AFBOF (AFBOF) Q4 2026 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the African Rainbow Minerals results for the 2026 financial year. We would like to thank everyone who is joining us online, who is joining us via LinkedIn, but a special thank you to those of you who are joining us in person. Before I hand over, just some house rules. We will allow the presentation until the end, then we will start with questions. We will start with questions from the floor, then we will move over to online questions, then we will conclude the presentation. Please help me in welcoming our Founder and Chairman, Dr. Patrice Motsepe.

Thank you. Just a few brief remarks here. Deep gratitude, my personal deep gratitude. I know I speak on behalf of the board, I also know on behalf of the management to thank each and every one of you for being with us, it is very important. Phillip will lead the team with Tsu and the executive management to talk about the results. Also, my deep personal gratitude to our board members: Dr. Noko, Bongani, Tshifhiwa, and Pitsi, thank you so much for being here and the rest of the management team. Just as I go and sit down, two important issues. Number one is, you know, we started this company many years ago, we have got some of our partners here. Is that right? Yeah, can you whisper some names because Thabang, because some of the partners say I mention some and do not mention others. Sorry, Assore. Who is here from Assore? Oh, Sandra, wonderful, it is good seeing you. Thank you so much, Sandra. And Impala and Glencore. Valterra. Sumitomo was in Geneva two weeks ago at a meeting of the top CEO and Chairman of the largest companies in the world, and somebody came to me, I thought a young man, said hello to me halfway, said to me that, "You are my partner." Well, we work together and I was a bit embarrassed, sometimes you have got to pretend, yeah, I am your partner. Yes, I am your partner. Thank God he did not ask me who am I. The global CEO of Sumitomo, thank you so much. Please pass my deep gratitude to him, tell him that it was wonderful seeing him in Geneva and the partnership, good work that they are doing with Assore through your shareholding, the partnership in Assmang. Very important. As I said, two quick issues before I sit down. Number one is, every company is judged by its results. We have always known that we have to consistently, from an African Rainbow Minerals perspective, deliver competitive results, good results. What is very obvious is, of course, there are circumstances which are outside our control, we understand and we know that. We are no different in that regard from every single mining company in the world. So, take price of our commodities. Our commodity prices are very volatile and cyclical. We also take the prices, the currency, I should say, as a South African, I love a strong rand. I should stop there. It is good for the country, good for the poor. We have always said we have a broader obligation. Of course, our number one duty is to make sure that in terms of our performance, this is why I am so proud, what Phillip, Tsu, Jacques, Maryke, Thando, Johan, Kajol, everyone who is part of the management, Thabang, the rest, as I said, thanks them to the board. Our track record must reflect that we consistently, based on what the management does, deliver competitive results and our dividends, Phillip, Tsu will talk about it in terms of policy that the board has set, is competitive, world class. But the second issue, which is also important, is a company that behaves in a manner that reflects integrity, that reflects honesty, that reflects governance, that respects legality, due process. It is important for us to create value for shareholders. It is equal, if not more important, that we do so in a legal manner, in an ethical manner. That has always been the culture of ARM and all other partnerships we have established. The last point is, we have always had a commitment, all stakeholders, the company, South Africa has a duty to reflect the best. Based on meritocracy, the best of our people from all backgrounds, cultures, black people, white, colored, Indian, and everybody else must feel that this is their company. Not in terms of what we say but in terms of our track record and how our employees and management feel that we behave; and also a duty to the country jobs and upliftment. I am not going to answer any question, and any means any. We are going to focus exclusively on the results and if you have any question about who is going to win the MTN, I do not know what the MTN means or other questions that are significantly more complicated there will be other platforms for that because I am not going to tell you anything that I have not said in the past. The results are good so when we have good results. And of course, the aim is to do even better. Let me conclude and thank you all for coming. We are so honored and grateful that you are here and I am going to hand over back to Thabang and she will call the rest of the team. Thank you so much. Thank you.

Thank you very much ladies and gentlemen. I will now hand over to Mr. Phillip Tobias to take us through the presentation.

