Tharisa (JSE:THA) — Tharisa interim results FY2022

0:01 Good morning and welcome to the THARISA PLC Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated on the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives to the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Ilya Graulich. Good morning.

0:33 Good morning, and thank you very much. And to those participants, thank you for joining us. We have booked this down for an hour to present our interim results for the financial year 2022. With me today are our COO, Michele Taylor and our CFO, Michael Jones. And without further ado, let me hand over to Michele. And at the end, I will hand all questions and redirect them to the relevant parties. So Michele? Thanks, Ilya. Good morning, ladies and gentlemen, and thank you for joining us this morning for our interim results presentation for the six months ended 03/31/2022. I think before I go into those, unfortunately, Phevis, our CEO, is unable to join us this morning. But rest assured he's in good health, and and I'm sure we'll be speaking to all of you in due course.

1:21 Firstly, let's have a look at our operational performance. As always, safety is key. And to that extent, we have reported an LTIFR of naught point seven two per 200,000 man hours worked. Importantly for us is that we've achieved 5,800,000 fatality free shifts as at the end of April. Operationally, we've continued to increase both in terms of PGM and chrome production. In terms of our extension of our chrome production, we were able to finalize the construction of the Vulcan plant at the end of December twenty twenty one, and we started commissioning. That commissioning is going well. We are very pleased with the results that we see coming through the Vulcan plant, and we expect to achieve nameplate capacity during q three with us reaching nameplate capacity certainly by the end of q three, but I think it will be well before that.

2:11 From a financial point of view, EBITDA was reported at $111,000,000, and we have a positive net cash position of $26,900,000 with cash on hand of $101,000,000 Pleasing is an interim dividend of 0.3 per share. As important as it is for us to deliver into strong, robust operational and financial results, so too is it for us to deliver into our strategy. And to that end, this last six months have been particularly satisfying for us and and pleasing because it was the culmination of two key acquisitions that were undertaken. And, of course, whilst and I'll touch on those acquisitions in a minute. But whilst we were finalizing those acquisitions, we continued to invest in the THARISA Minerals twenty year life of pit mine operation.

2:58 And our Arco metals beneficiation, r and d programs, and technologies are developing at pace. It's it's appropriate at this moment to just mention a little bit more detail around Arco metals. There are a number of projects that we're working on there. The one that is line of sight for all of you clearly is the Vulcan plant. Many of you have come to site and seen that in terms of the analysts, and we're really pleased with the technology that we've developed there and that we've been able to bring it into the commissioning phase. In terms of the value accretive transactions that we have been able to finalize during the six months, we announced a landmark or BE landmark transaction in terms of the acquisition of the 26% shareholding held by our BEE stakeholders in Theresa Minerals.

3:44 That was settled in the form of an issue of shares for cash and is a very pleasing transaction for the group. I think our stakeholders in the BE shareholders have been with us for a number of years. They are they've been fantastic stakeholders, and we are pleased to continue our relationship with them in the form of shareholders at THARISA PLC level. What is of particular importance and really gives me a great kick to actually discuss with you this morning is the fact that we were obviously able to finalize the acquisition of a majority stake in a tier one asset in Zimbabwe, that being the Cara Platinum project. We've been talking to you about this project for a number of years and the fact that THARISA had an option over the project. I think finalizing the acquisition of of that asset is pleasing to the management team. And as I said, it's key for us to deliver our strategy into the future. And we take that as seriously as we do our current operations.

4:42 Ilya, if we move on to the next slide.

4:45 If we look at the key metrics and the key numbers for the six month period, production, reef mined increased by some 14.6% to 2,830,000 tonnes. PGM production increased as well. That benefited off a higher feed grade of 1.74 grams per tonne and recoveries which was steady at around 77, which resulted in production increasing by some 22% to 91,800 ounces. Similarly, chrome concentrate production increased as well. The benefit there was a consistent feed grade of 17.6% and a pleasing improvement in recoveries to some 66.7, which resulted in an increase of 6.3% to 776,000 tonnes. This translated into revenue of $334,000,000 which is up 6.5% on the comparable period last year. As I've already said to you, EBITDA was reported at $111,000,000 with profit before tax up some 18.8% at $124,000,000 Net profit after tax, also a pleasing increase of 34.2% at $101,000,000 with EPS up a significant 52.8% at 32.7¢.

