Harmony Gold Mining Co Ltd Q1 FY2023 Earnings Call

Good morning or good afternoon, wherever you may be across the world. I am Peter Steenkamp, CEO of Harmony. Thank you for joining us virtually today as we present our Interim Results for the Half Year Ended 31st of December 2023 for the current reporting period. Please take note of our safe statement. Let me begin with a summary to remind you who we are and what our strategy is. Harmony is a specialized gold producer with a growing international copper footprint. We also produce small amounts of silver and uranium. We have over 73 years of gold mining experience in South Africa and have been operating for over two decades in Papua New Guinea. Our strategy is aimed at producing safe, profitable ounces and improving margins through operational excellence and value-adaptive acquisitions. Our mineral resources and mineral reserves declaration of 138 million ounces and 39 million ounces respectively, presents an incredible opportunity to convert the quality ounces into shared value for our shareholders and stakeholders. Our gold tailings re-treatment business, or recycling as you may know it, is the largest globally and is set to grow, supporting the circular economy. The Tier 1 Moafie Gold Project in Papua New Guinea and Eva Copper in Australia give Harmony a sizable copper gold footprint, which will be transformational. Currently, our diversified portfolio of operating assets includes nine underground mines, two open pit mines, and a significant tailings re-treatment business. Production comes from four business areas, namely our South African high-grade underground mines, our South African optimized underground mines, a large and growing surface sources business in South Africa, and a growing international copper gold portfolio, of which Hidden Valley is the only producing mine at this stage. Mining with purpose ensures that our stakeholders share in the benefits of the minerals we extract. In our presentation today, we will provide further insights into how we are creating long-term value, shared value for all of us. Over the past few years, we have set ourselves ambitious goals, and I'm proud to say that we've largely achieved them. Reflecting on the first half of the financial year of 2024, we have delivered significant improvement in safety with our last time injury frequency rate improving to from above seven in 2017. The 9 or 5.19 per million ounce worked in a supporting period. We maintain the belief that a safe mine is a profitable mine. We have reduced our gearing and built a strong balance sheet, which is now in net cash position of ZAR 74 million or US$ 4 million. Through organic growth and investment, we continue to convert our mineral resources to quality mineral reserves, focusing on higher grades and margins. This is evident in our comprehensive pipeline of projects in execution. Group all-in sustaining cost improved to ZAR 843 and ZAR 43,000 a kilogram or US$1,403 per ounce. We achieved higher underground recovered grades at 6.29 grams per tonne. Harmony generated a record operating free cash flow of ZAR 7.1 billion or $381 million. This equates to a group operating free cash flow margin of 24%. Our acquisitions have transformed Harmony completely, having added quality ounces and copper to our asset portfolio. We are a new company with a long and exciting future ahead of us. The effective allocation of capital has placed us in a position to return capital to our shareholders, rewarding them for investing in Harmony's story. Allow me to unpack the operational performance for this reporting period. The stellar results in this reporting period were a result of our ongoing investment in operational excellence. This has enabled us to deliver consistency throughout the gold cycle. We are, therefore, well-positioned to take advantage of the current high gold price. Let me give six reasons why I strongly believe Harmony will continue to deliver. First, everything we do starts with safety, which I again want to emphasize is non-negotiable. This is supported by a healthy organizational culture. Operational flexibility and predictability in our planning ensures that we consistently deliver on the tonnes alongside higher-grade ounces. Harmony has always controlled what we can with cost being one key factor. With a rand cost base, we have a stable and predictable cost structure. The strong partnerships that we have built with our stakeholders enable us to maintain a social license and continue operating successfully. Our substantial mineral resource base of over 174 million ounces presents an abundance of opportunity to grow our mineral reserves through internal investments. Let's look at the numbers supporting these statements. We are seeing a continued improvement in safety performance. It requires a daily commitment, and we are confident that we will ultimately achieve the goal of zero loss of life. Our proactive culture of safety and care has resulted in our lost time injury frequency rate trending lower. Group lost time injury frequency rates improved to 5.19 per million ounces worked in the first half of this financial year. Our operational results demonstrate that a safe mine is a productive mine. An incredible amount of work goes into ensuring that our workplaces are made safe. We have continued safety awareness initiatives to reinforce that safety always comes first. Regrettably, four of our colleagues have lost their lives in mine-related incidents since the start of this financial year. Each loss of life is a sharp reminder that more needs to be done. We mourn the passing of these colleagues and we work tirelessly to ensure that each Harmony employee returns home safely. Improved planning allows for better flexibility and predictability. This combined with the acquisition of higher-quality assets resulted in multiple improvements in recovered grades. Underground recovered grade in this reporting period increased by 11% to 6.29 grams per tonne from 5.6 grams per tonne year-on-year. This now exceeds the upper end of our full-year guidance. This has primarily been driven by the high-grade underground mines in Penang at North Tshepong. Consequently, production increased by 14% to 36 tonnes of gold or 832,000 ounces, and we expect to meet or exceed the upper end of our FY 2024 production guidance. These charts perfectly illustrate how our effective capital allocation has transformed Harmony. We continue to see an improvement in our all-in sustaining costs in both rand and US dollar terms. Our rand all-in sustaining costs improved by 5% to 843,000 rand a kilogram. However, we delivered a remarkable 12% improvement in US dollar all-in sustaining costs to just over $1,400 per ounce. This considerable shift down in global all-in sustaining cost growth has been a function of the higher grades, well-managed cost increases, and increased production and prices at Hidden Valley Mine and Moab Khotsong operational, respectively. With over 90% of our input sourced in South Africa, we have been largely protected from rampant global inflation. In addition, our labor and electricity cost increases are predictable, allowing us to manage our costs effectively and deliver on this guidance. We're a proud South African gold producer and are fortunate to sell our gold in U.S. dollars. As a result, our all-in sustaining cost margins are now over ZAR 350,000 per kilogram or $600 an ounce. Improved safety and higher grades translated into high production. This was further supported by a strong rand per kilogram gold price received. This allowed for higher margins, driving record operating free cash flows. Total operating free cash flows increased by 265% to ZAR 7.1 billion, while operating free cash flow margins expanded to 24% from 9%. In U.S. dollars, we generated $381 million in operating free cash flow, up 237% year-on-year. To put this in perspective, we generated more operating free cash flow in rand over the past six months than we have in the previous full year period. The majority of our total free cash flow comes from our South African high-grade operations