Earnings Call Transcript - GFI Q1 2023

Operator, Operator

Good afternoon and good morning, everyone, and thank you for dialing in today to the Gold Fields webcast where we will be presenting our Q1 operating update, which we released this morning, and then our ESG results for the 2022 full year. Presenting today, we've got Martin Preece, Interim CEO; Paul Schmidt, our CFO; and Kelly Carter, who's Group Head of Legal & Compliance. So with that, I'm going to hand over to Martin to present. Thanks.

Martin Preece, Interim CEO

Thank you, Thomas. Good afternoon and good morning, wherever you are joining us from. We appreciate you taking the time to be with us today for a Q1 update and our ESG performance review for the past year. We have much to be proud of and have started the year positively. I'd like to remind you about the forward-looking statements and advise caution. Now, moving on to the key highlights. Unfortunately, we faced a tough first quarter in terms of safety, experiencing a fatality at our Tarkwa mine. Additionally, at the Asanko joint venture operated by Galiano Gold, there were two fatalities due to a vehicle-related incident earlier in the quarter. We extend our heartfelt condolences to the families, colleagues, and friends of those we lost. It’s crucial that we renew our commitment to eliminating serious injuries and fatalities across our operations. Regarding ESG, we have recently released our climate change report and stakeholder report, both available on our website. Operationally, we had a stable first quarter with production flat year-on-year at 577,000 ounces, generating free cash flow of USD 83 million. Our balance sheet shows a net debt of $875 million, with our net debt to EBITDA slightly increasing to 0.36x. We take pride in announcing the proposed Tarkwa/Iduapriem joint venture during Q1 after more than a year of hard work from many individuals at AngloGold Ashanti and Osisko. We are currently negotiating with the Ghana government to finalize this. Earlier this week, we also announced and closed the joint venture agreement with Osisko in Canada for the Windfall Project, which is in the early stages with all conditions met. Looking at our global operations, Australia led production in Q1 at 42%, followed by West Africa at 30%, South Africa at 15%, and the Americas at 13%. This will significantly shift next year with the addition of the Salares Norte mine. In North America, with the recent announcements, we now have a presence in Canada. Production remained flat at 577,000 ounces, with all-in costs marginally rising by about 2% year-on-year for Q1. As mentioned earlier, we generated net free cash from operations of USD 83 million. A key goal for us this year is to bring the Salares Norte project online, which will significantly impact our production next year and alter the distribution of our gold output. The project is over 90% complete, and our team has made consistent progress, anticipating first gold production in Q4 this year. We have fully staffed operationally and added extra project personnel. Our camp is operating at full capacity, prompting us to relocate our exploration teams to a satellite camp as we prioritize completing the project. During the quarter, we successfully drilled over 7,000 meters of exploration. The photos show the progress of the process plant and mine offices, with the primary crusher now operational. Systematic commissioning of the stockpile and mill will occur in the upcoming months, and we are pleased with the progress made. We have nearly 1 million tonnes of ore stored in stockpile, ready to feed into the plant as it becomes operational. The Brecha Principal pit, previously a mountain two years ago, has now transformed significantly, with mining having removed around 60 million tonnes of waste, setting the mine up for production.

Paul Schmidt, CFO

Regarding our outlook and guidance for 2023, I am pleased to confirm that we remain on track, and the guidance we provided in February is still valid. To recap the figures: our attributable production is projected to be between 2.25 million and 2.3 million ounces, with all-in costs ranging from $1,480 to $1,520. It’s worth noting that when we issued our guidance, we mentioned a potential cost increase of 25 if we decide to proceed with the St Ives solar project, which has yet to be decided. Capital expenditures are also on track, estimated to be between $1.1 billion and $1.2 billion. Our long-term guidance for 2024 and 2025 remains unchanged. It is concerning that inflation continues to be an issue, with year-to-date figures up to April indicating 7.2%, which aligns with our projections made earlier this year that accounted for approximately 7% in year-on-year estimates. A particularly encouraging performance has been observed in Peru, where they have managed to mitigate much of the inflationary impact, with a forecast of around 1.6%, making it a positive outlier within the group.