5:56 And, of course, there's some accounting anomalies in this, albeit that we have a healthy increase year on year. And Michael will unpack this in a little bit more detail for you a little bit later on. Moving on to the next slide. You know, as much as we've discussed and I've briefly spoken to you already about our operational metrics and we've spoken about some of the key financial numbers, and we're going to delve into those in some more detail, The key topic of the day is always ESG and carbon emissions. And when we reflect and look at the THARISA operations, what we are pleased with is that we are producing sustainable commodities into the future. And that we've bolded some of the key highlights for you and some of the key focus areas when you consider the commodities that THARISA produces.

6:43 So with platinum and palladium and rhodium, these are essential to remove NOx and c o t for c o two from vehicle emissions. Hydrogen economy continues to advance and see continued investment in the sector, and the hydrogen economy is extremely positive for platinum demand. Last week, I was in London for platinum week, and and the the investment in technology, the investment in hydrogen, the investment in reduction of carbon emissions, the benefit of what this means as it translate to the supply demand fundamentals for PGMs is particularly reassuring and pleasing to see as we go into the future. From a stainless steel point of view, chrome is that element that remain that is the essential ingredient in terms of producing stainless steel.

7:28 And to that end, stainless steel is recyclable. It's required in terms of the hydrogen economy economy supply chain, and it supports hydrogen production, distribution, storage, and use. From an r and d point of view, everything that we look at is about being an active participant in the in the decarbonization drive. So research and development, a key ethos in terms of the THARISA group. I think I've gone through that really quickly. Michael's gonna talk to us in a little bit more detail around the financial numbers and how these translated over the six month period. You're gonna have some questions around cost because that is another topic of the day as we all try and understand what inflation looks like over the next six months. But I think without further ado, Michael, why don't you take us through the financial numbers, please?

8:18 Thank you, Michelle, and good morning to all participants on our results presentation this morning. Before delving into the financial numbers for the six months, I'd just like to touch on some of the operational highlights that inform these particular results. So mining volumes, as Michel mentioned, increasing to 2,800,000 tonnes. And this is on the back of sustaining our stripping ratio of 11.9x, that's on a Q for Q basis, and really enables us to have input flexibility and also takes into account our previously announced extension of the open pit by seven years. Reef mills, 2,800,000 tonnes, and we continue to have a strong focus on feed grade improvements that flows through from the mining through to the processing. I think particularly pleasing is the increase in the PGM Rafa feed grades, which are up 22.5% to 1.75 grams per tonne.

9:08 And then PGM outputs a record 91,008 ounces, also up 22.2%.

9:14 The Vulcan plant is in the ramp up phase, so expect to see increased production coming through on the chrome front. If we move on to on the back of that sorry, I seem to have some problems with my control here. Thank you. If we just have a look on the back of that very strong operational performance, it's really informed our financial results for this financial interim period. And it's really characterized by three themes. The first is the very favorable commodities market which we've been operating in. The second one, unfortunately, is cost pressures, and most of these are associated with the cost of fuel. And we'll see what's happened to the price of fuel at dispensing and also price of Brent. And then the third one is the accounting anomalies really created by the acquisition of the controlling Sin Cara Mining Holdings.

10:08 Revenue for the year, up $334,000,000, and that's up 6.5%. If you have a look at PGMs contributing some 70% to our overall basket, that's on an FCA basis, as we split out the costs of sales and shipping. I mean that's in the back of PGM sales volumes at 86,500 ounces and the PGM basket price down marginally 8.2% at $2,592 per ounce. The chrome business contributing just under 25%. Chrome sales, 816,400 tonnes and a very strong metallurgical grade price performance up 20.7% at $175 per tonne. Just looking at numbers a bit more, rhodium has really been a spectacular performer and contributor.

10:54 While it comprises less than 10% of overall pool split, the contribution to the PG revenue stands at 59%. Our specialty grades, that's chemical and foundry grade chrome products, higher value add products contributing some 23% of our overall revenue from chrome. Our gross profit, 122,600,000 and very pleasing notwithstanding the past pressures and the cost pressures we faced, 36.7%.

11:29 Just touching on some of the costs. This slide is quite a busy slide. Let's focus on some of the numbers. The cubes mined up 17.3%. So the cost per cube mined up marginally at 1.2% at $8.7 per cube, very pleasing, less benefiting from economies of scale as we move the increased volumes. Tons mold, up margin 1.3% to 2,800,000 tons and the online cash cost per ton mold, up 16.6% at 47.8%. And that increase of 16.6% really needs to be seen in the context of the increase in the volumes mined. As I mentioned, Kyiv mined up 17.3%.

