it remains a very important focus area for our business. And of note, Synergy invested over 2 million rands towards the Cape Vulture Food Management Program to create the Eastern Cape Vulture Free Zone, or Vulture Safe Zone, in partnership with the Endangered Wildlife Trust. Now, looking at our municipality, Capacitation Programme partnerships with the National Business Initiative really resulted in very good results, especially in the improvement of the audit outcomes, with the Waterberg District Municipality receiving accolades for its exemplary performance, among others. We continue to empower the youth through education and also the implementation of our Early Childhood Development Programme. which benefited 1,400 children. Our school development program as well benefited about 11,000 learners and teachers during this reporting period. Now, coming to other critical sustainability matters at the operational level, where we ensure that we invest enough and the right resources and levels of resources to manage. And we do this because it is the right thing to do. and it is in sync with our values. So firstly, the Black Lung class action that you know we've been dealing with is progressing quite well with a dedicated team cooperating with all stakeholders and will keep you up to date if there are any further developments. Regarding the Denacol water treatment plant, we continue to explore alternative solutions, but it is our wish that we focus quite well in making sure that the right quality levels of this decant is on target and stabilized. Additionally, there have been movements regarding the Sundane family relocation, I'm sure it just puts some lights in your head when you think about this. And this is one issue that concerns us, and we want to make sure that we see this family reintegrate quite soon with the community. And we really prefer to handle these matters outside the courts. We are pleased to report that we've regained our position of four out of five rating on the FTSE Russell ESG index. And Exaro currently sits at the top 20% of the ESG performance convened by the FTSE Russell. And this improvement is underpinned by our ability to integrate our ESU principles in the course of doing business. And if you look at the outcomes of this, you will see that in terms of our disclosures on the environmental side, I think the team has done quite well. The work we've done a little bit on the decarbonization plan has also added to this. So as part of our government excellence, we have maintained our BBB level two rating, exceeding our level three target. And this speaks to our commitment towards driving transformation in our industry and the broader economy. So as I've mentioned, progressing very well on the decarbonization efforts for a company like ours is very important that we prioritize these efforts and make sure that we contribute to the much-needed efforts energy solutions through our current business. So we need to manage this very well. We have been proactive in addressing our impact on climate change since 2008 by partnering with research institutions and growing industry collective knowledge and capabilities as we contribute towards South Africa's energy transition. And what is key to this partnership for us is underpinned by the technical skills dedicated towards specific decarbonization needs of Exaro, especially around the issue of scope three emissions reduction, which becomes a challenge for us. So we're very happy to report that between 2019 and 2023, we have reduced our carbon emissions by 12%, resulting in a 7.7% reduction in carbon intensity due to these operational efficiency programs at various operations. So furthermore, we aim to reduce our Scope 1 and Scope 2 emissions by 40% by 2026 through various projects such as self-generation energy and increased operational efficiency, for example. Now, looking at what we've done, for example, in places like Gigi, we had to reconfigure our pit operations to optimize energy efficiencies to ensure that we reduce traveling distances, to reduce diesel consumption and associated emissions. The completion also of our Lipalalu solar plant under construction at Gigi, progressing quite well. And this plant, we believe, will really supplement our energy consumption with this self-generated green energy by the first or second quarter of 2025. So the first half we're looking at getting the benefits, including the cost of electricity or power. Going to the high-caloric value, which is our high-quality coals, which we mine, it further contributes in lowering Scope 3 emissions, especially in export markets. And we're committed to the diversification of our portfolio, which will further contribute to carbon neutrality by 2050. And as such, our board of directors are steadfast in supporting the execution of our plan, making sure that the strategy is clearly laid out and is closely monitored by them against set targets at subcommittee and board plenary level. And with that said, let me hand over to Khabib. to speak to us about your operations.