Martin Preece, Interim CEO

Okay. We go into our ESG performance. A picture from our Salares Norte mine. It's a beautiful part of the world. And that picture very much reflects the operating environment. Just to remind you in terms of our ESG targets, the 6 big targets that we're focusing on is safety, health, well-being, and environment. It's been the first priority area. We want to achieve 0 fatalities, 0 serious injuries and, importantly, 0 serious environmental incidents. In terms of gender diversity, we've set our target to get to a representation of 30% of our total workforce being women. In terms of stakeholder value creation, 30% of the total value created must benefit host communities. And then we've also started scoping and implementing in Peru the first of our 6 legacy programs that will benefit those communities. In terms of decarbonization, no need to remind the world, but net zero by 2050. We want to see a 30% net reduction from our 2016 baseline by 2030, which equates with our production build-up to 50% absolute emission reduction. That's based on 2.8 million tonnes, and that's Scope 1 and 2. Pleasingly, the team has started working on Scope 3 reductions, and we will report on that at the back end of this year. In terms of tailings management, our conformance to the global industry standard on tailings management, so we are actively driving that. We've got 2 high-risk dams, and then the remainder I've got to later finish that, and then reduce the number of active upstream raised TSFs from 5 to 3 over the coming years. Water stewardship, which I think is something that we've been focused on for many years and is going to become more and more of a challenge in the world, is to get up to 80% of our water to be recycled or reused and a 45% reduction in freshwater use from the 2018 baseline. So stretch targets, and we're certainly pleased with the progress our teams are making. So I've touched on the 2030 targets. Unfortunately, as I said in our introduction, we did suffer one fatality at our St Ives mine during the course of last year; and then at the beginning of this year, our Tarkwa mine and 2 fatalities at the Asanko joint venture. These are highly regrettable, and this is something that we remain very focused on, learn from these incidents and make sure that they never happen again. I think just talking to that, and I'm not going to go through all the points, but the 286% improvement in reporting transparency on near-miss incidents is a really important metric for us. We believe that if we can get people to report on near-miss incidents, what we do is we learn from potential incidents before they materialize into serious injuries or, worse, to fatality. So there's a very big drive on getting people to report on near-miss incidents. We've expanded our approach around safety to include mental well-being and psychological safety. And so we are busy developing our approach and tools and risk assessments on how we better manage that. And then I think innovation and technology space specifically related to safety is the development of vehicle interaction and collision avoidance technologies. We are making progress across the group with some of our operations a little ahead of others. We're confident we will have a solution in South Africa by the back end of this year, where it will become a legislated requirement. Other operations are following fast behind that. And then electric vehicle trials are going on both in Australia and later this year at South Deep to reduce diesel particulate matter risk but also the greenhouse gas risk or decarbonization. So the team are certainly moving in the right direction with many of the issues we need to tackle. In terms of gender diversity, we've got to a point of 23% women representation in our workforce. Importantly, in leadership roles, that number is running ahead of the total workforce. We certainly believe that if we can drive the women in leadership positions, it will send the right message and provide the right leadership in our business to grow the demographics or match the demographics of our workforce with the countries in which we operate.