at Hidden Valley in Papua New Guinea. Our South African high-grade underground mines contributed 51% of total production, but delivered 45% of operating free cash flows at a margin of 34%. Let me remind you that the South African optimized underground assets continue to serve the company well. This mine produced 40% of the total production and generated 90% of group operating free cash flows at a margin of 11%. Bear in mind that we are investing significant capital to expand our South African surface operations. These assets produced 17% of group production, generating 11% of operating free cash flow at a margin of 17%. Hidden Valley produced 12% of group production but contributed 25% to total operating free cash flows and had a phenomenal 50% margin. Sustainability and ethical mining are integral to our operating model at Harmony. The sub-multiples stewardship is about managing all aspects of ESG. We support the circular economy through decarbonization, more specifically through energy efficiencies, renewable energy programs, and a green energy mix. Effective waste management through waste rock and planning street treatment is a priority. We also donate waste rock dumps to our communities for aggregate production. We promote good water stewardship by prioritizing the recycling and efficient use of this scarce resource. And we contribute to the resilience and prosperity of our host communities through benefit sharing. This makes Harmony a partner of choice. Mining with purpose is what we are all about. Through sustainability is embedded in all we are and the decisions that we make. At Harmony, we believe in actions over words. As a result, we continue to receive positive external recognition for our efforts in sustainability. We have once again been included in the FTSE4Good Index. Our inclusion in the Bloomberg Gender-Equality Index for five consecutive years demonstrates we foster gender diversity and inclusivity. We always treat our employees fairly without bias or prejudices of any kind. We have received a score of A from the CDP for best practice in water management strategy in 2023. Our near-term and longer-term carbon reduction targets have been validated by the Science-Based Targets initiative as we aim for net carbon zero by 2045. Because life of mine is finite, we are continually investing in converting our resources to reserves while striking a balance between capital intensity and shareholder returns. Harmony presents a substantial opportunity to invest in an exciting gold and copper story. Our resource base, which includes copper, is too big to ignore. We are in a fortunate position that we can deliver on our long-term plans for internal investment, as we convert these resources to reserves. Our production profile has been significantly de-risked and future production will come from a combination of South African surface and underground gold, Papua New Guinea copper and gold, and Australian copper. Our quality growth pipeline is aimed at creating long-term value as we take our projects up the value curve. Feasibility studies to determine the possibility of safely extending Mponeng and conducting the pillar extraction of the Tau Tona have been completed. I am delighted to announce that we have received Board approval and will commence with the life of mine extension project at Mponeng in the West region. I will elaborate more on Mponeng in the next few slides. We are conducting various exploration drilling activities across all other jurisdictions. The Eva Copper feasibility studies are being updated and negotiations to permit Wafi-Golpu are also continuing. We are making good progress with various projects currently in execution. The Moab Khotsong extension, Mine Waste Solutions, TSF Extension, and Hidden Valley extension are all progressing well and further details are available in the next year. Now moving to the Mponeng life of mine extension project. Mponeng was acquired in 2020; we began a comprehensive update of the feasibility study to determine if we could extend Mponeng's life of mine. After the two-year study, we now have an optimized mine design, which ensures we can extend the life of Mponeng both safely and profitably. The project meets all our investment criteria. Mponeng is an incredible mine with existing world-class infrastructure. It's a mine with access to both excellent ore bodies, namely the carbon leader and the VCR. Both of these economic horizons have exceptional grades north of nine grams a tonne. This major project will convert over three million ounces into mineral reserves, delivering an average steady-state production of 260,000 ounces per annum or 8 tonnes per annum of gold. Once the project is complete, we are forecasting a cash contribution of about ZAR 2.5 billion per annum from this project at a real gold price of ZAR 1.1 million a kilogram. Because of this high grade, the project will have an attractive real all-in sustaining cost of ZAR 768,000 a kilogram or $1,290 per ounce based on current assumptions and estimations. The life of mine will be extended from 7 to 20 years, ensuring Mponeng remains a top-performing asset in our portfolio until at least 2044. Capital expenditure for these projects will be manageable and affordable. This project will be self-funded through internal cash flows. With a substantial mineral resource of 24 million ounces, that's another example of how we continue to extend our reduced production profile by converting mineral resources to mineral reserves. We are proud that in our hands, Mponeng will reach its true potential and deliver a significant positive social impact. This embodies how Harmony creates long-term value for the shareholders and stakeholders. A de-risked modular approach will be taken to access three high-grade blocks. State health is at the forefront of our design methodology and mining practices. The project will focus on mining the two ore bodies, the VCR and carbon leader, ensuring that we maintain a high level of flexibility. The extension is only about 270 meters deeper. This will target early gold by accessing the Harmony shaft through a ramp system at 120 levels, and the VCR will be accessed through the west and eastern side. Lastly, we will also mine the VCR portion of the Tau Tona shafts pillars, which provides additional high-grade ounces. This is truly for illustrative purposes and includes both approved plans and projects still in feasibility. Adding the Mponeng extension, Eva Copper, and Wafi Golpu, Harmony is going to remain at 1.5 million ounces of production well into the future. Importantly, the Mponeng extension combined with the Moab Khotsong extension will deliver over 400,000 ounces of high-quality, low-cost ounces per annum for more than two decades. This will ensure strong future cash flows at higher margins. There is significant potential within our asset base for further value to be unlocked through future mineral resource conversion. Bear in mind that this illustration also excludes any potential future value-accretive acquisitions that form part of our strategy. Capital guidance for FY 2024 remains unchanged. Capital for early work development from Mponeng was provided for in the FY 2024 capital budget. We estimate ZAR 7.9 billion in project capital over the life of the project in real terms. Capital guidance for FY 2025 onwards will now include the Mponeng extension project. Mponeng generated ZAR 1.9 billion in operating free cash flow in the reporting period in this particular six months. At an annual estimated CapEx of ZAR 1 billion or approximately US$ 50 million, this project is therefore affordable and has low capital intensity. Harmony has a sizeable and well-sequenced project pipeline. Our project timing is deliberate and ensures our project capital remains affordable and does not put pressure on our balance sheet. These projects are catalysts for meaningful, sustainable production and expand our margins while driving costs down in the future. Now allow me to hand over to my colleague and Financial Director, Boipelo Lekubo, to run through the financials. Over to you, Boipelo.