Thank you, Nombasa. Good morning, ladies and gentlemen. I'm excited to present the COOL performance results for the first half of 2024. We are proud to report that we've improved our safety performance this period. And to me, this is our biggest achievement, sending all our employees back home safely. As I unpack the operational performance, It is evident that volume still remains a major component, but adding business value remains paramount in all our business decisions. We also effectively controlled our total cash costs and continued our focus on value-adding projects in capital execution. You will further notice how the operations responded to the changing business environment. making impactful decisions and enabling operations to continuously and diligently adapt to markets. Deliver the required products to our customers while we continuously looking for ways of improving our business. I will now dive into our performance in more detail. Starting with safety, which remains our priority and underpins how we do business. Even though we are grateful to remain fatality free. I would like to take a moment to convey our deepest condolences to the families and friends who have lost their loved ones in the mining industry during 2024. Improved safety comes across the business remains a continued and collective responsibility. Year to date, we recorded four last time injuries compared to five in the second half of 2023, resulting in a frequency rate of 0.06, an improvement from 2023, where we ended with a frequency rate of 0.08 for the year. This confirms the success of our safety focus drive, as mentioned by Dr. Nombasa, at our operations. We remain committed to zero harm, which is imperative to our business, and we continue to proactively address safety risks at all times. We would like to highlight some noteworthy achievements in our environmental performance, demonstrating our dedication to sustainability. A 5% improvement in carbon intensity due to the energy efficiency projects with an ongoing commitment to achieve our 2026 goals. target of reducing Scope 1 and Scope 2 emissions by 40% from the 2022 baseline. Water intensity came in at 167 liters per run of mine ton, staying well below our target of 180 liters per run of mine ton, and well below the coal mining benchmark of 380 liters per run of mine ton. The main increase in the water intensity was mainly due to the lower runoff mine. Our rehabilitation efforts resulted in the rehabilitated area remaining in line with the previous period. We also maintained zero level two and three environmental incidents with actions in place to remedy the level two incident, which Nomvasa has highlighted, which is the Danakol incident. We had this incident in the second half of 2023, and there are remedies to deal with that, as it was mentioned. Social investment for the six-month period amounted to 1,045,000 rent, which is higher than a billion which we spent in the second half of 2023. The local procurement spent on black, small, medium, and micro enterprises constitute 77% of the social investment. Combined, this initiative have supported 372 SMMEs through local procurement as well as enterprise and supplier development. We continue to invest in our mineral succession and education program to ensure we have sustainable communities. We currently support 63 black farmers and three ESD businesses, which consolidates into 47 projects under this initiative. Next, I will focus on our operational performance. Looking at our production, we are 12.7% down, about 2.8 million tons. The 2023 volume impacts continued, mainly from lower offtake at our Kuta Halak mine, resulting in a decrease of 1.8 million tons for the six months of 2024. Despite an improvement of about a million tons in the second quarter of 2024, the team has done a lot of work, the ESCOM team and the team led by Lars at Kuta Halak, to ensure that these improvements are realized. We expect a continuation on this improved trajectory assisting in all possible ways to continue realizing this improvement. Mpumalanga production was mainly impacted by Leopan, where we continued with our strategy to focus on delivering value and not volume, as mentioned before. This resulted in 400,000 tons lower production. Our sales volumes were 11.7% down, negatively impacted by lower off-take production due to unit outages and equipment breakers at our off-takers, and this occurred in the first quarter of this year. We have started to see an improvement in the second quarter for the first half of 2024. Lower product availability from Luopan, as highlighted in the comments on production, also impacted us. We were successful in developing alternative logistics channels, resulting in an increase of 600,000 tons, which we've moved through the ports. And this is equivalent to 22%, as it was mentioned by Nombasa. This impacted the domestic offtake somewhat, as available volume was allocated to the markets based on the financial availability and our market resource optimization strategy. Looking forward to the second half of 2024, we forecast production for the second half of 2024 to increase by 1.8 million tons, which is about 9.3%, and sales to increase by 10.6%, mainly due to the following. An increase at Kootenai Lake based on the expected 2.3 million tons increased offtake due to the improvement seen and based on the contracted volumes. A 13% 0.8% decrease in input malanga production is mainly driven by MATA decreasing by 42% as expected and highlighted previously with a mine two short haul which is stopped in May and the subsequent transition to mine one. We did receive all the capital from ESCOM to finish the project. This was offset somewhat by Leopold's optimization value drive initiatives which are now established. Furthermore, We are expected to build on this foundation, which will enable a new market avenue in a sustainable domestic market, resulting in a production increase of 500,000 tons, which is about 45%. We continue to manage the Mbumalanga mines on a portfolio level. And this is important that we don't look at each operation as a unit, but we look at it as a portfolio. where management decisions on our operations and distribution of our products only solve for the maximum return for Exaro. We are planning to maintain the improved export sales of 3.3 million tons into the second half of 2024. I'll move to our market slides. Our market to resource optimization strategy continues to add value to our portfolio and ultimately delivering into our financial performance. There is a great collaboration between our marketing team and operations team to execute our strategy. Starting with our export sales destination at the top right-hand corner. With Europe relating to a normalized proportion of our sales, we have seen India back in the market as coal prices came down. Nearly 50% of our export coal was sold to Indian customers during this period. Our marketing team was able to successfully play into the decarbonization and environmentally cleaner imperatives in delivering to the market and also supporting our customers with high-quality products. Moving to the bottom left corner, we show our progress towards optimizing our export product mix the tandem strategies of ELU value and market-to-resource optimization continue to guide us to sell the highest value product mix. As per our previous guidance to the market, the RB1 portion of the mix, now at 70%, will see short-term pressure as we export higher volumes of lower-quality coal via other channels. During this period, 25% of our exports took place via channels other than Richards Bay Cold Terminal. We continue to develop mechanisms to optimize the sales mix across the portfolio, also via the other export channels. Moving to the right, we talk about the average realized prices. We are still experiencing significant pressure on pricing dynamics, both domestically and and internationally, with a lower API4 price of $101 per ton versus $112 per ton in the second half of 2023. With increased export volumes via alternative channels, we have guided previously that there will be temporary pressure on our price realization performance, now sitting at 95%. We still view this as a benchmark price realization performance. We believe that we have seen the lows in the transnet freight rail performance and are cautiously optimistic for incremental improvements in export rail performance to Richards Bay coal terminal. We are strongly encouraged by the approach taken by the new management under Michel and Russell. We are focused on continued optimization of routes to market, and I'm confident that we will in time show even more success in this regard. I'll now move to the course slides. During our financial results presentation to the market, we highlighted the fact that we have installed capacity to produce 50 million tons. And Dr. Nomas has spent a lot of time explaining the importance of us operating at 42.5 while we've designed for 50%. So that is quite important in terms of what it does to our business. We also indicated that offtake and logistics constraints will add additional cost pressure. And our guidance of remaining within coal mining inflation on a cost per ton basis is at risk, Here I'm in front of you telling you the same story. It's what I told you earlier in the FD pre-close also. We are therefore pleased to report that our cost of production has decreased by 147 million rand and even including the additional investment of 614 million rand in logistics options. Our total cash cost only increased by 5.2%. well below the mining inflation of 7.2% for the first half of 2024. This was made possible by continued cost efficiency and improvement initiatives remaining true to our commitment to produce at benchmark cost levels. This commitment remains relevant to ensure we proactively minimize all impacts on our business. As discussed in our production performance, The offtake at Rotorola continues to impact this operation, and the higher volumes through alternative channels does come at a premium. The lower offtake impacted the operational reading, and again, requires us to pivot regarding our mining value chain processes. We are designed to move coal via conveyor or rail. Now we're tracking coal also on top of that, so that is that requiring us to pivot. Previous anomalies. we mentioned have been concluded and strip ratios will return to long-term averages in line with the life of mine designs. In the first half of 2024, we continue to utilize opportunities to prepare our operations to be more responsive to this changing reality. Focusing on equipment maintenance, exposing cold, and ensuring that we are prepared for the increased demand. as we have indicated in the second half of 2024, embedding our alternative logistics channels while continuously optimizing. The reduced production volume amounting to 2.8 million tons, or about 12.7%, resulted in an increase of 12.8% in our production cost per ton and an export logistics cost increase of 10.5% per ton. The latter investment has resulted in an additional 600,000 tons, which we sold through alternative logistics channels. I will now unpack the key contributors to our production cost pattern as indicated by the shaded area in the bottom right graph. Firstly, the increased equipment and plant maintenance, as discussed above, accounted for which contributes to 5%. Employee costs increased by 4% due to normal labor increases of 2% and a structural change due to the technical support services moving into coal. Increased contractor costs of about 3%. This was mainly at Belfast, moving additional volumes in the first half of 2024. to increase cold inventory and enabling product flexibility. The rehabilitation costs reduced mainly due to the impact on the liability as a result of the change in PPI and the discount rates. In conclusion, we remind you again that cost containment remains our highest priority, especially when impacted by decrease of take and below normal logistic channels or performance. We pride ourselves in that despite all what has been mentioned, we are still able to remain within the second production cost quota on aggregate as example. Having said all of this, we continue to challenge ourselves to keep our production costs within the mining inflation. As mentioned, I remind you that we will continue to maintain our operation resilience and responsiveness to changing external factors that may impact our business. This is supported by our commitment to driving digital programs targeted at obtaining insights from our data analytics. Finally, we move to our capital expenditure. We are still within the 5% guidance provided to the June 2024 of the FD pre-close. with the actual expenditure at 2% below the forecasted value. We remain committed to our capital excellence journey and spend our cash prudently focusing on the investments to effectively sustain our business. Our spend is also aligned with the normal project execution plans, which reflects an increase in the second half of 2024. Looking ahead, we forecast our 2024 capital expenditure to remain in line with our overall guidance, which is between 2.5 to 3 billion per year in real terms. Key areas of focus include equipment strategies and license to operate infrastructure, as indicated in the table above. Now I would like to take this opportunity and express my gratitude to the operations team, and our colleagues here at The Connection for their exceptional agility and resilience demonstrated through the year. Their efforts have played a significant role in our finance and operational achievements. Now I will hand over to Khopis, who will provide a detailed overview of the financials. Thank you.