Kelly Carter, Group Head of Legal & Compliance

Thanks, Martin. In terms of stakeholder value creation, whilst the efforts are obviously focused across all of our key stakeholder groups, we've got a very strong focus on our host communities being those communities that are most directly affected by and impacted by our mines. That particular stakeholder grouping received 27% of all of the value created last year, which amounted to $913 million. In terms of the focus areas that we undertake in order to achieve those results, we're really looking at 3 key areas, which are employment, being how we can employ more members of the host communities in which we operate, how we can procure goods and services from enterprises that reside within these communities, particularly SMEs, and then how we can invest in those local communities in terms of community infrastructure, health and education facilities, and other community projects with a very strong co-design principle underpinning that. Our second major 2030 target is to develop 6 legacy programs. These are transformational, enduring programs that are anticipated to have a material impact on those communities through economic diversification and job creation, infrastructure development, climate change mitigation and adaptation, and improving health and education outcomes for those communities. As Martin mentioned earlier, a pipeline of those legacy programs have already been framed and conceptualized in all of our regions around the globe. One of those programs at our Cerro Corona mine in Peru is ready to be launched later this year. Here, we provide some more color on our host community value creation. As I just mentioned, of the total value creation, 27% was dedicated to host communities amounting to $913 million, a number that's risen steadily over the last 3 years, as you can see from the chart here. It's important to note that in 2021, that number was $872 million. The largest share of host community value creation is the $747 million that we spent with host community enterprises. Supporting that activity, it's important to note that we introduced favorable payment terms for SMEs across all of our regions in the group being 14 days from invoice receipt. Our total procurement spend last year was $2.3 billion, 97% of which was spent within businesses in our countries of operation and over half of our employees, being 52%, come from within our host communities. Looking beyond our own operations, we're working with our communities, contractors, and suppliers to create jobs outside of the mining supply chain, particularly in agriculture. To date, we've created about 800 non-mining jobs, mostly in South Africa, Ghana, and Peru. These types of projects feature heavily in our legacy programs. Yesterday, we published our annual report to stakeholders, in which we detail the value that we created in 2022 for all of our material stakeholders on a country-by-country basis. It also outlines our approach to engagement with all of those stakeholders and transparently shows some of the challenges that we're currently facing and how we're seeking to address those with our stakeholders. That report is available on our website for you to look at.

Martin Preece, Interim CEO

We just touched on decarbonization, and I did touch on those targets. Where we ended up last year is an 18% reduction in our absolute emissions. We had a 1% net emission increase, which is linked to our growth. I think importantly, if we look at the key developments in terms of renewables, 14% of our group electricity came from renewables. Of that, that came from 2021 at 4%, so we've made a 10% mark in the year. That's largely driven by bringing online the South Deep solar plant, the 50-megawatt solar plant that was done within budget. Our mine Gruyere in Australia completed the 12-megawatt plant. Then the Cerro Corona electricity has been certified as 100% renewable coming from hydroelectric. This year, we are working, as Paul said earlier, in terms of the capital we'll spend very hard on finalizing a microgrid feasibility study for us at St Ives mine in Australia, which will compile solar, wind, battery, and gas to look at how we move to 85% renewable power at that mine. That's a long-life mine that we see value in investing in. Our sustainable development teams are working with our regions to properly scope our Scope 3 emissions and set reduction targets; that work is underway. Paul is playing quite a leadership role there as well with our teams. 3 of our mines are now ISO 50001 certified, and the remainder of the mines are going through the certification during the course of the year, so positive developments with decarbonization. As I said, the project rollout at our mine, the South Deep plant was commissioned late last year. I and then at below is the 12-megawatt plant at Gruyere; great developments for the year. Cerro Corona, as I said, is now classified as renewable. I've touched on this St Ives microgrid that we're working on right now. Our colleagues up at the top of the hill in the Andes, at Salares Norte, have started doing the work around the solar project concept study to put in a sort of 10- to 12-megawatt plant at Salares Norte. We are continuing in earnest to get our renewables sorted out. The climate change report was released at the end of March this year. I think it deals with the strategies, our performance, and the specific targets that we've spoken about. It deals with the energy performance at our respective mines, something we'd measure, I think, because we believe it's important from the impact we make on the world. But it's also a significant cost driver in our business. We've measured progress against our 2021 climate change risk and vulnerability assessment. We've got the key performance environmental areas that we cover in there. We're looking at our Scope 1 to 3 performance, and as I said, that Scope 3 emissions will bed down during the course of this year. Lastly, this isn't our view of the world. We have independent auditors that come in, and there's an assurance statement in there just to make sure that we keep our feet very close to the fire with this very important aspect.