12:08 Just focusing on the graph on the right, diesel becoming more significant cost, meaning that's our primary energy source for the input fleet, so just under 16% of our overall costs. Electricians, utilities, just under 6% and then royalties on the back of the commodity prices and utilization of our tax losses just under 12% of our online cash costs.

12:33 If we were to analyze our cost on an all in cost per 6E PGM ounce basis, that stands at $15.72 dollars per ounce and really needs to be seen in the context of the overall basket price of $2,592 per ounce.

13:04 Right. Sorry. I'm just having a few technology challenges there, and it's a little slower than I'd like it to come through. If we look at the absolute costs when we analyze the income statements, I think we have to take into account the mining volume increases, the mining output increases and also the increase in the costs associated with the Vulcan plant. So there, we've created 96 new permanent jobs. Celine, Chrome, and Cora, an additional 100 new jobs, and all of those have an impact on the overall cost base. If I ever look at the inflationary pressures and where these are the key driver of these is, the key driver is the oil price and therefore our diesel prices, for example, up 53.8%. Explosives associated with the chemical industry, 110.

13:50 Electricity, tariff increase of 15% and also small component of our overall costs, we'd expect to see some further inflationary pressures coming through as South Africa goes through its restructuring of Eskom. Seafreight, logistical problems there globally on sea freight contributing 102 increase. However, if we have a look at our overall inland and sea freight costs, those increasing by some 40% as we've shifted more to rail than from rail. So if you look at those pricing pressures that we faced, we're very pleased with the maintained gross profit margin, therefore, the cost control in the business to the extent possible of 36.7%.

14:35 I'd like to spend a little bit of time unpacking this particular slide where we analyze the differences between earnings per share and headline earnings per share due to the quantum of the difference. The real difference is accounting for the benefit of the discounted farm and option that we negotiated and that we've now exercised in this financial reporting period. Just to give you some background, in 2018, Therese acquired a 26.8% equity accounted shareholding in Kora Mining Holdings. And as part of its obligations, it funded an advanced shareholder's funds to help the exploration program, which was successfully concluded. As part of this transaction, it's integral that we negotiated a discount to the value at the time of the exercise of this farm and option, and the benefits of that decision are now reflected in the accounts.

15:26 We have accounted for this transaction as a business combination, and that requires us to fair value the assets of what we are acquiring. The first instance here, with the initial investment that needed to be revalued, that gave a fair value gain of $33,500,000 The gain in the acquisition, the bargain purchase, for the additional just under 38% that we acquired, dollars 15,100,000. So here, there's some $48,000,000 in total. So if we then reconcile it, we had net profit attributable to ordinary shareholders, 88,900,000. We take off these differences and end up with headline earnings of some $42,100,000 So the net effect of these transactions is a favorable $0.16 per share movement, and that's reflected then in earnings per share of 32.7 and headline earnings per share of 15.5.

16:24 Let's move on to the cash flow and the dividends. Cash flow, pre working capital movements, some $121,200,000 We then did have an increase in trade and other receivables of $45,200,000 an increase in inventories of $14,200,000 resulting in net cash flow from operations of $49,100,000

16:46 additions to property, plants and equipment amounting to $51,100,000 As previously mentioned, the Board approved an interim dividend of $03 per share. Our dividend policy is to distribute a dividend of at least 15% of consolidated net profit after tax on annual basis. The practice has been and continues to be the declaration of an interim dividend. However, in calculating this particular dividend, we have then excluded the gain on the acquisition subsidiary being a noncash flow item, and that is likely to flow through towards the end of the financial year. So we've excluded that $48 odd million adjustment on the fair value.

17:29 At March 31, our cash and cash equivalents stood at $101,500,000 Our total debt was $74,300,000 Of that amount, short term trade finance stood at $34,300,000 and that's really associated with pre and post shipment financing on the chrome trading business. In terms of currency denominations, 66,200,000 of our total debt was dollar denominated.

17:55 Another accounting issue that we required to put through flowing through from the acquisition of the controlling Sin Cara Mining Holdings was that The Republic Of Zimbabwe has an option to increase its shareholding in KARA patent by a further 11%. It's a short dated option, twenty four months from March 30, and a period of exercise of up to thirty six months at the fair market value of what is calculated now based on the NPV.