Thank you, Khopi. Good morning, ladies and gentlemen. It's a pleasure to engage with you again to present our financial results for the six months ended 30 June 2024. To remind you again, the results will be compared to the second half of 2023. The IFRS results are adjusted with headline earnings adjustments to make the results more comparable. and we have included further details in the backup slides. So on the first slide, the high-level overview of our group results highlights the performance of our own managed operations depicted on the first two graphs at the top on the left, followed by income from our equity-accounted investments on the top right. So you can see revenue in EBITDA of our own managed operations declined by 4 and 11% respectively, and we will unpack that later on. The total contribution from our non-managed operations depicted in the equity income graph was also lower as we recorded weaker performance from all our equity-accounted investments. The SIOC equity income decreased by 1.6 billion Rand. So it is definitely evident that we are operating in a challenging environment, but despite the tougher trading conditions, our cash generation of 4.8 billion resulted in a net cash position of 9.8 billion, setting a solid foundation to execute on our growth strategy. This translated into headline earnings per share, or R15.28. If we look at the EBITDA slide, so EBITDA reflects lower prices with increased logistics costs. If we look at the split of EBITDA between the coal and the Waterberg and Mapumalanga operations, the EBITDA decreased at both Waterberg and Mapumalanga compared to the second half of last year. The decrease in EBITDA at Waterberg of 100 million was driven by a decrease in revenue of 455 million due to lower export and sales volumes at lower prices, offset by higher prices we received on our ESCOM sales. Also, we had a favorable impact of higher discount rate used to calculate the rehabilitation liability of R149 million. As we exported less tons from Groote Geluk, distribution costs decreased by R63 million. And due to the inflationary pressure, that added R96 million to the Waterbrook cost base. At Mopumalanga, the decrease in EBITDA of R528 million is attributed to lower revenue of 30 million, as we saw higher export volumes from Belfast and Leopold, albeit at lower prices, while domestic volumes decreased in line with our priority for exports. So as our Mapuma Langar mines are the main exporting mines, we saw an increase in distribution costs in Mapumalanga of R410 million in line with the higher export volumes. At Mafube, the JV with Tungela, our buying cost was lower at R147 million due to lower pricing and also volumes. Inflationary also played a part and added R41 million to our cost base, And on the environmental rehab liability, we had a negative adjustment of 67 million. So as Gabi pointed out, we continue to look at optimizing the logistic solutions in the group, as well as also at the Leopold mine to focus more on value over volumes at the mine. This translated into a stable margin of 20%. 8% for the coal business, with the Matla Ibida remaining stable. If we look at synergy, the synergy wind operations generated 339 gigawatts of electricity for the six months, marginally higher than our prior guidance, and we are still forecasting generation of 720 gigawatt hour for the full year. Remember, the generation is normally higher in the second half of the year. The EBITDA margin remained very stable at 79%, and the Synergy Project finance debt includes $4.2 billion for the wind farms, which will be settled by 2031, and also $850 million for the Lepalale solar project debt drawdowns. this debt will ultimately be settled by 2042. So both facilities have no recourse to the Exaro balance sheet and are hedged through interest rate swaps. So the Lepelale construction is on track for completion in the first half of next year and within budget. Cumulative cost incurred up to 30 June on this project was $350 This, as explained earlier, presents the first major project that will reduce our Scope 2 emissions at Groote Gelukmijn, as well as contribute to substantial electricity cost savings in the group. If we look at the next slide, the Iberda waterfall graph, firstly the price bar. So as explained, we increased our export volumes, but at lower prices, resulting in an average realized price achieved of $96 a ton, a 12% decrease compared to the second half of last year. Our price realization on coal compared to the API4 price was also 2% lower at 95%. But this was partially offset by higher prices realized in the domestic market, mainly on our ESCOM sales. So our export volumes increased by 581,000 tons as a result of our strategy to use alternative logistics channels. And sales volumes in the domestic market decreased as we prioritized these higher exports. As Gabi explained, we also experienced lower offtake from our offtakers in the Waterberg due to unplanned maintenance affecting both the power stations. Inflation, similar to the rest of the mining industry, still experiencing inflationary pressure during the six months, with electricity costs increasing 6.4%, labor 2.1%, and the rest of our cost at PPI of 1.9. There was some relief on our diesel cost as it decreased by 3.8%. As explained earlier, the buying cost from Mafube, our JV with Tungela, decreased by R147 million due to lower volumes at lower prices. Looking at the other cost, selling and distribution cost, increased $659 million in line with the higher exports through the alternative logistics channels, and the increase in operational costs was already covered by HABI. We also had an increase in stock movement, resulting in a positive variance of $280 million, and on the rehabilitation side, the impact from external surveys performed on our costs combined with a favorable movement in discount rates, resulted in a positive variance of 268 million. The net positive forex variance is due to the impact of the weaker RAND dollar exchange rate on revenue, as well as realized and unrealized foreign exchange differences on foreign debtors and cash balances. On the next slide, we will look at our balance sheet, In applying our capital allocation framework, we always aim for the net debt EBITDA ratio, excluding our project financing arrangements of below one and a half times. So for this six-month period, our cash flows totaled $5.4 billion, comprising of $3.3 billion from our own operations savings. and we received dividends of $2.1 billion from our investment in Session Iron Ore Company. In terms of the capital allocation framework, we used this to sustain our own operations and support functions with capital of $1.1 billion. We paid dividends of $5.5 billion, consisting of a pass-through of the SIOC dividend of $2.1 billion and $3.4 billion from our own managed operations. Included in the other bucket of 270 million are shares acquired to settle vested share-based schemes and the translation of cash and cash equivalents. Our closing net cash position as at the end of June, excluding the synergy net cash of 4.2, was therefore 14 billion rand within our target range 12 to 15 billion as previously indicated to the market to be retained for our growth strategy. We shared the economic value of various stakeholders including 3.5 billion with employees. We contributed 2.7 billion to government through taxes and royalties and we paid 5.1 billion to our external shareholders as dividend and we also shared 101 million with elk communities. I'm also pleased to announce, as Nombasa already pointed out, that the board has resolved to pay an interim dividend of R7.96, and that is at an overall group cover ratio of 1.9 times. This is a pass-through of the SIOC dividend and a cover of 2.5 times on Exaro-adjusted group earnings. As previously signaled to the market, we aim to balance the level of cash retention with our growth strategy and returns to shareholders. So taking into account possible downside scenarios and retaining balance sheet flexibility, we earmark the 12-point 12 to 15 billion Rand cash buffer, excluding the energy project financing for the growth strategy. The cash retention will continuously be reviewed by our board, taking into account the economic outlook as well as the pace of our growth strategy. So the board has therefore resolved not to pay a special distribution at this stage, as we are within our targeted cash retention range. But however, the board will reassess the position when we announce our final results in March, taking into account our cash generation over the period. So also with that, I would like to thank everybody that made the results possible for their contribution, whether you're based at the operation, here at the connection also, finance team for all the hard work. Thanks very much. And with that, I hand over to Nombasa again.

