Caledonia Mining Corporation Plc (AMEX:CMCL) Q4 2024 Earnings Call Transcript

Caledonia Mining Corporation Plc (AMEX:CMCL) Q4 2024 Earnings Call Transcript March 31, 2025

Caledonia Mining Corporation Plc beats earnings expectations. Reported EPS is $0.443, expectations were $0.16.

Operator: Ladies and gentlemen, welcome to the Caledonia Mining Q4 Results Presentation. I’d now like to hand you across to Mark Learmonth, the CEO. Mark, over to you.

Mark Learmonth: Good morning or good afternoon, depending on where you are. Welcome to this webinar to discuss Caledonia’s results for the fourth quarter of 2024 and for the year. I’m here in Jersey. I’m joined also in Jersey by Ross Jerrard, our CFO, who joined today. And then in Johannesburg, I’ve got James Mufara, our Chief Operating Officer; and Victor Gapare, an Executive Director, who is based in Harare, Zimbabwe. And in case I need them, I’ve got some accounting support in Johannesburg and Bulawayo. Okay. So should we get into this? If you could move to the next slide, please. If you just move forward, we’ve got the disclaimer next, which I think we just need to pause on. So that’s the presentation we’ve already dealt with.

Okay. Let’s move on to the summary. So a record gross profit for the year of nearly $77 million, that’s up 86% from 2023. And that pretty much flowed down to the bottom line with net attributable profit of just under $19 million compared to a loss of $4 million than the previous year, that’s reflected in stronger operating cash flow. So that’s after tax and interest and working capital before CapEx and dividends. And that was nearly $42 million compared to just less than $15 million in the previous year. Production of Blanket was within guidance, slightly towards the top end of the guidance range. And there was also a continuing very small production and build those oxides, which I’ll refer to very briefly. Last week, we — so there’s a lot more information on these results as we go through this presentation.

Last week, we announced that we’re going to extend the period of time need to look at the feasibility study for Bilboes. That gives us time to assess some factors, some of which have only materialized within the last month and to optimize the project economics. So we have a little bit more on that. We have some good exploration success at Blanket and Motapa, which is encouraged us to do more work in that area. So we have a slide on that. And just so that we — on Monday, we announced a further dividend of $0.14 for the quarter, making $0.56 for the year. And it’s fair to say also that we’ve had some fairly significant changes to the Board and to management over the course of the last year or so with James joining us as COO in May, and that’s given rise to a very substantial turnaround in the operating performance at the mine, particularly at the mine as opposed to the metallurgical plant.

And you’ve seen also that we’ve refreshed the — strengthened the Board with some recent board appointments and then we’re joined today by Ross, who’s taken over from Chester as the CFO. So Ross is very welcome. So should we move forward? Next slide. Before we get into this, I just want to touch very briefly on the delay in the publication of the accounts. We put out a press release about a week ago, which notified people that we need an extra week to evaluate an accounting issue that have been identified, right at the end of the audit process. The accounting issue really relates to the calculation of deferred tax for the year to December 31, 2019. So this is about five or six years old, and that then flows through into subsequent years. Just to be absolutely clear, this is an error relating to the calculation of deferred tax.

It also flows through into the calculation of unrealized foreign exchange gains and losses, and then below that, it then flows through into profit after loss. I want to make it absolutely clear that this error had nothing to do with actual tax payments or any submissions that were made to Zimbabwean tax authorities and also make it very clear that this has nothing to do with cash. So the accounts that we published this morning for the year to December 2024, also include restatements of the prior year accounts for ’22 and ’23 and at the back of the audited financial statements, I think Note 40, you will find full disclosure of the various line items, which have been affected by this restatement. But in summary, it’s deferred tax, it’s IFRS profit and retained earnings.

So to be absolutely clear, there’s got nothing to do with cash or with actual income tax calculations. Okay. Should we just move on to touch on the results themselves. Starting off with safety and production. It’s probably best if I hand over to James at this stage, if you’d just like to say a few words about safety and production, please.

James Mufara: Thank you very much, Mark, and good day to you all. So on the safety front, I mean, following the loss of life incident that we had on the 21st of September, which is the previous quarter, which we already reported on, we embarked on a journey to see real risk reduction and to put controls, better controls to make sure that we actually move up the cave with regards to our safety. We wanted to embark on a culture, a lot of you would remember, I joined on the 1st of May. And we wanted to embark and realize that there was quite a lot of safety protocols that we left on, and we had employees basically that followed safety protocols primarily out of obligation. And the idea is to want to move the dial where employees work not because I have to follow rules because I have to, but you need employees to have an identity that I need to follow rules because I want to.