Paul Schmidt, CFO

In terms of tailings management, I've touched on the targets a little bit earlier. But our GISTM conformance is on track. The Tarkwa TSFs in Ghana are currently being transitioned from upstream to downstream dams, and the team is making good progress there. I was on those dams with them earlier in the year. Our tailings team, Johan Boshoff and Louise are working really hard and are collaborating with industry colleagues to get us the best solution. You will have seen earlier in the month, we're looking at solutions to mix the waste streams and monitoring technologies linking to how to do this a whole lot better and collaboratively. We're doing early-stage planning around reducing moisture content. This will hopefully start materializing during the year. We've developed our new TSF management standard, and the climate change baseline studies are done. A real positive step forward for Gold Fields is at Salares Norte, the mine we are building and will commission later this year. This will be our first proper dry stack filtered tailings dam. We believe we will learn many valuable lessons there. We finished the construction of Cell 4 Granny Smith in the past year and the Doornpoort at South Deep's TSF Stage 2 construction. That construction at South Deep is now for the full life of mine, so that dam is constructed for the next 80 years. In terms of water stewardship, against the target of 80%, we're already up to 75% of our water recycled and reused. We've managed a 41% reduction in freshwater consumption. At Tarkwa, they've installed a micro-infiltration unit to increase recycling. South Deep, pleasingly, has installed an RO plant where we're tapping freshwater underground to generate our own potable water, which allows us to take less freshwater from the grid and increase recycling and reuse. The teams are doing really well in getting us to the targets we've promised.

Kelly Carter, Group Head of Legal & Compliance

Thanks, Martin. I think beyond the work that's been done across those 6 key streams, it's absolutely critical that everything that we do is underpinned by sound governance and compliance structures and practices. For us, we see this as the absolute cornerstone of building trust with our stakeholders. It's obviously something that we've always taken very seriously at Gold Fields. Whilst our alignment and upholding of King IV is absolutely central to this, I wanted to take the opportunity to discuss a couple of emerging trends and how that's shaping our approach to governance in the organization. I think what we're seeing is, with increasing expectations from both regulators and key stakeholders more broadly around transparency in reporting of ESG-related risks strategies and performance, we are seeing a corresponding increase in regulatory action and litigation particularly focused on greenwashing. Accordingly, our focus is on ensuring that we've got robust controls in place that are firmly embedded within the business that give our stakeholders confidence in the veracity and consistency of the information that's contained in not only our suite of annual reports but also our continuous disclosures. Another area that we're also seeing regulatory and broader expectations shifting is with respect to the understanding and influence that we have not only on the impact of our own operations but also those of our partners across their value chain. To address that, we're really taking a multidisciplinary approach throughout the organization to conduct due diligence and manage issues such as human rights and modern slavery. We've made some great progress in that across the group, and I'd particularly like to call out the work that's been done in our Australian region with respect to identifying and managing modern slavery risks in our supply chain. I think what's really interesting about this is that it's an area where we see the intersection between the S and G in ESG. It's particularly pronounced and demonstrates the need for a very integrated approach to these elements. That really underpins Gold Fields' approach.

Martin Preece, Interim CEO

In conclusion, I do not intend to reiterate everything, but I believe we have set ambitious targets for ourselves in these six priority areas. Overall, we are making good progress, and our teams are dedicated to this effort. These metrics are part of our long-term incentives, ensuring accountability rather than just discussion. We are, however, very disappointed with our performance in the safety area, especially after losing a colleague at Tarkwa this year and another at St Ives last year. This issue remains a top priority for our mines as we focus on eliminating serious injuries and fatalities across the business. Lastly, I want to express my gratitude to the women and men of Gold Fields who continue to support this mission, believe in it, and achieve these ambitious goals; I take pride in that, and I know our team around the world shares that pride. If I can stop there, Thomas, we can move on to questions.

Operator, Operator

Thank you, Martin. We'll go to the call first for questions, please.

Operator, Operator

The first question we have is from Jared Hoover from Morgan Stanley.

Jared Hoover, Analyst

I have three questions: one about operations, one about strategy, and one about ESG. Regarding operations, it seems like performance has been strong across the sectors, with ASIC at $1,150, which is nearly $200 lower than your Gruyere dam. It appears that the situation will continue to improve for the rest of the year. You also seem to be managing your cash costs well. Although you don’t typically provide guidance on this, could you clarify your earlier statement that M&A activity is largely complete for the group, given that there was a mention in your results about still seeking inorganic opportunities? Should we anticipate another acquisition in the $300 million to $500 million range in the near to medium term? Lastly, concerning ESG, you previously indicated an investment of about $1.2 billion between now and the end of the decade. Is this your decarbonization CapEx? How much of this figure is included in your recently updated SIB CapEx per ounce estimates of around $350 to $400? I'll stop there.