Thank you, Kopi. So as we conclude our presentation and looking at what we did in the organization in terms of skills and having new acquired skills which are necessary for us in execution of our sustainable growth strategy, we are confident to say we are actually executing our growth strategy as communicated before. Blessed to have a robust coal business which is enabling us to diversify our business. And we're looking at the diversification of our minerals business, at the same time growing our energy business into a formidable business energy solutions business, so that we could reach our carbon neutrality by 2050. And we have reviewed our strategic levers that will further position Exara to win in this ever-competitive, fluid, dynamic, whatever you call it, market. And we've identified and strengthened the values or the levers that we are looking at in terms of leveraging technology solutions, including generative artificial intelligence, to support in these following key areas. Decarbonization initiatives, our M&A intelligence, and investor relations, in addition to efficiencies and productivity, across our business value chain we have been reporting over the years. It is becoming more and more important for me as a leader of this organization to champion a supportive and nurturing culture that will ensure that our strategic objectives are achieved, including diversity, equity, and inclusion at the center of that culture. Globally, we continue to experience a challenging M&A environment with lower deal volumes that we've seen in this year, with just a few larger consolidation deals that have been announced, which we all know about. This, however, has not deterred us from our diversification activities, and Richard can share a little bit of what we've seen. But, you know, obviously when there is something to share, we will share with you. But we're very deliberate, as we've said to you, in ensuring that we evaluate all deals deeply, robustly, as guided before, and we will execute on value of creative deals. Now that we have concluded our structured organizational effectiveness process in the organization, I can confirm that all our people and resources are directed towards the execution and further positioning your business to win. And I want to remind you to say the business has gone through various transformation and changes And we had to look at a certain point that we consolidate the resources of the organization, align it to execute in areas which are important for the strategy. If you're going to be an acquisitive company in the short to medium term to achieve the strategy, we needed to build those skills to execute the strategy. Hence, Richard's team, you'll see, has actually been beefed up. So, Our success is rooted in the quality of our people and their ability to generate market intelligence and agility to respond to these market dynamics. We talk about this all the time. We've demonstrated this in the coal business. So this strength gives me confidence that we will deliver on our previous guidance of coal production between 39% and 43 million tons. Our total sales are 38 to 42 million tons. Coal exports ranging between 5.7 and 6.3. And what we've guided in as far as sustaining capex for coal being between 2.5 and 3 billion rands per annum. And with our wind conditions remaining favorable, we expect that the generation for the year to be between a 700 and 720 gigawatts hour. Turning now to issues that impact our business, that a successful functioning state breeds thriving businesses. like Exaro that are enabled to contribute towards favorable economy for its citizens and a better place to be or a better place to do business. So we're encouraged by the following developments that we see today. There's been promising legislation that has recently been signed that we view as progressive The first being the Climate Change Bill, which is an important step towards determining meaningful actions which are required from South Africa's response. The Amendments to the Companies Act of 2008, which is imposing greater transparency on the earnings gap between the highest and the lowest paid person in the company. And this is a journey that Exaro has already started as disclosed in our 2023 remuneration report, which forms our suite of integrated reports. Other visible developments are in the rail infrastructure. So you may have heard that the long-awaited infrastructure assessment has just been concluded. And it has been shared by the industry. And this really puts us on the path of planning the next steps in terms of how we engage with the challenges that we see. And following the publication of the network statement that you also see this year and its public process in terms of comments and inputs, we are also looking forward to the final network statement, which I heard this morning that could be in the next month or two, which is quite pleasing. And progressing from there will then go to an open access network, which allows train operating companies to offer real services to miners from 2025 onwards. The South African Development Bank approved about 18.85 billion rands corporate loan for Transnet Business Recovery Plan. That can be positive under this new management plan. Even though the performance numbers that we see in the second half do not show any improvement from Transnet, but we are encouraged that the approach and the openness of the new management is taking us ever so close. It is therefore our beliefs that the restoration of Transnet rail capacity will be slow. It's going to be a long process. However, as an industry, whether you look at the Minerals Council, you look at the BO4SA, you look at BLSA, we have committed to continue to support the TFR initiatives in making sure that we restore the journey where relevant, working with the National Logistics Crisis Committee. Furthermore, significant improvements in the energy environment has also been very encouraging in terms of the execution of of the Generation Operational Recovery Plan, and the National Energy Crisis Committee is so visible because now if you look at what has been happening with load shedding, we have not experienced much. And recently you would notice that the utility has exceeded its availability factor of 70%, marking a significant turnaround from 12 months ago. And this has given a reprieve to a lot of businesses, especially small businesses, improving their ease of doing business in our country. And following the elections, the market is reporting a cautiously optimistic outlook. Look at the Bank of America, which reported about 71% of surveyed fund managers were very optimistic about equities over the next three to five years. while 82% of those surveyed said they were prepared to bring back offshore funds if domestic resistance looks superior or as attractive. However, investors are applying a caution of a wait-and-see approach, and ultimately it will be in the successful execution of South Africa's great policies that will be put to the test. And I think that is where the indecisive commitment is we cannot allow this to happen. And hence you see the step of being a little bit more closer in terms of the support of our public and private partnership. And that are beginning to really prove that working together, really there's nothing that we cannot achieve as a country. We do this to power possibility to our country for Africa and beyond. securing the current and future energy needs. Last but not least, regarding our BEE unwind of our CSRF shares, which were under a 10-year lock-in period, are to be available to be exercised for either the option to sell, parallel, or all the shares in four trenches. The first trench being about 40 million shares at the end of 2024. The shares are not automatically released and sold because ASCZO RF must first exercise its option to sell or retain within ASCZO RF subject to the normal preemptive rights. So as Xaro and our advisors, we're engaging with ASCZO RF to make sure that we execute the option of their preference. And that work is ongoing and we do get a lot of these questions So that work is ongoing, and we're quite comfortable that towards the last quarter, we will be able to share some more. These results would not have been possible without our men and women at the heart of your business, who have proven to be the airplanes that took off against the wind, the diamonds that are revealed by market adversity, and every day, becoming better leaders through their hard efforts. With these words, I'd like to thank each and every one of you at operations in this building, everywhere, partners on our value chain, for your continued dedication, resilience, and loyalty. A special mention also goes to our board that continues to direct us and guide us in the work that we do, and making sure that standards don't drop, And ultimately, when all is said and done, wherever you are, you know that hashtag cruising nicely. Thank you very much.