So over and above the internal audit that we did with regards to the incident that we had, we decided to also put in place a number of measures, the first of which was to appoint a group shift manager, an experienced group shift manager coming from Harmony, who himself put a structure in place with regards to ventilation and health and safety and split all the departments into the appropriate depart. We also looked at five other areas that we will be embarking on so that we can actually have a better safety culture on the mine. The buckets would be to strengthen, governance and risk management, to strengthen emergency preparedness, to strengthen safety practices, organizational capability and to move the — in order to look at the whole safety culture and improve it.

So the safety culture, in terms of the safety culture, the flywheel has started to move. We started to turn now it’s a question of getting the momentum in place, and we can already see the massive improvement that we are gaining with regards to that. In the last quarter, which is the fourth quarter or Q4, we actually had 88 out of 100 accident free days, which is a marked improvement or the record within the safety history. In terms of production as well, we had a very good production quarter, and we also had a very good end of year, ending up on 19,841 sort of tonnes — ounces I mean, compared to quarter three, which was 18,992 ounces. I will touch further on production with regards to the next slide. Over to you, Mark.

Mark Learmonth: Yeah. So we’ll go back to production in more detail later. But it’s fair to say across the board a substantial increase in performance, obviously, helped by the higher gold price. So the average realized gold price in the quarter was just over $2,600 compared to just under $1,900 in the comparable quarter of the year at just over $2,300. So for those of you who follow the gold market, that won’t come as a great surprise to you. And clearly, that supports the substantial increase in revenue, also supports the increase in gross profit, so $21 million for the quarter and $77 million for the year compared to clearly lower numbers previously. And I already mentioned the increase in net profit attributable to shareholders.

One thing I would just draw to your attention, we declared a dividend again of $0.14. Just to reinforce the fact that previously, we used to declare dividends on a sort of metronomic quarterly basis. We’ve disclosed for several quarters now that, that’s now been changed slightly so that we declare the dividend at the same time as the Board approves the accounts. It just sort of streamlines Board processes. Now for most quarters, that doesn’t really make much of a difference. But for this particular — for the publication of Q4, it does mean that the dividend that we declared or we used to declare and pay at the end of sort of March or something, that does get pushed out a bit. So there is a little bit of a phasing issue. But in for the year, the total dividend is $0.56, and that hasn’t changed.

Should we just go into a little bit more detail on production? James, can I ask you to talk to this slide?

James Mufara: Thank you very much, Mark. So as already previously stated, we had a very good end of year and Q4 in particular, ending up on 76,656 ounces, which is a 1.6% improvement compared to 2023. The tonnes for 2024, which is 797,000 tonnes, 479,000 is a record. As you can see from the graph, it’s the first time that we actually hit those sort of numbers, which is at 3.5% higher than the 2023 number. And this was primarily as a result of three areas that we saw quite a good improvement. It was better utilization of our Central Shaft, which is now fully operational after all the work that we have done over the years. It was secondly, as a result of better equipment availability that we have underground. And thirdly, it was also better — it was also due to better labor productivity within our sections.

As you see that the grade has remained almost the same for a number of years, almost from 2014 to where we are. But if you look at sort of year-on-year, we actually went down from 3.25 (ph) to 3.2 from 2024 to 2023. Although specifically quarter four was 3.18 grams per tonne quarter three, which we have already reported on, we had a fall of ground in one of our high-grade stopes called Eroica, which actually exposed our need for better flexibility with regards to mining space. We have ever since embarked on better development. As you can see, our tonnage has been going up year-on-year, meaning to say that we actually need to open up more areas so that we can have better flexibility. This year’s development, which is really, really well improved and last year’s by end of year will actually help us in the years to come with regards to flexibility.