18:21 From an accounting perspective, we are required to account for those other financial liability as it has a potential to dilute the business going forward, and that is accounted for as a non current liability of $17,900,000 It will be revalued on an annual basis as we are closer to the option exercise period.

18:41 We continue to invest in Theresa Minerals and the growth prospects and sustainability of the business. Budget CapEx for the current financial year is still sitting at about $80,000,000 That excludes Cara Mining Holdings and Cara Platinum. As mentioned, we've expended $51,100,000 on property, plant and equipment in this financial year. The next accounting anomaly that we really have flowing through from having to revalue our assets is effectively we've had to add net identifiable assets of some $148,400,000 onto the balance sheet. The primary one of these, which is reflected under mineral rights, is some $200,000,000 attributable to the mining rights of Coral Platinum. On that note, I'd like to hand over to Michelle to conclude the presentation.

19:41 Thank you, Michael. Thank you for running through the financial numbers in the detail that you did. I think for us at THARISA, we are building on a very strong and healthy foundation. The focus for us is always on safety and ESG. This remains a core aspect of our business and a core value, and it it really takes a high degree of focus because the safety of our people is paramount to us, and ESG is about investing into the future. Technology is our enabler and our differentiator. We're seeing it already. We're living it as

20:11 we've seen regular optimization in terms of PGMs, increased production coming out of there, and we're now starting to benefit from the increase in terms of chrome production, which, again, is a function of our our technology and our research and development. So with that, our six strategic pillars will ensure sustainable growth into the future. The metals we mine will play a role in global energy transition. I discussed a little bit of that with you at the start of this conversation, and I'm sure we can spend many hours talking about this. But the PGMs that we mine, the chrome concentrates that we produce,

20:43 this all translates into a a global energy transition for for the world as we see it today. We are delivering our forecast in a responsible manner. We we talk to our numbers. We we live and breathe, THARISA, on a daily basis, and I'm very pleased with what we've been able to deliver again for the six months ended 03/31/2022. Delivering on the on these pillars will ensure a stronger foundation as we go into the future. And I think we've already shown a resilience as we navigated the pandemic and and the whole world navigated the pandemic of COVID nineteen. We're going into uncertainty as it relates to geopolitical events, but what we do know is that we are a strong producer and a stable producer of both PGM and chrome concentrates.

21:31 What does the future look like in terms of what a carro and a THARISA combination looks like? This is what really excites us. Looking forward into the future, we expect to have a life of mine for both operations of some twenty years. Our reef mine will be at 7,000,000 tonnes per annum. PGM produced will double. It will be at 350,000 ounces. Chrome produced will be at a healthy 2,000,000 tonnes per annum. And our group value in terms of consensus out there is that THARISA PLCARA NPV sits at $1,300,000,000.

22:04 So when we look at THSRSA and we looked at optimization and innovation being our key growth drivers, as I've said, innovation is the core of what THSRSA does. We we are always looking at how we can optimize, increase increase our production numbers, and obviously that translates into lower cost profiles. We've got a number of key strategic projects that we're busy looking at in terms of our Aker Metals site. We've discussed a little bit of those, in the coming months, we're going to be dealing with more detail around those projects that are enablers into the future. In terms of major milestones in Theresa, we are very pleased with the fact that we have the Theresa Mine with a stable steady state MGM Reef open pit mine, which is long lasting. It still extends for another twenty years and beyond that, another forty years in terms of underground mining.

22:55 When we constructed and commissioned the Voyager plant, that was a large scale PGM and chrome plant that we constructed and commissioned, got to steady state, optimized and took it

23:06 well beyond the steady state numbers that we were planning at the time. High energy flotation increased our PGM recovery and we've benefited on the back of that and we've seen increase in terms of our PGM production. The DC smelter that we're working on will beneficiate PGMs, and we're very pleased with the way that that technology is developing. And, of course, the Vulcan plant, I've discussed that with you already. That ultra fine chrome recovery will take us to 2,000,000 tons of chrome concentrate. Michael touched on the chrome market and I'm sure some of you will have some questions on that. We're seeing a very healthy market as it relates to chrome concentrate sales with pricing at some $295 per tonne. So we are well positioned with the Cara asset and the fact that we now have the majority control of that asset to double our PGM production and take THARISA into the next phase of growth into the future. And so with that, thank you for attending this presentation. I'm sure you're going to have some questions that we're gonna talk to.