Thank you, Peter. I'm pleased to present our exceptional financial performance for this reporting period. All US dollar figures and conversions are in their exchange. Group revenue for this financial half year increased by 35% to ZAR 31 billion. EBITDA increased by 114% to ZAR 17 billion. As a result, headline earnings per share increased by 226% to ZAR 956 per share. With ZAR 9.8 billion in available headroom through cash and undrawn facilities, our balance sheet is well-positioned to execute on our project pipeline and acquisition ambitions. Through operational excellence and consistent production, we have healthy margins at current gold prices. At ZAR 1.2 million per kilogram or $2,000 an ounce, our all-in cost margin is at 33%. This is essentially the margin available after all major capital. Our all-in sustaining cost margin is 42% and our cash operating cost margin is 68%. We are therefore well positioned with good buffers to absorb any adverse movements in the gold price. We have an effective hedging program in place with 20% of our production hedged over 24 months. The Rand gold hedge book was maintained at 20% or 558,000 ounces at an average forward hedge cover of over ZAR 1.256 million a kilogram. Returning cash to shareholders alongside our growth aspirations remains a key priority. Harmony's dividend policy is to pay a return of 20% of net free cash generated to shareholders, at the discretion of the Board of Directors. The strong operational performance and exceptional net free cash generation resulted in a record interim dividend of ZAR 1.47 or US$ 0.80 per share declared, which will result in a record payment to shareholders of over ZAR 1 billion. This has resulted in a 12-month dividend yield of just over 2%. Cumulatively, we've paid ZAR 2.7 billion in dividends since 2016. With ongoing confidence in our plans, controlling what we can, such as safety, production, and costs, we aim to stay true to our dividend policy. Thank you, and back to you, Peter.