Indeed, we are cruising nicely. That brings us to the end of our interim financial results. And we bid farewell to those of you that are joining us from LinkedIn. Enjoy the rest of your day. We will now, in the room and online, we will be going into our Q&A. I'd like to invite Leon Grunewald, our MD for Energy, to come and join the presenters, please. We will take three questions from the room. Please say your name, where you're from, and then answer the question. Or ask the question, rather.

Thank you. Good morning and congratulations on the results. It's Tim Clark from SPG Securities. My first question is just on your unit costs in coal. They've obviously bumped up a little bit and you've showed us the logistics breakdown and the unit and the sort of denominator issue that you've had of a lack of sales. But you've got a very strong second half. You've got a big bounce in and a nice little bounce as well across in Pumalanga. So Perhaps you can give us an idea of what you think the unit cost trajectory could be in the second half, given that improvement in productive capacity. My second question is just on your 40% carbon reduction of scope one and two by 2026. I was a bit surprised by the extent of the number and the speed at which you're going to achieve that, just given diesel and diesel abatement and how much of a challenge that would be. I wonder if you could just speak about the breakdown of that number and how much diesel is of your scope one and two carbon emissions and how you're planning on abatement. And then just taking the offer that you made for Richard to comment on what he's seen in the market and just overlaying that with your comment on manganese and copper that you'd seen your strategy playing out. I guess the problem with that is making pro-cyclical investments, right? When manganese prices have been strong and copper prices have recovered and that there's great optimism, perhaps the price of acquisition rises too. So maybe you can comment on what you've seen, Richard, and how you would manage pro-cyclicality.

Thank you. Do you want to answer first and then we come back? Yeah.

Projection. Tim, are you good? All right. Thanks very much. Thanks for the question, Tim, and good afternoon to everybody in the room. Tim, you would have seen the reduction, obviously, of the 2.8 million tonnes, and we've indicated what has that done to our rand per tonne picture, but we've also indicated what our absolute cost expenditure looks like. What we've tried to do, if you use a 40% variable cost calculation, if we had to normalize the costs, our inflation per rand per ton would have been around 5%. We have to normalize that. So if you can use that as a proxy to cater for the bump, as you've explained in the second half of the year, based on our detailed cost graphs that we've put on the presentation.

Before we get to the

decarbonization plan, Richard, on the market and manganese?

Morning, Highton. Cyclicality is something we're very conscious of. I think important to note that we're not seeing cyclicality in manganese. This is an event that has caused prices to spike. So in our discussions with manganese producers, there isn't this overlay of prices are now higher. The longer-term price has remained stable because we all know it's going to come back to normalized levels. The discussion you correct is different in copper. There seems to be a new fundamental flaw in what is a long-term copper price, what is the demand. And even though EV trajectory has slowed down, there's still this underpin that $10,000 is the new norm. So what does that do to our longer-term prices? So I don't think we're at the top of the cycle. I think we're seeing revaluation of what is the norm in long-term pricing and hence bringing that into our models, et cetera. And we're doing this across all the commodities that we're looking at.