The reserve grade for Blanket is sitting around 3.3 grams per tonne, and we will not mine further than the — I mean, not much higher than the 3.2 grams per tonne, which is where we expect to land in this year. The mine had an excellent production year in 2024. I mean December month actually summed up, it was the icing on the cake, where we ended up on, 89,727 tonnes, a record for the month. I mean we had never reached such a milestone. This actually exceeded our crushing and milling capacity at Blanket, we ended up with a stockpile of 8,487 tonnes, which we created. And it is good to report that actually that stockpile has been growing as well even in this financial year. So if you look at the bottom graph, one of the graphs that you see is the recovery, I mean, which has been sort of taking an up and down movement.

However, for the year, we ended up on 93.6% recovery, which is still very, very high and which is our plan. Last year, it was just higher at 93.8%. It was just higher than our plan, which is not really going to be sustainable. But by world-class standard, 93.6% is still quite a high recovery, which we have actually managed to keep there because of the work that we’ve done with regards to the oxygen plant that we’ve installed, the Knelson Concentrators that we have been replenishing over the years to make sure that our free gold recovery is on point and the tanks that we’ve also been installing. So we can see that production has really stabilized. This year, we have started off with a stock of 8,487, and we expect that this production should stabilize and be better going into the future.

Thanks, Mark.

Mark Learmonth: Thank you, James. I mean the difficulty we’ve always had or we’ve had over the last year or so has been our inability to blast the ore, trim the ore and hoist it. We had sort of, let’s say breakdowns, there are breakdowns in that process somewhere. And so what James has managed to do is, he managed to get this whole operation working much more cleanly, much more efficiently. We’re blasting, we’re trimming and we’re hoisting and the growth of the stockpile is very welcome, that’s something we’ve not had before, okay? So thank you very much, James. Should we move on to the next page? What this shows is for the quarter, it breaks down the consolidated results. It shows you what’s been going on at Blanket, what’s been going on at Bilboes and other, which is really sort of intercompany eliminations and head office costs.

So you can see quite clearly at the Blanket level, revenue very strong. The royalty stays the same. The government royalty stays the same at 5%. Production costs at Blanket, broadly the same, about just $19 million, although, we would like to get that down a bit. Depreciation very slightly down a bit, that’s the sort of technical reasons. So gross profit is, well, $20 million compared to $11 million in the previous quarter. Quarter-on-quarter, Bilboes has had very little impact. So there’s a slide coming later, which shows how we’ve authorized the losses from Bilboes. So at the moment, we’re continuing to re-leach the heat pads at Bilboes. Slight helped by the slightly higher gold price. And we’ll continue to do that for as long as that leaching process covers the direct costs.

So it’s basically washing its face. And other, as I said, is corporate and group adjustments. So shall we move on to the next slide? Okay. What you see two graphs. Left hand side is the on-mine cost. The right hand side is the all-in sustaining cost. And it just basically shows how our costs have developed and progressed from quarter four 2023 to quarter four 2024. So looking at the on-mine cost, you can see we had a benefit, 7% odd benefit as a result of putting Bilboes back on to care and maintenance. Negligible movement on power, some increase in labor. Now part of that in the quarter would be we had to rely very heavily towards the end of the quarter on overtime and a special bonus system that we introduced specifically for December because truth to be told, the first half of the fourth quarter was very difficult largely because of a sharp deterioration in the electricity supply.

So had we not made those interventions, I suspect at the end of November, I think actually quarter four would look quite sick. But thankfully, we made those interventions and we pulled quarter four around very nicely. And then an increase in consumables, which is largely costs relating to equipment, underground pumps, LHDs, that sort of thing. So that takes the — that walks the cost up from what it was in 2023 to 2024. And then you can see on the right-hand side, you’ve got how the all-in sustaining cost moves, some increase due to on-mine cost, some fating around with share-based expense and sort of accounting jiggery pokery sustaining CapEx and procurement margin, okay? It is fair to say that management is very conscious that these costs are higher than we’ve had historically.

And we are exploring ways over the course of the next few years to get down the on-mine cost, particularly focusing on labor and electricity, to use our labor more intelligently and actually reduce our electricity usage. And then at the all-in sustaining cost level, that will obviously benefit from any reduction in the on-mine cost, but also we’re looking at what we can do to reduce our sustaining CapEx. Sustaining CapEx does remain very high. 2024 sustaining CapEx was $19 million, which equates to about $240 an ounce. 2025, it will be about $30 million, which is about $400 an ounce. And that really goes into that sustaining CapEx is going to things like development, which James has explained is important to improve our mine flexibility. It’s got to go into things like milling and the tailings facility.