Thank you, Boipelo. So in conclusion, Harmony is a company that delivers sustainable, predictable, and flexible operational performance with a well-managed, fixed cost structure. Our guidance for FY 2024 remains unchanged. And we are confident that we will reach the upper end of our production guidance and the lower end of our cost guidance. Through our embedded sustainability practices and quality ounces, we have a company with a long reserve life. Our geared exposure to the Rand per kilogram gold price continues to provide us with good tailwinds from both the revenue and marginal perspective. We have two significant international copper projects that complement our existing gold assets. We understand our ore bodies. We have strong technical and exploration capabilities. And we are the partners of choice wherever we operate. As Boipelo mentioned, our flexible and strong balance sheet supports our growth pipeline. As a gold mining specialist with a growing international copper footprint, we are passionate about what we do and about transforming our goal into long-term value for all stakeholders. This is mining with purpose. Thank you. And I'll now hand over for questions.

Thank you very much, sir. Ladies and gentlemen, our first question is from Adrian Hammond of SBG. Please go ahead.

Hi Peter. Thanks for the presentation and well done on a great set of results you shared. Your share price has been the best performer globally over the past year. So I guess the question is can you sustain this incredible rating of yours? One of them, reference Slide 21, where you see a gap in your production profile, even with the international projects you have in the pipeline. So is that something that bothers the team that they wish to fill and does that mean you're going to do more M&A? That's the first question. Secondly, ever, we don't have a CapEx number yet on that, and perhaps you can enlighten us. But how do you manage to de-risk this project going forward? Do you think you're going to need a partner there? Doesn't it make sense? And then thirdly, I like your comments in the commentary around Uranium, which has become more of the material revenue generator for you, but you do say you're going to explore further potential. Can you expand on that, please? Thank you.