Paul Schmidt, CFO

Okay, it's Paul here. Let me discuss the all-in costs. You're right that Quarter 1 usually has much lower capital expenditures, so the AIC will align with our guidance. There were no significant cost reductions this quarter. I mentioned in my presentation that we are expecting inflation of about 7.2%. We have seen some positive impacts from lower oil prices, but we are also experiencing fluctuations in claims from our contractors, particularly in Australia. All regions have launched programs to try to reduce costs on-site. Regarding stay-in-business capital, much of the ESG capital depends on whether we proceed with South build or choose PPAs. The approximately AUD 360 million figure for the Australian microgrid is included in our stay-in-business capital. Currently, we are assuming PPAs for the other energy projects. If we opt against PPAs, we would need to adjust the stay-in-business capital accordingly. When Chris announced two years ago, we estimated a capital requirement of $1 billion to $1.3 billion, assuming we would handle all of it. So far, we've seen capital for the South Deep solar project and the AUD 360 million estimated for the St Ives project. At this point, it looks like less than half will likely be realized as capital; the remainder will be covered through the PPAs.

Martin Preece, Interim CEO

I think, Jared, your second question around the book, most probably too happening much this week. But the deal we announced with Osisko, we will keep on scanning the market. But my view is that we've got enough to focus on in the short term with the JV up at AngloGold and Tarkwa with Iduapriem. So that's a lot of work for our teams to focus on to get that over the line this year. Obviously, our new partners in Canada, we've got that work to do. So I think we've set our corporate development team to go clean off the radar equipment, get your spreadsheets all up to date again and maybe a bit more scanning this year. I think Paul has closed the wallet for a while until we can sort of get these things landed and get them back to steady state. Should I try and tackle Adrian's questions?

Operator, Operator

Are there any more questions on the call?

Operator, Operator

The next question we have is from Tanya Jakusconek from Scotiabank.

Tanya Jakusconek, Analyst

I wanted to follow up on the inflationary pressures because the all-in sustaining costs came in lower than I expected, and part of it was capital. However, some of it must relate to the total cash cost, which you mentioned is not reported. As I review some of your input costs, it would be helpful to understand where you’ve had some advantages, particularly regarding the oil price. Could you clarify what you're using for oil and your sensitivity to those costs? Additionally, you mentioned contractors, so I’d like to know what reductions you’re seeing on the labor side, as well as any other consumables or factors that I might not be considering and how those are impacting costs. That’s my first question.

Paul Schmidt, CFO

Tanya, I won't be able to answer all of them, but I'll give you the ones that are clear. I also said when we gave the guidance at the beginning of the year, we circa factored in 7% inflationary increases for our employees as well as the contractors. Unfortunately, we've seen a lot more pressure coming from the contractors. In the rise-and-fall basket, remember, there are also salary increases that come in. Especially in Australia, we've seen much higher demand. When we gave guidance, if I'm correct, we used a $95 oil price. Obviously, we're seeing positives in terms of that. Most of the other commodities are sort of tracking what we used in our guidance that we gave out at the beginning of the year, different things as to what we factored. I hope that answers it. Is there anything I've missed?

Tanya Jakusconek, Analyst

Are you seeing anything on consumables? Are you seeing any lower cyanide prices, lime, steel, like grinding media? Anything else, right, anything else that...

Paul Schmidt, CFO

Freight we've definitely seen. Remember, freight is really only applicable to Cerro Corona because they ship the concentrate. We have seen a big reduction there. This is one of the reasons when I showed in my presentation that it looks like Peru has got the lowest inflationary forecasts for the year. But in terms of the commodity basket, there have been positives and negatives coming in the baskets, and also depending on the region. Some people are going up; some people are going down, but the consistent one is oil on the positive side. The negative side is increased salary pressures coming from contractors.

Tanya Jakusconek, Analyst

And just on the oil side, if I could ask, in general, most of the coverage group were at $10 a barrel change, it's about $6, $7 an ounce to cost. Would you be in that similar range?

Paul Schmidt, CFO

Tanya, I can't give you an exact answer right now. We'll need to check on that and get back to you. That was the situation about two years ago. Avi and I will follow up with you.