The work on the new tailings done continues. And clearly, we need that because we need somewhere to deposit the waste. And we have continued to spend heavily on engineering to increase the robustness and the resilience of the equipment at Blanket. That higher level of sustaining CapEx will continue for 2025 and 2026, and then we’d expect it to begin to fall away from 2027 onwards. Can we move on? And then this really just shows everything below gross profit. So we discussed revenue, we discussed on-mine costs below gross profit, you’ve got net foreign exchange losses in the quarter, which were only $600,000 in the fourth quarter. For the year, they were much higher. So it was very pleasing to see that the local currency, the ZiG has stabilized in the fourth quarter, and that’s continued through into the first quarter.

So we’re not seeing a recurrence of the very substantial FX losses that we incurred in the first nine months of the year. Other is a ragbag of stuff. It primarily includes $2 million of retirement costs. As you’ll recall, in the third quarter, we initiated a retirement program, which affected just over 100 people who are over the age of 60 for manual work and 65 for non-manual. And that’s an action that really should have been taken some time ago. So we bit the bullet, 104 people were retired. And I’m also pleased to say that as part of that retirement program, you have seen a very significant cultural shift at Blanket, which has contributed to the very strong performance in the fourth quarter. Tax is a combination of income tax, our old friend deferred tax and also a significant component of withholding tax that we incur as we move money around the group.

And the NCI, the non-controlling interest, that is the minorities at Blanket. And that takes you down to adjusted earnings per share for the quarter, which was $44.3 compared to $0.2 in the fourth quarter of 2023. Okay. Should we move forward? Okay. This graph — this looks a bit stark, but all I was trying to do here is to show to splits out gross profit of Blanket from gross profit at Bilboes. So Blanket in the top half. And you can see that gross profit in 2022 was $17 million, down to $11 million. Then in the first half of 2023, Blanket’s performance was really not very good, largely because of lower production and higher costs. And you can see now towards the back end of 2024, we’re now getting gross profit of $22 million, nearly $20 million and then just over $20 million.

So the point of this graph is to show that Blanket as a cash generative engine is back where it should be, okay? And then on the bottom half, you can see that Bilboes incurred losses of $3 million, $2 million and $1 million in the first three quarters of 2023. But in 2024, we’ve now quarterized that as Blanket is now on care and maintenance and is just running so long as it will cover its operating costs. I just want people to understand that the cash drain that was coming out of Blanket’s poor performance and the cash drain that was coming out of Bilboes has now been dealt with. Okay. Should we move on to cash flow? Next slide, right. It’s quite a dense slide. But frankly, I think this is probably the most relevant slide of the whole thing because really, it all comes down to cash at the end of the day.

So cash from operations before working capital, that’s the first line. 2024, it was $65 million, which equates to about $1.25 million a week. In quarter four, it was $19 million. So that’s about $1.5 million a week. So a very substantial improvement in the rate of cash generation in the fourth quarter compared to the previous three quarters, right? Below that, you’ve got the movements in working capital. And what’s — if you look at these closely, you’ll see that in the year, we absorbed $10 million into working capital. And in the quarter, it was about $3.5 million into working capital, quite substantial amounts of money being absorbed into working capital. And really, there’s two main areas. One of those is inventories and prepayments, and we are one of the ways we manage our exposure to possible devaluation of the ZiG is to make sure that if instead of holding ZiG cash balances, we use the ZiGs to buy inventories or to make prepayments as a way to reduce our ZiG holdings.

So that has given rise to some increase in the inventories and prepayments. And then receivables has increased largely because of the higher gold price, which just means there’s more money flowing through the system. So there has been an absorption into working capital. The other area of significance here is net cash used in investing activities, which was $32 million for the year and nearly $13 million for the quarter. That is mainly sustaining CapEx at Blanket. So of the $32 million spent in the year, $27 million was spent at Blanket. Of that $27 million, that’s broken down in, I think, Paragraph 4.4 of the MD&A, but that’s broken down into the main components being the work — continued work on the tailings facility and on development. Bilboes and Motapa also absorbed $3 million in the year, and that was largely on the ongoing work on the feasibility study and exploration at Motapa, which actually turned out to be rather good.