Okay. So let me just get to the first question. Obviously, we want to close the gap in our production profile that will probably go down to about 1.2 million ounces. But, one must remember that there's also a much better quality of ounces at the same time. I think the margins of the portfolio of assets we have at this time are very good. So there are some opportunities to fill that gap. One is, obviously, to do more surface sources. But I mean we are always looking at what we can do in terms of an acquisition or a kind of a merger that can potentially take us over that and take us forward. And, obviously, when we do an acquisition, it needs to be a real near-term production or already in production operations. So we have a team, a new business team under the leadership of Johannes van Heerden that is doing wonderful work. And we're currently in Miami at the BMO and Johannes is here with us as we try to find what we can do in that respect. So we are always looking for opportunities that will help us get there. Regarding the EVA Copper CapEx, people will know the work that we've done thus far, and EVA shows that it will be a slightly bigger mine but a much longer life mine than we currently have. There are a few amendments we want to make in terms of the permits; we remember we bought this mine with the full feasibility study and fully permitted. But we want to make a few amendments to that permit, specifically regarding energy mix, water management on the mine, and the diversion of a creek that now has to be somewhat different than we originally thought. We hope that these will be viewed by the Queensland government as minor. If it is minor, we can most likely take it to the Board in the middle of next year for the EVA project and then try to get approval. If it's major, we will have to go through a bunch of different processes, which will require public participation, though nothing that will stop the project. It might just delay it for a while. Talking about the CapEx for that, we would obviously come up with a CapEx plan as part of the feasibility study when we bring it to the market. But most likely, it will be a combination of proceeds from our current facilities and cash flow from operations, and maybe a little bit of project financing. Remember, EVA will be a short-term two-year bulk and immediately afterward, we will generate cash because of the low strip ratios and everything else that we have there. On the uranium, that's a very interesting question, Adrian. There are a few opportunities; we obviously get uranium from the ore that we process through our plants, which is both our ore and also the ore from Kopanang mine that goes through our processing. In the beginning, we had uranium facilities, but they are either through retreating dumps and good uranium operations. Obviously, there is a massive uranium mine in the area that used to operate, which is currently in business rescue. So we haven't got a formal plan to increase uranium production, but at the moment, it's a massive source of cost efficiency because we get it as cost credits in Moab Khotsong. Unfortunately, that's the only uranium operation we have. However, we have a project team currently doing a lot of work to explore how we can potentially increase that.

Sure. Do you see the partnerships with local players there?

Yes. Potentially, we can. But remember, all of this pertains to one plant, and the plant is pretty full at this point in time. We are factoring our ore through the Moab Khotsong.

Thank you very much. Next question is from Arnold Van Graan of Nedbank CIB. Please go ahead.

Yes. Good morning, Peter, and good afternoon, everyone else. First of all, well done on the results. It's good to see Harmony crystallizing the value of the gold price. So, well done on the back of not just the high price but also very good operational performance. So my question is quite similar to Adrian's, perhaps with a bit more detail. But I just want to get a sense of how sustainable the higher grades are at Mponeng. I mean, it's phenomenal to see that, we love to see that. However, can you continue mining at these rates for the next year or so? And then I guess the question that goes with that is what's driving these high grades? Is it where you are in those ore bodies? Is it a result of your operating performance and additional developments? Can you just give us some comfort that in six months or 12 months from now, when we are back, we'll still be seeing similar grades and not a significant step down? And yes, that's it for me. Thanks, Peter.

Yes, Arnold. South African grades are quite sustainable. Where we're mining now at Mponeng, we have obviously mined through the lower-grade assets. We're now in the higher-grade assets. Remember, that was always the argument when we mined from AngloGold Ashanti where it was argued that the grades were low, but it's going to be much higher going forward. So, yes, we are really focused on that. Obviously, mining up is always better, but you have to have a great mix with the middle mine that’s performing well. Now the middle mine performed very well in the last six months and will most likely continue to perform well going forward. But there's always the one that is complicated and has some issues with seismicity and other factors. However, we believe that where we plan to mine is what we'll be able to extract in terms of grades. Also, there are notably good grades from the Sponsouth operation, which is better than we expected. All the other grades have been as per plan, although higher than expected. The one area where we'll likely see a drop will be at Hidden Valley. We expect to hit lower grades that we've explained to the market. In the last six months, we were mining at a b grade. Although this quarter, we will still process some of that b grade. However, we will transition into lower grades that align with the typical 1.1% versus the 1.6% we currently have in production. That said, it represents only about 10% of our overall production. So we are very comfortable with the guidance that we've provided and expect to maintain good grades going forward. Overall, the other operations have performed well regarding grades.

Thank you, Peter. That's all from me.

Thank you. The next question is from Leroy Mnguni of HSBC. Please go ahead.