24:02 So, Ine, perhaps you can run through the q and a, and we'll answer as best we can. Michelle, Michael, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions using the q and a tab just situated on the top right hand corner of your screen. But just while the company take a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. As you can see, we've received a number of questions throughout today's presentation, and thanks to all the investors for submitting those. Ujj, could I just ask you to read out those questions and give responses where it's appropriate to do so, then I'll pick up from you at the end. Sure. Thank you. Michel, onto you. You've spoken a lot about Vulcan. This is sort of the next steps with regards to the technology and it's twofold.

24:48 Firstly, can the Vulcan technology be used on on other metals? And then secondly, have we had any interest of people purchasing the technology for use on the on the owner operations of the Vulcan technology? Thanks, Ilya. Yes. We are looking at how we can extend the technologies in terms of the Vulcan plant and how we can use it in terms of other metals and the and the basic principles of that technology. So certainly something that we are looking at, and I'm sure we'll be sharing with you in due course. In terms of other producers being interested in the in the technology, absolutely. There's no doubt it's something that we discuss with our peers, and they've been very interested to see the construction of the Vulcan plant going up. Some of our analysts visited it recently, and I think they were impressed to see the scale and the efficiency of that plant.

25:38 And I'm I'm certain, and I can speak with some confidence that our our peers will be looking at the technology and looking to see how they could use that in their in their operations. So yeah. Thank you, Ilya. Cool. Sticking with with you and and your favorite topic of Chrome, indeed, I think there's more questions coming through on on the Chrome market. So question here is, can you talk us through what you're seeing in the chrome market at present and how prices are developing? Sure. Know, what we've reported for the six months is an average price on metallurgical grade concentrate of some $175 per tonne. Now at the end of twenty twenty one December time period, sales were certainly at that $1.65 to $1.75 level. As we progress into 2022, we saw the the sales price start to increase dramatically, and that really was on the back of lower inventories coming out of China and what what the stock holding was.

26:36 And we've rapidly, over the the three months period from January through to March, seeing price improve and increase up to the $295 levels. So remembering that when we sell into our order book now, it's product that will be delivered. So if we're now on the May 26, we start to deliver that product into June. So that's why you'll see a lag in terms of pricing. But, certainly, for a number of weeks, we've seen consistency around pricing being around the $295 level. And, obviously, we see a similar increase on the specialty grade concentrates, which Michael touched on earlier, and that enjoys another $50 premium on top of the the $2.95 that we're seeing. I think in terms of liquidity in China, we're seeing regular buying patterns coming in from our usual customers. So there isn't any concern yet. I think the biggest constraint that we will have will be logistics, and it's logistics as it relates to South Africa as well as China.

27:33 In South Africa, it's really a function of the floods that we've experienced recently in terms in Natal, which has impacted inland logistics and certainly caused some delays in terms of of normal sea vessel cargoes going out. And, of course, in China, we once experienced the the COVID nineteen pandemic and the lockdowns there with lockdowns in Shanghai and Beijing and and one or two other provinces. Typically, we don't deliver into Shanghai. We do deliver into other project ports like Xingang. So deliveries are still going on as usual, albeit that there are some bottlenecks in China that one would expect. You know? With the lockdowns that they are, there will be delays in terms of road logistics and so on. So for the moment, we are seeing regular deliveries into our customers.

28:23 Do we expect some delays in the next six months? Yeah. I think we absolutely do, and that really is a function of of what we're seeing happening in China in terms of lockdowns. Sticking on on the topic of Chrome, and I think you sort of hinted it, but maybe sort of delve further into it. Could you please provide some color on finished stocks? Is the rise a reflection of logistical constraints or strategic reserves? So I think it it relates to what is our normal inventory cycle. Maybe talk the talk the listeners through that. Yeah. Sure. So typically, we would have six to eight weeks of inventory in South Africa. So remembering that when we account for the sales revenue, it comes through it it's only accounted for when the tons are physically shipped.

29:08 So there would be some inventory import, and there'll be some inventory in at the at the mine just because of the nature of when one transports the material. At the end of March, we saw the initial floods that affected the area. That caused some delays, and we saw shipments moving into the April months. I'm not concerned with that at all. We certainly were able to to move that inventory as per normal. In terms of inventories and where we are today, we still are within a normalized inventory level of around six to eight weeks. Going forward, I think that there may well be some delays. In it, there was another question there as well regarding inventories. Yeah. It was so could you please provide some color on Finn's stocks? Is the rise a reflection of logistical constraints or a strategic reserve?