And then the final thing would be cash used in financing activities, that’s a combination of the Caledonia dividend, which is just over — just under $11 million. Dividends paid to the blanket minorities, which is about $1.6 million. Offset against that will be increases in debt, which includes further modest issues of bonds to institutional holders in Zimbabwe and movements in overdrafts. So some improvement in cash, but we do intend at this higher gold price to focus on improving our cash position, okay? Should we just move on. And this, again, very similar — this slide, very similar to the one I showed you about gross profit is intended to show how the quarter-on-quarter cash generation in the last sort of three quarters or so has improved after the sort of the dip, the sort of hiatus in late 2022 and early 2023.

Okay. Let’s turn to the feasibility study. Work on that is progressing well with support from DRA and other technical consultants. And the feasibility study will supersede the PEA that was published in June 2024. We put out a press release last week, the effect that we want to extend the time line that we need to complete this feasibility study. And that’s for several reasons. The first is to give DRA more time to do their work, but we also want to explore some new development options, which have become apparent. One of them will be the potential, when I say the potential to export concentrate in the project. Now previously, we thought that we have very strong indications that, that would not be acceptable to the Zimbabwe government and they wanted very strongly to have in-country beneficiation.

But now we understand that given the complexity of processing complex gold metallurgists such as Bilboes, the Zimbabwe government may be more flexible on this. If we can export concentrate, that will mean that we wouldn’t need to incur the — whether we can get that for a short period of time or for the entire duration of the project remains to be seen. But if we can achieve that, that would significantly reduce the capital expenditure by removing the need to build a BIOX plant. It would derisk the project, particularly in the eyes of North American investors who are probably more wary about BIOX than investors elsewhere in the world. And it may also have implications for the eventual tailings facility. And then just looking at the tailings facility, currently, the TSF is — we intend to locate it on a very flat area at Bilboes.

We may be able to move it to an area at Motapa, where we can effectively lean it against the hill and thereby reduce the need for one or more of the retaining walls, which again would get — would reduce CapEx. The tailings facility is the biggest component of the entire capital of the project. It’s nearly $100 million. So anything we can do to reduce that cost will benefit the project. But also having seen some good results coming out of exploration at Motapa, we want to continue to do more work at Motapa and potentially one day fold into the Bilboes feasibility study, a resource at the neighboring Motapa property, okay? So that’s the work that’s going on at Bilboes. Just turning on to the next page, just to reiterate, and I think I’ve said this before, but just to reiterate our approach to funding Bilboes.

Our objective is very simple. It is to maximize Caledonia’s NPV per share and that really includes three elements to it. The first is to optimize the overall project economics, get the best internal rate of return we can get on the project. And that’s why we’re looking at areas of things like the potential impact of concentrate and/or moving the tailings facility. The next thing we want to do is to maximize the debt funding for the project within the constraints of financial prudence, okay? And the whole point of this is to minimize equity dilution, okay? And so as part of that, we’re also evaluating the potential for near-term revenue opportunities elsewhere in the portfolio, by which I mean re-leaching — potential to re-leach heat pads at Bubi, which is in the Bilboes property and at Motapa.

We also think we may have some near-term revenue opportunities at Blanket on an oxide resource that we found late last year. But in terms of debt funding, we think the project — the Bilboes project has a very high capacity for debt. We think that nonrecourse debt is more likely to be limited by overall banks’ lending constraints of about 65% to 70% of the total cost of the project. If it wasn’t for that, we believe that actually Bilboes could carry more debt. But at this stage, there are three potential funding sources which are coming into focus, and they’re set out there. One of them is African DFIs. The other one will be South African commercial banks working with ECIC cover. And the third is a resource-specialist credit or private equity outfits.

It could be one or any permutation of those three. But it’s safe to say, whilst we’ve had preliminary engagement with all three of these groups, we can’t really get down and get dirty until we have a feasibility study completed, okay? But at this stage, all the indications that we’re receiving is the project is eminently fundable. And we — our focus now is on how do we optimize those projects economics with a view to minimizing dilution, okay? — we should move forward. Just a word on exploration. At Motapa, the exploration focused on three areas which have historically been mined. So that’s Motapa North, Motapa Central and Motapa South, very imaginative. But we’re very excited to have actually got good results from a new area called Mpudzi.