Tim, two key drivers on the decarbonization for 2026. You will remember that we looked at optimization of the portfolio itself. in terms of certain assets that need to be off our carbon register, and also the huge shift that we're going to get from the LSP project. I think the LSP project is just below 20%, which is significant. The balance of that would be the early results from our energy diesel efficiency. I don't have the numbers for specific diesel right now. But we can do that breakdown and put it on the net. But suffice to say that we know beyond 2026, it's going to be a challenge to take out Kabul. We know that. Because then again, your low-hanging fruits are no longer there. But I think we're still in that wave of a low-hanging fruit. Yes, we're also looking to see whether we can do the same in Bumalanga. But we know that in Lipalale, you know, LSP is going to endure for longer, and we're going to see that benefit, and it actually does contribute to the broader, you know, emissions in the group.

Okay. Thank you. Bumile Lomtembu. Oh, I can't go. Bumile Lomtembu, EPSA Capital. I've got three questions. The first question is, can you give us a sense of what's supporting the richest pay benchmark? And what's your outlook for the second half? And then the second question, it's with regards to page six on the slides. I'm not sure quite get... Slide six. Yes.

The color scheme.

Yes.

That's what we... Yeah, okay. So we've corrected it, I think, now.

But the question on that is the alternative channels of the 3.3, are we saying... the majority of it is not going to Riches Bay or we're saying it's getting tracked. So I wanted clarity on that. And then the last question, I noted that your second half for sales and production guidance is higher, especially for Waterberg. What's the reason for that? But also I noted that Belfast and Leopan, the forecast is actually lower. So I just wanted some clarity on that. Thank you.

Okay. There's a benchmark, which is birth.

Thank you for the question. So Richard's benchmark, API4, that we commonly talk about. We also had a question earlier this morning from the media on why does the coal industry seem so bearish at $100 per tonne, which normally was a very good price. And it still is quite a good price if you're a South African producer and you have rail capacity through RBCT. And that's exactly where the problem sits. With Transnet performing at 47 million tonnes annualised per year, exporters do not have the rail capacity through that efficient channel, which makes $100 per tonne a challenge if you cannot put it on the rail. If you look at the mining inflation that we showed earlier, and you look back over the last three to five years, what that has done to mining costs, as we also indicated to you, there's a huge bump up in cost of producing coal. And I think you will generally find that where $80 was a fairly decent price three, five years ago in a balanced market. $100 is probably that price today, given what mining inflation has done. So I think there's a cost underpin to that Richards Bay benchmark that we do see. What also remains quite elevated is the Australian benchmark, the API 6, sitting at about $140 into the Pacific price. and that there's a certain differential between that and API 4, which also assists South African producers. Then I think the other question you had was on the outlook. So we prefer not to give our own outlooks in the public domain, but talk about what the analysts are saying. So if you look at what McKenzie is forecasting for the rest of the year, they have now in three months changed up, then down, and then up again. So just to illustrate how volatile the environment is out there. But I think the current type of API4 price that we see now is more or less what's expected for the rest of the year if I look at the analysts. And then you asked about the alternative channels versus RBCT. So the tons that we moved through RBCT in the first half was more or less 2.5 million tons. with about 800,000 tons through the alternative channels, which, as Nombasa indicated, are multimodal trucking railing in some cases.

We'll take one more question in the room, and then we'll go online and come back to the room. Over to you, Shailen.

Morning, everyone. It's Shilin Modi from HSBC. Just a couple of questions regarding volumes. Given the The numbers that Saki just mentioned that you exported 2.5 million tons through RBCT and 800 kilotons tracked. You still have 3.3 million tons exports in your guidance for 2H. Should we expect a similar split? Or do you think there will be an improvement in Transnet's capabilities in line with their guidance? The second thing is at GGE, you are guiding quite a big step up in volumes in the second half. Is that just based on the contractual volumes with ESCOM for Mdupi, Mdupi and Mutimba, or is that a real number that's going to play through? Part of this is, do you know what the stockpile is at Mdupi and Mutimba, and can they still add to that stockpile? Okay.

I've got one follow-up question.

Thanks so much for the question. Similar split second half? I think so. I will be very happy if Transnet gives us something more than a 47 million tonne annualised. I saw a figure yesterday of if you take the second quarter number So first quarter, we had a lot of derailments. If you were to take the second quarter of the calendar year and you were to extrapolate that for the rest of the year, on an annual basis, you get to 54. So, yeah, we really would hope that we can close off the year much closer to 50, if not a little bit over that, which will then help us definitely on the export tons. Then grote geluk tons in the second half. definitely looking forward to a much improved performance by TFR. We have started to witness actually in May better performance, June much better, July also quite good, and August also going good. So we're quite hopeful that we will at least stay on contractual levels, minimum contractual levels for the rest of the year, and if we're lucky, hopefully they can claw back a bit of what was lost in the first half. And then the stockpile, yeah, we prefer not to comment on ESCOM's business and what is over the fence. There's a lot of coal, and I would prefer if that question can maybe rather be directed at them. We have not seen that ESCOM is not able to take the coal because they fool on a stockpile yet. So maybe just to give that answer. Okay, thank you.

Maybe you can help us understand where do you guys derive comfort in your workings with ESCOM?

Yeah. The team at Fort Hillock and the ESCOM team, they're working quite very closely. If one looks at the first quarter, the challenges are known with the feeding system. Those were addressed in the first quarter. If one looks at the second quarter, actually there was a million tons improvement Hence, now we're quite comfortable that we're going to see a 2.3 billion tons improvement into the second half.

And then just the last question. Nombasa, you mentioned that 40 million shares in the BE structure will become available towards the end of the year. Assuming everyone exits the structure, what does that mean for Exara? Does once empowered, always empowered hold in your view? Thank you.

Do you want to take that or should I? No, I can take it. Okay, at least you say something.

Yeah, so currently we're busy with the engagement with shareholders. So I don't think there is a view that the 40 million shares will all accept the structure. And obviously from a regulatory perspective, we are the whole time monitoring the position. But also in that structure, remember, there's also some of the shareholding is held by our community trust and also our employee share ownership trust, which are evergreen green vehicles.