29:56 No. It's not a look. We will always produce clones, so we are not holding back in terms of inventories and when we sell our product because we the nature of it is that we need to produce, move the material, get it into port, and ship it out. One can't be build building stockpiles of of a 100,000 tons and and higher and maintain that and and keep that going up. So, no, we aren't holding any strategic reserves. We continue to sell into the market. And I think the market is enabling us to sell continuously into a higher market, and that's what we will continue to do as the price moves up. Alright. Moving to Zimbabwe, can you provide an update on Chrome? Sure. So Celine Chrome has been another exciting project for us and it's something that we started with the construction last year. Celine Chrome is always strategic to us in terms of getting our feet onto the ground in Zimbabwe, understanding how to construct, understanding what the the local dynamics were, understanding how we we move our material, we and we move capital equipment in. So I think Celine Chrome has been a great learning curve for us on the one hand. And on the other hand, it's a it's a project that I think is gonna be particularly financially rewarding.

31:06 What we were already seeing, and we're we finalized the construction of the Celine Chrome plant. There were a couple of things that we're still doing in terms of construction, but, fundamentally, it is complete. We're busy. Hi, Ilya. I I believe we've momentarily lost Michelle there. Yeah. So So if we could potentially go on to another question maybe for Michael. Absolutely. Michael, let's let's wait for the system to to come back. Apologies for that. Michael, if you are if you are able to to talk to to us on on the system, There you are. Perfect. Thank you.

32:09 So I'm just much. Know that she was just talking to to herself at that point of time. So apologies. It seems to be Can can you hear me now, Michael? Yeah. We can hear you. We can hear you now. I was waxing lyrical about how excited I am about this lean chrome project and more importantly, how excited I am about what the chrome prices are of that type of ore. And I think probably what I was saying to you at the time was that we've been very pleased with the results that we're seeing in terms of the chrome that we produce in Zimbabwe and that it's a healthy product of some it varies between forty six and forty eight and a half percent in terms of the grade of that material. What that translates to in terms of commodity prices is that you're looking at prices in the region of $400 a ton. So when we initially looked at this lean chrome project, I think commodity prices for that type of material was probably in the region of $220.

32:59 So seeing it at $400 is a great outcome, and and I'm looking forward to selling into that market. And we're certainly confident that the commissioning will produce healthy results for us over q three. So I think that answers that question. Thanks, Elia. Yeah. Thank you so much. Let me move on. A lot of questions here around around cost pressures, and I think we were anticipating those. I think it's an industry wide wide issue. So, Michael, I don't know if you want to talk a little bit how you see cost developing. What are the likely rates to half on half with regards to cost pressures? I know we also received those questions earlier, so maybe provide as best as we can. Okay. Thank you for that.

33:46 It's a very interesting question. I mean, often debates and turn as to how we're going to go and manage with the costs. If we work on the premise that you've actually gone over the worst of the shock of increase in the oil prices and that Brent doesn't go to the $150 plus, and I have seen some talk about that. Then the worst of those cost pressures have actually impacted on the business as such. And as such, if you look forward on an annualized basis, we probably could cost inflation of some 8% on the overall operating costs of the business itself. I'm very pleased to say that we've completed the construction of Vulcan. There's been a strong impact on steel parts, in particular, concrete prices, so very pleasing that we're missing those particular cost pressures and that Vulcan came in on budget. If I just look not just on operational costs, it has raised the flag going forward. We do import a lot of yellow fleet manufactured around the world.

34:40 And while at the moment, we're still very satisfied with the orders we've placed for our products and the pricing, I do see some pricing pressures coming through there, and I'm not sure what the quantity is going to be as you start bringing the yellow fleet from Roundwell. There's shortage of the yellow fleet in the first instance as steel prices have gone up and shipping and freight rates as such. So that's really where we see our costs going forward. Labor, we do have an agreement of four years with our respective bulging units. And so that's CPI linked increase, so no real cost pressure is coming through from that side. ISKEM, I'm expecting again to see some above inflation increases at the next rates. They're not able to keep the lights on, so we'll see some cost pressures coming through there. The other one that is a little more difficult is freight rates, which are very volatile at the moment. They they swing quite quite widely.