Tanya Jakusconek, Analyst

Okay. And then my second question has to do with you've now done these 2 new acquisitions, or one is a joint venture. You've made a footprint now into Canada. I'm just wondering, as you look at your portfolio, we've got obviously demand still sitting there that has to be dealt with and probably Asanko. Just kind of want to have your thoughts on how you're thinking about those and sort of timing on your decisions there.

Martin Preece, Interim CEO

Tanya, we're certainly very focused on the portfolio. We go into our strategy session mid-year this year. Those mines are still making money for us, but we are looking at opportunities and options for those mines as well as in the longer term at Cerro Corona. Hopefully, by year-end, we'll be a lot clearer on what the process is with the broader portfolio. As we bring in a quality asset like Osisko, which is still some way off, it does give us those opportunities to look at the portfolio more holistically.

Operator, Operator

We have a follow-up from Jared.

Jared Hoover, Analyst

Production came in pretty good in the quarter, but I wanted to focus on South Deep. They also performed well this quarter. However, based on your comments, you mentioned a fall of ground and some challenging ground conditions. I wanted to know if that suggests potential issues with how the mine is oriented as you increase production, or if we should consider it just a localized event that is unlikely to happen again. I would appreciate any insights on that.

Martin Preece, Interim CEO

Thanks, Jared. What I'll do is I've got some questions from Adrian which I'll try and answer at the same time. So we've had 2 ground fall of ground events at South Deep in the quarter. One was in a main access drive in one of the higher-grade corridors. Fortunately, nobody was injured, and the great testament to moving to mechanization that, one, we had less people there, but the people in a drill rig had proper rods and fobs on; so we've damaged the drill rig, but we're able to walk away from it. The teams are working on opening that up. To answer some of Adrian's questions, we reduced volumes out of that corridor. It was in the main access drive, so tonnages were down at South Deep related to that. That is a prominent stoping area. Your question, Jared, I think it's got nothing to do with the orientation. I don’t think it's something that we must factor into the mine. The reality is, at deep-level mining, you will have falls of ground and discontinuities in the geology. We've learned how to get through it, rehabilitate those tunnels, and get on with it. The second incident occurred where one of the main ramps is actually starting to be mined out, the footwall held into an old conventional stope below it. So we stopped mining in that area. The ramps are generally fairly high-grade areas. We've stopped that mining. We had to go and rehabilitate that footwall, get it all concreted out again. That piece of work is finished now. The teams are back in their mining. To answer Adrian's question, those are the 2 reasons for the lower tonnes and why the mining tonnes lagged the mill tonnes. So what we have had is a strategy to stockpile, and that comes in thanks to the electricity crisis in South Africa. We've got material that we've had stockpiled as we go along. If we have load shedding, we typically keep our mining operation going and stop milling and hoisting, and build up stockpiles because mining is our bottleneck. We want to keep the most expensive part of the business running, where we've got the least flexibility in terms of capacity. So the mining and mill tonnes sort of lagged. As a result of that, I think that talks to grade as well. We've drawn down on GIP and treated stockpiled material during quarter 1. Pleasingly, at the start of quarter 2, the volumes have picked up, and we're still getting back into the grade in those areas. We've mined through it, Jared. Falls of ground will happen from time to time, and we will get through it.

Operator, Operator

Thanks, Martin. We're going to go across to the webcast now. First question comes from Sergio from Credit Suisse. He is just asking why do you expect such a material increase in costs for the full year '23.

Paul Schmidt, CFO

It's capital. It's the simple reason. We're way behind in capital. Capital is unfortunately not spent equally over the quarters. We still got a big chunk to be spending on Salares Norte. So the bulk of it is capital that's coming through disproportionately on a quarterly basis, and that's why we will end up being very close to guidance.

Operator, Operator

Thank you. Next question comes from Catherine from JPMorgan. She says there have been no changes to overall group guidance, production guidance. But can you please confirm whether there are any revisions to individual asset guidance compared to the February results?

Martin Preece, Interim CEO

In terms of production, all the mines are tracking the individual guidance as well.