Over the course of the year, we did just over 5,000 meters of RC drilling, 4,000 of DD drilling, and that shows widespread mineralization over a 9 kilometer strike length. So this year, the program for this year is targeting shallow oxide potential at Mpudzi and then also the deeper, deeper sulfide resource, which in due course, if we can find anything, would form part and parcel of the Bilboes project. So that’s Motapa, looking very exciting. And at Blanket, as you know, in May, we did a resource upgrade. We more than doubled our S-K 1300 reserves and a very substantial increase in resources. This year, we’re focused on increasing the confidence level of those resources to push more into reserves. But then we’re also now beginning to evaluate new areas, and that’s outside the existing mine footprint.

So that’s on the blended Ironstone formation, which is about 800 meters to the east of the current mining area. And also, we believe we’ve got potential for some shallow oxide resources at Blanket. So we’re beginning to look more expansively at Blanket instead of the traditional areas that we’re currently mining. So I think we’re pretty much finished. In terms of the outlook, with — as you can see with James as the new COO, we’re focused on maintaining stable production at Blanket. We want to get away from the gyrations that we’ve had over the course of the last two to three years. We’re investigating near-term growth opportunities across the portfolio, Blanket, Bilboes and Motapa. We continue to advance the work on Bilboes and how we can convert that into an asset producing asset.

We’re doing further exploration at Blanket and Motapa. And in the next year or so, we’ll continue to invest in Blanket, with a view to achieving longer-term cost reductions and improving the reliability and the resilience of the Blanket operation. So I think we’re finished, in which case, we can open this to questions.

Q&A Session

Operator: Thanks very much for that, Mark. [Operator Instructions] We’ve got our first question, which is from Nic Dinham. Nic, if you could unmute yourself and ask your question.

Nic Dinham: Can everyone hear me?

Mark Learmonth: Yeah.

Nic Dinham: Okay. Hi. Good afternoon. Reat. Thank you. Just a couple of questions. One is what is the status of the solar power project, the sale of that asset? That will be the first question.

Mark Learmonth: Sometime this week, we expect. Next?

Nic Dinham: So the second question is to James. It’s a little bit about your sense of reliability of what you can produce out of the mine. I know we have a target that’s gold related. It seems to indicate that you should be able to pull out 800,000 tonnes out of the shaft, not necessarily process it in the next year. Is that the right sort of number we should be pegging into our models?

James Mufara: Yes, Nic. That’s the right sort of number. 800,000 we should pull out of the mine, yes.

Nic Dinham: Excellent. Okay. Well, welcome because that’s a very stable number. The third set of questions relates to Bilboes. And it’s back to you, I think, Mark, the tie-in with getting a resource or a reserve out of Motapa is somehow gives a sense that this could be almost like a year or two years to develop a reliable reserve that you could weave back into your feasibility study. That’s the first question about the Bilboes.

Mark Learmonth: Sorry. Yes, we’ll take as long as it takes to get the best project we can, okay? So if we feel we’ve got a project that works is fundable based on what’s just what’s at Bilboes right now, that’s fine. We’ll run with that, and we can introduce Motapa at a later stage. If we feel that the introduction of Motapa would materially affect the equity and the debt story, we owe it to ourselves to consider that, okay? So like I say, if you go back to what I said, we’ll consider things on the basis of net present value per share, okay? And that includes the effect of any delay in the project, okay, time, value of money. The various sort of competing tensions will be optimize the project in terms of maximizing NPV, minimizing dilution, and doing something quickly or slowly.

Nic Dinham: Okay. The second — sorry, no, that’s fine. Thank you. Second thing was you’re talking about maybe a change in the tailings dam strategy because you’re looking for a hill. But you also mentioned in passing that it could affect what you do. Now obviously, the input there is if you are able to toll — get your concentrates toll treated by somebody else, the nature and designation of the TSF is going to change. Is that what you’re thinking about?

Mark Learmonth: Correct. Yeah. Now that really only works if we can get permanent permission to export concentrate. So if we only get temporary permission that will still mean that we’re going to need to set the tailings facility up from the outset so that it can receive material from a BIOX plant even if that BIOX plant may not be in place for two years.

Nic Dinham: 100%. Okay. So finally, the toll concentrate idea is awesome. So I mean, from an outsiders perspective, but there does seem to be an other side of the coin, which you may be limited in scale and volume of those exports simply because one can’t imagine that too many people within the economic catchment area of your concentrates are going to be able to accept what you initially proposed to be your production.