35:31 And as to what impact of fuel price and self worth is going to go through on those. So those are the uncertainties. So touching on it again, possible impact of that because that translates to explosives in all parts of our business. If that shock wave is over, we'll start seeing more normalized increases going forward and similar on the freight rates is the other uncertainty. Michel, I don't know if you want to add anything onto the freight rates. I'm getting some questions here with regards to global freight and logistics. I think you've spoken about in your presentation, but do you have anything to add on the freight costs for the second half? And then while I'm on it here, Michael, are there any working capital requirements or changes with regards to the second half coming through? So maybe Michelle, first on freight and then Michael on working capital.

36:18 Thanks, Ilya. Look, I think if break it down and we look at the six months, we certainly saw if I look at the total freight and logistics costs, think as Michael's already said, we saw that total going to some $89 a ton. That's compared with the prior period of some $63. That's an increase of 40%. Now that's obviously a blend of freight and and road. In terms of freight itself, we've seen that increase by some 100% over the six month period. But what we have seen clearly is a significant increase in terms of pricing. So in the same way, we've seen a a 40% increase in terms of freight costs and land and road logistics, we've actually seen a much higher increase as it relates to revenue and as it relates to the sales price and what we expect to actually achieve over the next couple of months.

37:11 So costs are a concern. I have no doubt, and it's something that we obviously will manage closely and work with our team on and make sure that wherever we can, we could limit the creep on costs. But at the same time, we are seeing changing in terms of the fundamentals on pricing, particularly as it relates to chrome. PGM's a little bit more subdued. But, I would expect to see the drivers that push costs will also be the drivers that will push pricing as we go into the future. Thanks, Ilya. Michael, do you want to perhaps touch on the working capital? Sure. If you just look at the working capital cycle, we've had some questions on stock. I think those have actually been answered in terms of the stock. So the team, Arca Logistics and the people responsible for shipping, I've said, done a remarkable job on moving goods. They expanded through Maputo for the first time, moving the chrome, and take into consideration the constraints in Durban and some in Richards Bay. So I've been able to move the stock very well. So I did not see an impact on the stock line.

38:11 Receivables, probably higher than I would expect at the moment, that really has to do with the timing of shipments more than anything else. I'd expect that to drop a little bit, but normalize again going forward. Accounts payable, that's a normal cycle. We please ourselves on our accounts payable days. We try to maintain those at about thirty days on average, so that's normalized and should be staying where we are on payable side subject to, of course, the normal inflationary pressures we've been talking to on those costs coming through. So in summary, I think a little bit of a release from Endesa side going forward, but otherwise, probably a fairly normalized working capital cycle. Thank you. Moving commodities a little bit. I know, Michel, you spoke a little bit about the PGM market.

38:59 But we do have a question here is, can you provide your view of the PGM market giving easing lockdowns in the face of geopolitical tensions in Europe and Asia. So if you can provide some color on the PGM market, that would be appreciated. Thanks, Ilya. So I think, look, it it is the tale of two stories. So on the one hand, while we see the easing of lockdowns and we see the the positivity in terms of production profiles in South Africa increasing and the PGM producers being able to have stable production and increasing it where they can, we certainly have seen the geopolitical events in terms of of Russia and Ukraine. And I'm certainly not an expert on that. I'm not I'm not gonna comment on that other than to say that there is an impact. There's no doubt with with Russia being a key producer of palladium and PGMs for that matter that there will be an impact as the consequences and the unintended consequences of this war rollout.

39:54 I think the beneficiaries of what happens in Europe is is probably the South African producers. With that being said, at the moment, I'm certainly not going to be bullish in terms of where pricing would we could go other than to say I do see it increasing, and I do see it being being steady and stable into the future. We're not gonna be forecasting, you know, crazy price increases, but at the same time, we see stable, consistent growth. We see investment into technologies that uses the PGMs. And so I would expect to see a healthy outlook for PGMs into the future. Thank you. We got a little bit of time left, so let me try and squeeze some questions in. Two very operationally focused questions. One, can you outline your four year wage agreements when that started and how long that still has to run?