Yeah, but maybe just to take you back, Sherlyn, in terms of where we're coming from with the BEE, where we have performed above what the law had asked of us because we believe that was the right thing to do. We've experienced the benefits of being a BEE company, and we think it needs to be something we look at it positively. So it just can't be about the law. It has to border between what the shareholders' interests are, but at the same time, also on our value system. So between what I've said, you should probably read the answer.

Okay. We have two questions on the line from Sandile Makakula from Umtomba, both of which are M&A related. The questions are, How much progress have you made from an M&A perspective and what could drive Exara's appetite for premium valuations? The second one is when looking at M&As, what considerations do you have for the choice of your acquisition targets in relation to Exara's climate targets and policy?

Thank you, Sandile. In terms of progress, I can confirm that we've made positive progress. In the course of this year, we have, as Nambasa alluded to, scaled up the growth team within XRO. We are actively involved on a number of detailed due diligences. We are engaging with principals and owners of assets across a number of commodities. So I can confirm that there has been very positive progress. What we are seeing again, reinforcing Nambasa's presentation, is far fewer sales projects globally than in previous years, which means we are having to engage far more on bilateral basis on encouraging sellers to interact with us. And when you get into that environment, you have to entice them to sell. And one of the levers you have is the premium that you can offer. So So in a number of these discussions, or most of them, you're right. We have to think about what is that level, what is that strategic premium because of a scarcity in the market when it comes to M&A. So that is something we have to consider, but within our targets on our return on capital employed and IRS, et cetera, we build these numbers in to make sure we're doing responsible deals. The second part of your question around how much does ESG drive our our investment criteria, I think the answer is that it has to be at the heart of everything we do. As a business right now and in what we invest in, it is an aspect that we have to consider. How does it affect our scope one, scope two, scope three targets? How do we utilize our due diligence in ESG to make sure we're selling a good story to our shareholders? across the assets we're looking at. And the fundamental goal of investing into transition metals guides that narrative around what are we doing in energy generation, energy storage, energy infrastructure that enables decarbonization and a cleaner world.

And maybe to say that internally we do set targets of how we see the phasing of what we call the current business, which is looking at energy solutions, and then diversifying it through these new acquired mineral businesses, which will still complement the energy transition. Surely we have to model it as we pace ourselves. And suffice to say that given the demand that we see, you know, which is strangely enduring, you know, on coal, where we would have anticipated a peak in 2019, but it continues. to be over a billion tons globally, then it actually sees that you've got enough room to build value out of a business that actually is taking very good quality product because of climate change, because we had to change the product as well to talk to the fact that you're going to need clean water. you know, relatively cold that is not as emitting as other colds, which really gives us, you know, that play. But if you look at it internally, we've got to pace ourselves such that the 2050 target is achievable by looking at how much EBITDA, you know, we're looking at over time. How do you model that in terms of what you acquire between your manganese, your copper? And another play for us, which is becoming more and more interesting, is looking at some of these commodities with a long-term view of going in and saying, for a type of commodity like copper, maybe you need to look at being more exploratory than wanting to go to the hard cash end. Diversify through your manganese and other commodities that can complement from those energy transition sources. minerals to create a portfolio view. I think for us that's what is important. We're not looking at each one of these commodities as a single commodity, but we continuously look at how long will coal endure and how much can, on the back of coal, diversify in a smart way. So I'm comfortable, personally, to say that for as long as we decarbonize our current operations and what you acquire... is not as emitting as coal, then your net carbon balance is actually taking you to your 2050 target. Okay.

Operator on chorus call, I believe you have some questions. Can we take two for now, and then we'll come back to the room.

Thank you. First question, Councilman Sashi Ishikawa of CETI.

Hi. Good morning, everyone. And thank you very much for this opportunity. I have three questions. The first one is on the guidance. During the pre-close, you marginally increased your production and domestic sales guidance. But now they have been revised down. I just wanted to understand what changed in the past couple of months. My second question is in cost savings, which you are targeting through solar project. And my last question is on TFR. Do you see any more downside performance, any more downside in TFR performance from current levels?

So where do we start? Saki at the tail end? Yeah.

Sashi, thank you for the question. I'll take the TFR one. We think we're through the dip with TFR. We're pretty certain that we've seen the lows, and I think people may get despondent by saying we've done 48 million tons last year for the whole year, and this first half we've done 47 on an annualized basis. So we actually regressed by 1 million tons on an annualized basis. I think what we're missing is where we may have been as an industry if the level of collaboration between TFR and the industry and even at the National Logistics Crisis Committee did not happen. We could easily have gone down to a 45 and lower annualized performance. And I think the fact that we averted that was already something very positive for us So no, we do not think we're going to go down for a year. We think we've seen the lows.

Second half? Projections, I think, is it?

Yes, on the second half we hope we go up. I think if I can refer back to my previous answer on one of the questions, I think if we could invest, as Gabi also referred to, if we could invest In the infrastructure challenges that is there, that is causing a lot of speed restrictions on the rail line, causing derailments, and also on the signaling. Now, all of that is not going to be sorted out in the next 12 months. In fact, if you look at the assessment results, it's going to take five years to resolve some of these structural issues. But we definitely think we will start to see improvements here. in the second half of the year. So yeah, we're quite positive.

The cost question, is that? Yeah.

Yes, do you want to talk to it?

Yeah. Hi, Sachin. So the guidance that we give is between 80 and 100 million rand for a full year of production.

Yeah.

Okay. Operator, second question.

Thank you. The next question comes from Brian Morgan of R&B Morgan Stanley.

Hi, guys. Thanks very much. Javi mentioned in the presentation that stripping ratios at GG are quite high at the moment and that we should expect them to come down towards life of mine levels. Could you just elaborate on that a little bit more where stripping ratios are at the moment and what the profile looks like over the next few years?

Are you asking across the operations, Brian, or just at GGE?

GGE.

Let's hear from Lars.

Thank you. Thank you very much. I think the stripping ratios for GGE if you look over the next few years, next five years going forward, we expect it to be more or less in line with what will have been communicated in terms of the life of mine plants of Gigi. So we're expecting it to be around 0.74 or so, which is a figure that has been communicated previously. Thank you very much.