Operator, Operator

Thank you very much. So Adrian had a couple more questions. On the South Deep solar project, he says it can be considered a benchmark study for other gold mines. How is the solar plant mitigating Eskom's impact at South Deep currently? What is the plant's load factor? And how have electricity costs improved thus far?

Martin Preece, Interim CEO

Thanks, Adrian. Certainly, it is mitigating the Eskom power, and hence, the study work we're doing currently around a wind farm, putting up turbines in South Deep. We've got most erected, and we're collecting wind data. Contrary to my belief, living on the reef, I thought the wind didn't blow up here. The wind does blow, and we do see an opportunity for smaller, so the 3 to 4-megawatt wind turbines. It's giving us an opportunity to keep our mining operation going. We forecast about 24% of our annual electricity consumption from the solar plant as it is. We'll keep investing in renewables. In terms of the current load factor, we're currently consuming about 72% of what's being generated in that solar plant. What we found as we commission the plant is that the electricity that's going to the South Shaft, which is our old shaft; a lot of the equipment there, the pumps, fans, direct drive equipment, and the compressors. When we were starting that on load from the solar plant, that sudden spike in electricity was causing trips. We bought soft starters to put on that equipment. That is possibly being delivered in the next couple of weeks; it's got a fairly long lead time. We believe that by year-end, we'll be in the 90% consumption of what we're generating. I think your third question is the impact it's had. When we motivated the solar project, we envisaged about ZAR 100 million per annum coming out of our budgets in terms of our electricity spend. This year, when we put our budgets together, we sort of had budgeted at about ZAR 124 million. With the subsequent price increases at Eskom going beyond what we had envisaged, we are forecasting about a saving of between ZAR 160 million and ZAR 170 million on our electricity bill at South Deep this year.

Operator, Operator

Thanks, Martin. I think Bruce Jackson at USS has a sort of follow-on question. He's just asking, has Eskom load shedding impacted production in South Africa at all?

Martin Preece, Interim CEO

So Bruce, I think we're blessed at South Deep. As I was talking earlier is that we've got more shaft capacity than we require. We've got more milling or processing plant capacity than we require. So as I said earlier, during load shedding at South Deep, we're unique compared to the rest of the mining industry here because of that buffer we have. We are able to keep our mining operation going and stockpile underground and stockpile on surface at the mill. When load shedding is not prevalent, we catch up with our processing and hoisting, but always a focus to keep the bottleneck activity, which is your mining and stoping, operating. We track the number of days, and there's been a material increase in the number of days that we've been on load shedding. But at this stage, between the strategy I've now described to you, and we do have some diesel generators which we run when load shedding goes to Stage 6 for prolonged periods. Last year, we started the emergency generators 3 or 4 times in anger; the rest of the time has just started to make sure they're turning over for maintenance purposes. We are able to manage it well, but I think we're fortunate compared to a lot of other mining businesses.

Operator, Operator

Thanks, Martin. Another question from Bruce is, when will the Scope 3 target reduction setting work be completed?

Martin Preece, Interim CEO

We're aiming to complete that by year-end, Bruce.

Operator, Operator

Thanks. Our next question is from Charmel Flemming from DRDGOLD. He says congratulations on your gender diversity outcomes, and I look forward to following your journey to reach your target. Do you see the current war for talent and, in this instance, female talent or representation as a risk to achieving the target for 2030?

Martin Preece, Interim CEO

I think the fight for talent is a global phenomenon. We see it playing out very differently in our different regions. I think it's driven by the demographics and culture in the region. We certainly have very different challenges in each of our regions and different skills that are getting poached. What is pleasing for me is that we have the best demographics at our operations in South Africa in terms of female gender representation. That's a positive, something I'm proud of from where I come. I think part of the solution, though, is how do we create an inclusive and caring culture that people want to work with us; that we don't have to lure them with other attractions. We're doing a lot of work to build a culture that I think everybody feels valued, can reach their full potential, sees opportunity, and feels included. We’re stopping bullying and harassment, which is prevalent in core industries like ours. That's what our focus will be, and how we create an environment where people can achieve their best, do the best, and feel they are part of something bigger than themselves and that they can make a unique and valuable contribution.

Operator, Operator

Thanks, Martin. Next question is from Peter Cromberge at Mergermarket. Can you outline what additional solar and wind capacity could be installed at South Deep and the approximate cost of this investment?