40:45 And then secondly, you spoke about in your production report a few weeks ago, you spoke about secondary mill issues. Have those been resolved? Sure. So we concluded the four year wage agreement. I think we're in the second year of that agreement. So we've got another year to run. I think it's actually a three year wage agreement, not a four. So we've got another year to run going into the fourth year. Our relationships with our unions are good. So we've got a good wage agreement. I think everybody stands by it. There there are no issues or concerns as far as that that is concerned. And I know that there's a lot of talk around strike action in South Africa. I think from a THARISA point of view, I can say to you that we have good relationships with our employees and our unions. So I'm certainly not anticipating any issues as far as that's concerned.

41:34 In terms of the secondary mill issues that we had at the end of q two, those were resolved, and we're pleased with the way that they've been resolved. And we can certainly see improvement and increase coming through into our production as as we've gone into we're already in the middle of q three. So, again, very comfortable with where we are in terms of the way the secondary mill issues have been addressed and that we've got normalized production in terms of that plant. All right. Let me let you guys breathe a little bit. There's a question here on the high stripping ratio and if that's going to be reduced in the future. Let me just maybe answer that myself. We had a life of mine stripping ratio of roughly 9.6% pre the extension of the open pit that we announced last year of an additional seven years. With that additional seven years, the stripping ratio, the new life of mine stripping ratio is in the region of roughly 11.5 to 11.8 cubes on cubes. So the strip ratio that you see in the results is the actual strip ratio. And you would have seen, unlike previous years, we don't have an asset that Michael has created on the strip ratio. So the strip ratio you're seeing now is what we should be stripping on into the future.

42:49 Just, Michel, maybe a little bit more flavor on Coro, some time line. You spoke about the combination of the two companies. When do you see that combination reaching full production? And I guess it's related to the Coro time line. So I suppose the answer is as soon as possible. But I think to give you a bit of a clearer idea, you know, we've recently appointed Bernie Price, the managing director of Coro, which is a great step in terms of what we're doing next with Caro and as we develop the project and we actually take it into into production and and well, construction first and then production. In terms of timelines, I think we're gonna be able to give the market a lot more clarity certainly by the end of q three. We are busy relooking and looking at detail around the the project timetable.

43:36 My expectation would be that it's gonna take between eighteen and twenty four months in terms of delivering that project. Obviously, there's some factors that may be outside of our control, but I think in the normal course, that's what we would expect to deliver. From a costing point of view and capital costs, we're looking at those numbers in some detail because, of course, as we've discussed a lot on this call and on a number of other calls, the cost creep is is certainly the inflationary inflation cost increases are there. And so we are evaluating what that capital cost looks like and what the increases may be, And we will be communicating with you in far more detail, as I say, by the end of q three. So beginning of July, we'll be talking to you around the detail of where we see the timeline, what the key milestones are over the next kind of twenty four months, what their capital cost looks like, and also the detail of the funding of that which Michael is working on. The all of that is progressing well.

44:33 And I think the the pleasing thing for me is we have actually been able to place the orders for the the long lead items. So that's underway. It's really about making sure that we haven't missed anything in terms of the detail, and we're confident on on delivering that project as soon as possible. Michelle, thank you. That's great. If I could just come in and say thank you for addressing those questions from investors. Of course, the company will review those questions submitted today and will publish those responses on the Investor Meet company platform. But just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Michelle, could I just ask you for a few closing comments? Sure. Thank you so much. And thank you to everybody for taking the time to attend this investor meet presentation. We've certainly enjoyed talking to you about our results that we are particularly pleased within the six months given that we've come out of a pandemic, albeit that COVID is still around. We've been able to show that we are resilient through a pandemic that nobody expected, and we're now going into an uncertainty of what the economy looks like worldwide.

45:34 Having said that, those are the factors that are probably outside of our control. What is in control is our operations. And what we've been able to do consistently over a number of years is produce chrome and PGMs. We've been able to increase that production, continuously focus on the increased production, which then translates into a lower cost per unit. And and, really, that's where we're going. Going into the future, it's Vulcan coming online, chrome recovery is increasing, unit cost is decreasing, both both for chrome concentrates and PGMs, and there'll be inflation. That's a fact of life, but at the same time, fact of life as well is the fact that we are living in an environment with with good commodity commodity pricing. So with that, I'll leave you and look forward to talking to you in the coming months as we continue to develop our projects.

46:22 Michelle, Michael, earlier, thank you very much for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure be greatly valued by the company. On behalf of the management team of THARISA PLC, we'd like to thank for attending today's presentation, and good morning to you all. Thank you.