Mark Learmonth: Yeah. Correct. And I would just say this opportunity has emerged very, very recently. So we do need time to consider it. And there are swings roundabouts — yes, you’re quite right. So it’s something we need to consider. But this has only materialized within the last four or five weeks.

Operator: That’s great. Thanks so much for that. We’re now going to move on to Howie Flinker. Howie, if you would like to unmute yourself and then talk to the team.

Howard Flinker: Hello, Mark. Hello, Victor. So three short questions. One, do I read correctly that your bank debt is down to about $2 million?

Mark Learmonth: No. Slightly more than that. We — our net — is in slide somewhere. Our net cash would be, let me just find it…

Howard Flinker: I think your cash exceeds then.

Mark Learmonth: We’ve got more cash than debt, yes. But the strategy will always be to have debt in country and cash out of the country. That will always be the strategy.

Howard Flinker: Okay. Second, are your taxes going to be 42%, as they seem to be in the fourth quarter?

Mark Learmonth: Pretty much. So if you were to look at the — in the MD&A, we break down the tax. We break it down into Zimbabwe income tax, Zimbabwe deferred tax, South African income tax and various bits of withholding tax. If you look at Zimbabwe income tax plus Zimbabwe deferred tax, and express that as a look at that as a percentage of gross profit, which equates pretty closely to Blanket’s PBT, you’ll actually find that, that rate is about 20% odd, 20%, 24%. So that’s the underlying sort of proper commercial tax rate. The commercial tax rate in ZIM is 25% — 24%. On top of that, we incur tax leakage, I think it’s about $1 million of withholding tax as we move things around the group. The management fees that we pay from Blanket to South Africa aren’t tax allowable in ZIM, but they also incur withholding tax.

And then we have all of the expenses that we pretty much incur outside Blanket. So that will be in Johannesburg, Harare, and here in Jersey aren’t offsetable against profit because either here in Jersey, it’s a zero tax regime or there is no taxable profit. So you’ll find that our — we’re doing the best we can, but you’re going to find that our effective tax rate does remain somewhat high because of structural inefficiencies, but not things that we can readily address.

Howard Flinker: Okay. And the last question is probably some technical error. I got a weird announcement this morning, you bought 11,500 shares at $42 something. Is that some technical error by the service provider?

Mark Learmonth: I got quite excited about that. Yes. So that’s a company called Caledonia Investments, which is a U.K. investment trust and somehow — I don’t know how it happened, but somehow their announcement ended up on our website. I think it’s been rectified. I hope…

Howard Flinker: I thought it was ours, but I wanted to verify that.

Mark Learmonth: I got slightly excited about that as well.

Howard Flinker: That’s all I have. Thanks.

Mark Learmonth: Okay. Thank you, Howard.

Operator: Thank you. Our next question comes from Tate Sullivan. Tate, if you please go ahead. Unmute yourself and put your answer to the team.

Tate Sullivan: Great. Thank you. Hi. Mark. You mentioned retirement expenses in 4Q. Are you within your cost guidance for 2025, are you planning more retirement expenses?

Mark Learmonth: No. Well, there will be, but there’ll be de minimis. I mean 104 people out of a workforce of 2,200 reflects the fact that we hadn’t really — we hadn’t imposed this policy for very, very many years. And we had people doing pretty much full-on physical exercise, physical jobs. I mean, even if you’re in a supervisory role, going underground is hard work in their mid-70s, and that was clearly inappropriate. So the retirement policy will continue to be enforced, but it will now only affect a few people a year. So it will be nothing like the magnitude that we saw in 2024.

Tate Sullivan: And then you paired — if I might have misinterpreted, but in terms of the 4Q costs, were some of the higher labor costs associated with the lower availability of electricity and if so, why?

Mark Learmonth: Yes. So maybe James can comment to this, but the first part of the quarter was terrible because we had some really serious electricity problems. It started raining, which meant that the grid collapsed. So we’re getting very poor power from the grid. Because it was raining, it was cloudy, which meant that the solar plant doesn’t work particularly well when it’s not sunny. There was also an equipment failure within the solar plant, which we managed to rectify, but it was a bit of a problem for some time. So I think pretty much I’ll hand over to James in a minute. But I think by the time we got to the end of November, things are looking a bit bleak. So James had to do some fairly fancy footwork to get his team together to raise morale and get them focused on delivering in December. James, do you want to talk about what you did? Because it bloody worked whatever you did?