Martin Preece, Interim CEO

Peter, so we're working on that. This year alone, we're going to put an extra 10,000 panels at South Deep. But we're getting to the limit of what solar can do before we have to put batteries in. I think that in an energy-starved country, spending money on batteries is probably not the best way to invest right now because there's a big battery called the grid and a lot of hungry consumers. We are working with Eskom to take surplus energy back that we can get back at a later stage. In terms of wind, that's the next phase. So we're most likely looking at between 30 and 40 megawatts from now until 2030 or 2035 of wind to put in at South Deep. That would be our immediate focus, then probably looking at some sort of battery solution. We could top up those batteries with a bit more solar, and then that's probably another 10 megawatts of solar and another 5 megawatts of wind after that. That should keep us going for the full life of mine. As for costs, a good wind turbine costs between ZAR 80 million and ZAR 100 million. So 10 of those is another ZAR 1 billion worth of turbines. You're looking at another sort of ZAR 100 million to ZAR 150 million of solar, but that would be at the back end. And batteries, the price of batteries, if we go to get enough battery capacity, could be somewhere between ZAR 500 million and ZAR 800 million. But batteries are right at the back end of what we're considering.

Paul Schmidt, CFO

In terms of the question that Jared has asked earlier, we haven't factored anything in for the batteries. We factored in the solar, and we factored in the wind in our capital guidance but nothing for batteries at all.

Martin Preece, Interim CEO

Yes. And that 100 million for solar is actually in this year's number. We’ve taken into account this year that we'll add the extra 10 megs.

Operator, Operator

Another question from Peter is can you outline any progress regarding refinancing of near-term debt.

Paul Schmidt, CFO

We're in the final stages of refinancing our $1.2 billion. Hopefully, we can make an announcement in the next week or 2.

Operator, Operator

Thank you. Bruce Williamson from Integral Asset Management asks, if Eskom goes closer to level 10 during winter, what curtailment of underground ops and loss of monthly tonnes do you expect?

Martin Preece, Interim CEO

Bruce, let's pray that we don't get to stage 10. We've built scenarios from total blackout through various stages down. Our focus would, as I said earlier, be on maintaining the mining operation. First, the safety of our people would be right at the front and center of what we need to do. After that, we must ensure we can keep on pumping and then keep the mining operations going. We believe that on a sustained level 6 with our diesel generators, we can do that. What will impact is that we would stockpile material, so the revenue might lag the cost a little bit, but we try to keep the mining operation going. As we go at levels above that, we would switch off corridors of the mine at a time. At stage 10, you're looking at losing 20% to 30% of your capacity. The team is doing detailed study work on that to best mitigate that.

Paul Schmidt, CFO

Yes. During the day, we could theoretically use 22 from the diesel gensets and close to 50 from the solar and wind resources. The significant challenge is at night when we would be limited to the 22 megs of diesel. It's an evening impact, and we'll focus on the core mining activities.

Martin Preece, Interim CEO

Yes. As you know, we need to keep the mine dry and ensure the ventilation is going to keep our people safe. So that's our focus.

Operator, Operator

Thank you. One more question from Adrian before we wrap it up. He asks, what is the CapEx required for the tailings compliance by 2025?

Martin Preece, Interim CEO

You know that number?

Paul Schmidt, CFO

Adrian, we'll have to get back to you. It's not material, but we'll get back to you.

Martin Preece, Interim CEO

Yes, Adrian, it's all incorporated into our business plans. The waste we're managing contributes to operating costs, including various administrative, monitoring, and consulting costs. It's all part of our operating costs, which is standard practice for us now.

Paul Schmidt, CFO

Yes. It's the extra haulage cost of that stuff. But we'll get back to you, Adrian.

Operator, Operator

Thanks. That is it with the questions. Martin, if you want to wrap it up?

Martin Preece, Interim CEO

I want to thank everybody for joining us. And importantly, thank you to my colleagues around the world. They make this happen. Paul, Kelly, and myself sit here and we talk about it. But the men and women around the world, they believe this, they live it, and they make it happen. We have the privilege of presenting it, and I want to thank our colleagues from around the world who do this.