Hi, good afternoon. Thanks, Peter. My first question is around your guidance. You've had excellent operational performance in the first half of the year. I understand the seasonality going into the second half of the year, which is normally a bit weaker. But are you anticipating anything other than the normal seasonality that is going to have an adverse impact on your operational performance? Keeping your guidance flat or unchanged seems to suggest there could be something. So, if you could please give us a bit of color on that? And then just an update on the turnaround efforts at Target and how those are going. Are you still on track to have turned that mine around by the middle of the calendar year? And then my third question is, has the fatality at Mponeng had a significant impact on your operational momentum at that mine?

Now, regarding guidance, we said that we'll at least get to the upper end and probably beat that. We don't foresee any issues other than seasonality, but I've talked about value that will probably involve lower grades in the fourth quarter and even in this quarter, probably in the March month will yield lower grades. But, yes, other than seasonality, there's nothing that we believe will drop production. I mean everything is going well. We always have a slow restart after Christmas. I wish I could say one day that we can get through Christmas without any issues with the restart. However, everything over the Christmas period in terms of restarting the mines went according to plan and was executed well. Regarding Target, we are glad to report that the project is now complete. The crushers and conveyor systems are functioning and everything is down to the bottom of the mine. We're still completing the final parts of the workshops. So, we will have a much better Target going forward, allowing for a shorter travel distance in the process. I am very happy with that. So, yes, the Target will create the flexibility that we need going forward. It was a difficult project to execute smoothly. At Mponeng, we experienced a very unfortunate incident; we lost a senior person in our operation who went into a hot area despite being cautioned against it. This individual was very experienced and unfortunately entered an area he shouldn't have accessed. This had quite an impact on the mine more from a cultural perspective. However, this incident occurred in an area that was not primarily production-oriented but rather a vamping area. We believe we will move on from this, but it serves as a sad and poignant reminder to not take risks and to adhere to strictly what we should be doing. This is a culture we want to emphasize at Harmony. The Mponeng event will not affect our operations significantly.

Thank you. That's helpful. And maybe just one follow-up. Where do you expect the all-in sustaining costs for Target to land now that you've executed all that you needed to change there?

It will come down. I think in the next year, we would certainly be in a good profit situation at Target. I'm looking forward to that. Obviously, we have a planning process underway. The planning cycle is well underway. But we're expecting it to land at a good profit situation for Target going forward. However, this year will still be tight because of the flexibility we have yet to manage in the ore body, and that will be something ongoing as we speak.

Thank you very much. So we have no further questions on the conference call.

There are some questions here. Can you hear me? All right. So where should we start here? Yeah. I think, Peter, it's also just a couple of questions here from a few of the analysts that have questions about just the second half production, I mean relative to the first half. I know we have spoken about the guidance that was unchanged. But I mean, really just asking if there's going to be any material change in the second half given that we're tracking north of 55% in terms of guidance relative to the first half.

No, and again, like you said, when we provided feedback to Arnold, nothing regarding this year differs from last year in terms of expectations for the second half except for Hidden Valley, which will experience lower grades moving forward. However, the other operations remain in the same areas mining-wise, and we believe operations should continue as planned moving forward. We also have the seasonal slowdown we typically see after January and February. Other than that, I think we are well-positioned.

Okay. Just another question from Arnold here about the CapEx numbers. Obviously, we haven't updated the market yet based on the numbers. But maybe just some indication of how far out we could expect this project to be pushed. I think you did touch on it briefly, Peter.

As I mentioned, it all depends if we can classify these amendments as minor or major. If they are minor, we can start the latter part of this calendar year, and I mean, obviously take it to the Board in the final year results, which is around August for approval. Following that, we could proceed with early works. That would be the best-case scenario. If we need to go through a major amendment process, it will take longer than anticipated, but we may agree to execute some early works earlier, although we want to ensure we first get feedback from the Queensland government.

We can take some questions here in Johannesburg. I see we've got some pulling specific ones that we could direct at Boipelo.

We have another follow-up question on the conference call from Leroy Mnguni. Please go ahead.

Hi. Thank you. Peter, I was just curious: does the Mponeng life extension project trigger any of the resources that have that deferred consideration payable back to Anglo Gold attached to them? I know there were certain areas of the mine where if you extended into that area, you would have to pay like a royalty or a deferred consideration back to AngloGold Ashanti. Does that at all?

Yes, it is. It's a small amount per tonne. What's that amount again?

Yes. In terms of the existing infrastructure, I think it's $20 an ounce.