So just to clarify, that's 0.74 for the next five years. How does it evolve?

The way it went is that the 0.74 will be the average for the remaining life of mine. But what we've seen is that we're starting to normalize at what the life of mine have been communicated previously. But more or less, the 0.74 will be what we'll see over the next five years and over the next 10 years and 15 years. So it's an average that you're going to see across the business here.

Okay. So you shouldn't really be expecting any decline in stripping ratios from here?

No, no, no. I think as we move forward, debt is more or less the levels that should be expected.

That's very good. Thank you.

Thank you.

Thank you very much. Okay. Thank you, operator. We'll move back into the room. There's a question if that's all.

Morning, all. It's Tobela Picla from NetBank CIB. I've got a few questions. Let me start with you, Coppice. So during the pre-close, your net cash is at 31 of May was around about 15.3 billion. So a swing of about 1.3 billion to what it is now. Could you just talk to us as to, you know, what happened in that month of June and other things that, you know, occasionally happened in that last month before the end of period? And then the other question is with regards to the loss, well, Bumalanga is making losses on an EBITDA level. Which of the mines in Bumalanga are loss making? And what is currently being done to improve them, especially if the volumes, you know, remain constrained? And I will come back with another question soon.

Right, so the cash position from the end of May to June, the big one was, unfortunately, we had to pay provisional tax of $1.6 billion the end of June. So that was one of the reasons. And then, Mellis, I don't know, do you guys want to talk about Leopoldi optimization initiatives, et cetera?

I think that's a good question. Yeah, so you saw the picture for Pumalanga, which was a loss of 40 million. There's only one operation making a loss in the Pumalanga, and that's Leopon. You saw the volumes dropping in the numbers, and you see them kicking up, and you see some of the volumes going into Eskom in the second half, about a million tons. So there's a lot of stuff that's being done at Leopon. Firstly, I mean, it is our highest cost operation. It is the operation that's got a portfolio of lower quality coals. So we've gone through a whole rationalization process where we've gone from two pits to one pit. We've gone from two mining contractors to one mining contractor. So a lot of optimization that we've achieved there. We're also making sure that on the plant processing side, we're not utilizing plant capacity for non-value accretive volumes. So we've also rationalized that. So we've got a bit of a hybrid at Leopold as well, where you've got some of your own capacity, both in the plants and in the mining environment, between your own capacity and contracted incapacity. So we're really rationalizing that. And when we get to that position and the volumes go up, you'll be in a much better position from a profitability point of view. Thank you.

So just to add, I mean, as I previously mentioned, that we're looking at Bumalanga as a portfolio company. because Leopold has made its way up to, because of the low quality code, but also proximity to market from a train point of view is how we make decisions where we allocate trains. So I don't want us to look at Leopold on its own. But also what is important is what we've achieved now. We've achieved the market for Leopold. We started moving volumes now into the domestic market. and that will also improve on the profitability. So I just wanted to make sure that it's not an isolated, open conversation. Thank you.

Okay. Thank you. Just to follow up, maybe just to bring Saki in, with regards to realized pricing. So if one looks at your slide 13, besides product mix, what else affects your realized price? Because if one looks at your 1H23 product mix, versus one H24 product mix, it's more or less the same, but your realized price actually declined by, I think, 3% or so. And then maybe also just looking ahead in terms of the second half of 2024, you know, I'm trying to sort of gauge as to what is likely to happen to that realized price. And then last question from me is on the rail network issue. I think there was a report or an assessment that was supposed to be done with regards to the coal line. Could you just talk to us as to, you know, has that already come out? And what are some of the key elements, you know, that are being focused on? Thank you.

Thank you to Bello. So if I look at slide 13, you will see second half 23, we sold about 80%, 79% RB1. That has come down now to 70% in the first half 24, and we think we're going to hopefully achieve 71, so more or less the same in the second half. So what we've indicated in March is if we were to export all our tons through RBCT, then that afford me the opportunity through our market to resource optimization strategy to optimize the sales mix in RBCT to get the best value out of that products coming from the mines. Now, with a certain portion of our products now going to RBCT and nearly a quarter of our export tons now going through the alternative ports, We do not have that opportunity yet in the other ports to optimize the sales mix. We're working on it, and eventually we will get there. So that definitely will place pressure on the sales mix and on the price realization. I think what we also have seen in the past six months, in previous six-month periods, and even more so over the past three six-month periods, RB1 typically traded at the premium to the index in the physical market. What we see today is RB1 for the past six months trade at the index or slightly below the index in the physical market. That also places pressure apart from your sales mix optimization on what you have. We still believe that the 95 that we achieved in this six-month period, we're going to work very hard at maintaining that. So as we ramp up volumes through other ports, initially in the short to medium term, there will be pressure, and we've seen it now. But as we improve our ability in the other ports to also do sales mix optimization, we should start to see that number definitely stabilize and hopefully revert back up. So we still feel comfortable that that's a target we can chase. Then on the rail assessment – So, yes, the rail assessment has been made available to industry, and as much as we would not like to talk about Transnet's assets on what is wrong with their assets, I think what the assessment confirmed is that there is a massive backlog in maintenance on the rail network, and we must just understand that this assessment was only done on the rail infrastructure. It didn't look at locomotives or rolling stock, anything. It looked at the fixed infrastructure. And you will have seen the article in the media that says it's about 12 billion rand needed for the infrastructure portion over a five-year period to get it to move back, to get the capacity of infrastructure to move back into the 70 million tons. Now, we must just acknowledge then that this is just the infrastructure. What is going to move on that infrastructure is a different topic. But, yeah, that's more or less the outcome is huge backlog in maintenance, a lot of per-way investment that will have to be done, a lot of signaling investment. And I think between signaling and per-way investment, it's probably 75% of the capital that's going to be required. So huge investment required.

Okay, any more questions in the room? Okay. Going once, going twice. Operator, do you have any more questions?

No, ma'am, we have no further questions from the lines. Thank you.

Okay, I guess then that brings us to the end of our interim financial results. Thank you so much to all of you for joining us. For those that will be joining the Southside Roundtable, please help yourselves to some refreshments, and then we'll see you at 12.30. Thank you and goodbye.