James Mufara: Yeah. Thanks, Mark. I mean we had a very bleak start to the quarter. I mean we had — like Mark is saying, we had ZESA’s infrastructure is not that well equipped. I mean they collapsed with the rains. We had quite a lot of high rains this last rain season. I mean, so the grid part of they supply us. The way fair had not been done. So we actually had to jump in. We had a lightning strike that actually caused some of our transformers to be banned. We had to run around and get that equipment to start operating again. Solar was not waking. But we then regrouped the troops to say, guys, I mean we need to get what we need to get. We’ve got a bit of stream capacity within the plant that we also utilized. And unfortunately, it meant that we had to burn the midnight candle and we worked sometimes through Sundays to try and get the production machine going again. I have — it worked.

Mark Learmonth: Yeah, it worked. I mean, I don’t like to see people having to work over time and work hard, but they were paid for it. They were incentivized to do it. And they left — they finished the quarter with the tails up. And clearly, that’s now continued into this year. And it’s a virtuous circle. The mine is performing well. They’re getting production bonuses, everyone is happy. So it’s a virtuous circle.

Tate Sullivan: And then my last question. Thank you. Great context is for 2025 costs, Mark, is your — is the greatest variable? You mentioned slight impact from higher employee costs, but is it higher costs of consumables, unpredictable electricity or another factor?

Mark Learmonth: Yeah. That’s the one that is least predictable is electricity because to be honest, if the grid collapses and/or we have electric — the solar plant works very well. The solar plant works better than we had expected. But when it’s cloudy, and I don’t just mean super cloudy, just a blossom, a thin cloud piece of cloud, I mean that will reduce your power generation by about two-third. So if we have any interruption to power, that means we’ve got no choice. We have to run the diesels and they’re very expensive. So that for me is the biggest cost risk. And over the course of the next two years, we’ve taken the decision as a Board that we must look at ways to try and insulate ourselves further, if not completely, from the vagaries of the grid because this situation is not going to get better, and we must fix it.

Tate Sullivan: Thank you.

Operator: Thank you very much for your question. [Operator Instructions] I’d now like to invite Duncan Hay to ask his question.

Duncan Hay: Yeah. Thank you. Hi, Mark. Hi, everyone. Just going back to Bilboes and the concentrate sales scenario. You mentioned time value of money, which suggests that you don’t want to hang around too long sort of waiting for approval. But would the — is the strategy initially to try and get sort of no — an ideal scenario would be that you sell concentrate, there’s no commitment to put in the BIOX. Is that sort of preferred. But if you have to compromise, then the priority would be to sort of get moving on the project and try not to not hold out too long.

Mark Learmonth: Yeah. So I mean, the lever the government has typically got is they’ll allow you to export concentrate for a period of time, say, two years, during which — or after which you’re then supposed to put in a plant that can do the in-country beneficiation. And if you fail to do that, then you’ll be hit with punitive taxes. So that’s probably — that could be one option. Unless the government just decides that, frankly, they’d rather have a project or not have a project, in which case, export concentrate forever.

Duncan Hay: Yes, which that — because that’s what they’ve been doing on the platinum side, isn’t it — they’ve been — they’ve reduced which is…

Mark Learmonth: Yeah. The platinum side, that’s where they have actually held out and forced the platinum producers to do low in-country beneficiation. But I think there seems to be an increasing pragmatism from government. So we’ll explore it.

Duncan Hay: Yeah. Okay. All right. Thank you.

Operator: Thanks very much. We have got no further questions at the moment. So Mark, maybe back to yourself for any closing remarks.

Mark Learmonth: No, look, it was a strong — a substantial improvement in 2024 compared to 2023. Very pleased to see stability of the ZiG and that’s continued into 2025. Very pleased to see an improvement in cash generation and much better reliability in terms of mine performance. And we’re genuinely very excited about some of these near-term opportunities, which could make a significant contribution to our cash generation. So I think we’ve come through a fairly difficult 18 months or so, and I’m hopeful that certainly Q4 and then into Q1, you’ll begin to see a substantial improvement. So look forward to sharing that with you. Thank you.

Operator: Thanks very much. Already that concludes the presentation today, and look forward to speaking to you again.