Yes, above $250, but it's $5 an ounce for anything below that level, which will trigger it. It was taken into account in the feasibility study. So yes, so we are aware of that framing. We are currently paying because we are producing more than 250,000 ounces per calendar year. We are also making payments of $20 an ounce for everything over that limit. This information is also included in our financial results.

All right. Got it. Thank you.

Jared, perhaps we can just take some questions here in Johannesburg as it relates to mining specifically. Let's perhaps touch on one that Rene raises. Can I ask this question to you? It's just about the development of the ramp at 4,000 meters. It is concerning according to Rene. Usually, you carry development at those depths behind stope areas and distressed areas. How will you handle the stresses within our distressed stoping?

Thank you, Marian, and Rene for the question. Let me provide more context regarding the improved mine design for the Mponeng deepening project. It will, in fact, be three separate sets of infrastructure for three target areas of the ore body, starting at the first one, which is the carbon leader early gold. In fact, this is infrastructure or a ramp that will be created from 120 level, which is above the levels where we're currently mining, so we're well within the capabilities of understanding the rock mass and the stress regime in that area. On the deeper side of the mine, it's two sets of infrastructure towards the east and west on the VCR horizon. On the East, there will be a two-level decline sink. On the West, it will be a three-level spiral ramp. It is important to realize it's only about 270 meters to deepen the mine. Hence, we aren't doubling the depth. We're confident that we do understand the support requirements and the rock mass behavior at that depth. As mentioned, the green ramp in the picture is designated for development at depth.

Thank you, Peter.

I may add, Rene, we do have the kind of support systems that can, in fact, when we do declines, we will not conduct these under distressed areas. We do possess a support regime to ensure that. We've also, of course, given due consideration to whether we have the capabilities to manage seismicity in these deep-level mines. Mponeng's seismic activity has been well-managed with our current configurations. Our pillar configurations, the use of the latest support systems, quality backfill practices have improved dramatically over the years. We believe we have the necessary expertise to navigate these challenges. This is what makes us specialists in this environment, specifically there. We've also established a strong record of seismic management since taking over Mponeng, even prior to that with the work done at other operations. So we believe we've adequately addressed these concerns regarding safety.

Peter, thank you, and Jared. Just to address a couple of questions here regarding the end of a stream at Mine Waste Solutions and the implications for free cash flow. Specifically, Arnold's inquiry regarding the IRR assumed for the Mponeng extension and the gold price used to finalize that feasibility study.

Sure, Marian. So regarding Mponeng, the gold price was set at ZAR 1.1 million per kilogram, with the IRR at 17%. Yes. Additionally, the end of the stream will contribute roughly 25,000 ounces, contributing about ZAR 700 million to our revenue.

Thanks, Boipelo. And perhaps one last question for Asia in Johannesburg, we have Arnold Sankaran asking a tough question regarding gram per-tonne costs at 22%. Chris, but I'm sure you've seen that our all-in sustaining cost is coming down gram per kilogram, heading towards the left of that graph. Just to clarify, the gram per tonne costs rose 2% year-on-year in South African underground operations and 14% overall in South Africa. Can you comment on this high inflation level? What do you expect gram per tonne inflation to run at into 2024?

Thank you for the question, Chris. Harmony has always targeted improvements in our grade to help manage inflation. We are not immune to inflation challenges like other mines. Key drivers have included electricity costs in South Africa, increasing by 19%, contributing to gram per tonne inflation. Additionally, whilst we believe it is manageable, our wage numbers have escalated by 9% over the period. The third substantial factor has been an increase in royalties, which had a significant impact. However, we are managing our production consistently and effectively, continuing to improve our grades to mitigate the effects of inflation.

Thank you, Jared. We'll hand over to you and Peter in Miami if there are any further questions...

But nothing on this side. I don't know if there's anything on the line or call that could potentially be coming through.

We have no further questions on the conference call.

Yes. And perhaps I could just wrap it up there. Thank you, everyone, for calling in today. It's an odd time for South Africa to do it in the afternoon, but it's early morning here. There was a beautiful sunrise here over the ocean as we witnessed from our room. It's wonderful to have you all here, and I look forward to returning to South Africa at the end of the week. Thank you again for joining us; we truly appreciate it.