Good morning, ladies and gentlemen, and to all attendees, those attending in person and online. Special welcome to our chairman Dr. Patrice Motsepe and to the board members in our presence: the joint venture partners, executive leadership members, operational management and all the ARM employees. Improved earnings once again demonstrate the value and the resilience of a diversified portfolio in a highly volatile market. ARM is pleased to declare a final dividend of ZAR 7 per share. ARM has consistently paid dividends through the cycle. Net cash improved by 54% to ZAR 10.2 billion. This gives ARM the flexibility to pursue value-enhancing growth opportunities. All operations have and continue to improve mining flexibility. Headline earning is up 19% to ZAR 3.2 billion for this financial year. Final dividend of ZAR 7 per share declared. Dividends from Harmony of ZAR 512 million was received for FY 2026 which is up 113%. Assmang is finalizing its final dividend for the financial year FY 2026. Net cash of ZAR 10.2 billion, up 54%, underscoring the strength of our balance sheet. In terms of the headline earnings, improved headline earnings as I said, demonstrating the resilience of the diversified portfolio. A strong rebound from the PGM operations whilst the other divisions were largely affected by the stronger rand compared to the U.S. dollar. By division, ARM Ferrous posted ZAR 2 billion, which was 42% down comparing year-on-year. ARM Platinum ZAR 1.3 billion and ARM Coal a ZAR 428 million loss. Headline earnings per share increased by 20% to ZAR 16.60. The 19% increase in headline earnings was driven by the ARM Platinum division where headline earnings for Two Rivers Platinum Mine increased by 495%; headline earnings for Modikwa increased by 1,668% and this was partially offset by ARM Ferrous, ZAR 1.4 billion lower and ARM Coal ZAR 475 million lower where earnings were negatively impacted by the stronger rand. The ARM Ferrous division was also negatively impacted by the closure of Beeshoek in October 2025 where local sales decreased by 1.4 million tonnes. We remain committed to paying competitive dividends to shareholders whilst maintaining a robust financial position. Dividends received, we received ZAR 3.4 billion from Assmang and ZAR 512 million from our investment in Harmony. Subsequent to the year end, ARM received a dividend of ZAR 77 million from ARM Coal and ZAR 200 million from Modikwa via ARM Platinum and evidence of improving cash generation across the group. The segmental EBITDA slide demonstrates the value and the resilience of our diversified portfolio in a highly volatile market with a significant contribution from the PGMs this year. With continued improvement in the rail performance on both the coal and the Saldanha lines, ferrous and coal volumes should improve over time. Maintaining a safety and a healthy working environment remains our foremost priority. We are very pleased to report a fatality-free year, a significant milestone and our first fatality-free since the financial year 2017. It is possible, it is doable. The lost time injury frequency rate improved by 9% to 0.29 per 200,000 man hours. Key milestones just to mention, Khumani achieved 7 million fatality-free shifts, Two Rivers achieved 3 million fatality-free shifts, Modikwa achieved 2 million fatality-free shifts over 18 months period, and Black Rock achieved 1 million fatality-free shift over a period of one year. This reinforces our commitment to zero harm and to ensuring that all employees return home safely to their loved ones on daily basis. ARM remains committed to the responsible stewardship of natural resources. Environmental management continues to be embedded in the way we manage our business, and we are encouraged by the progress achieved during this financial year. Scope one and two carbon emissions decreased by 33%, to 1.06 million tonnes of carbon dioxide equivalents, mainly due to reduced activity and the adoption of renewable energy at our PGM operations. Also realized a 19% reduction to 21.30 million cubes in the water withdrawn. Construction of the 100 MW solar plant is completed, marking an important milestone in our transition to a lower carbon energy mix. Our PGM operations began receiving up to 50 MW of the renewable power in December with a full 100 MW expected to be realized by the end of the first quarter of the financial year 2027. A long term ARM Ferrous decision is expected by December 2026. The slide strategy underpins our business focus, our direction, and our organizational culture. ARM continues to deliver on its strategy by operating globally competitive mines, disciplined capital allocation, decisive action on underperforming assets, and pursuing value enhancing growth. Production by commodity: Iron ore production volumes decreased by 9% to 13.2 million tonnes, mainly due to Beeshoek mine being placed on care and maintenance in October 2025. Manganese ore production increased by 5% to 3.9 million tonnes reflecting targeted operational and technical improvements at our Black Rock Mine. PGM production was marginally lower. Two Rivers came down 1% as a result of the great decline, and Modikwa was down 3% as a result of the open pit ore that was actually delivered to the plant to substitute planned feed with a lower plant recovery factor. The cessation of Beeshoek and the closure of Cato Ridge demonstrate our commitment to take decisive action on non profitable businesses. This slides highlight the importance and resilience of the diversified portfolio in securing sustainable earnings. ARM Platinum headline earnings increased 204% to ZAR 1.345 billion on a stronger PGM basket prices. ARM Ferrous eased to ZAR 2 billion on a stronger rand and lower iron ore and manganese rand prices. ARM Coal reported a ZAR 428 million loss on lower realized coal prices and a stronger rand. Our outlook on earnings remains positive. We remain focused on quality mining, improving quality production volumes, and mining to ore reserve grades. A strong and improved margins from the PGM business on the back of firmer PGM basket prices. Our decisive actions to exit manganese alloys businesses is in line with our stated position to deal decisively with loss making assets. The increase in PGM prices drove earnings, with the segment result benefit materially from higher realized U.S. dollar prices and also positive mark to market adjustment. Two Rivers and Modikwa unit cost will improve as volumes increase. We remain focused on grade improvement and quality production to support unit cash costs. We continue to focus on factors that are within our control, the cost discipline, mining flexibility and quality mining. PGM production at Modikwa, as mentioned, decreased by 3% due to lower plant recovery from the increased processing of open pit ore, and the unique cash cost rose by 8%. Two Rivers' production declined marginally by 1%, impacted by sympathetic geological structures affecting mining flexibility. Unit cash cost was further impacted by increased development that was realized which contributed an additional 1% to the total increase. Volumes are expected to improve as we mine away from geological disturbances and additional phase length flexibility to be created. Capital expenditure at Modikwa increased, driven by fleet refurbishment, critical spares, and open pit waste stripping. Very pleased that the board approved the development of the Bokoni 180 KTPM project following the completion of the successful definitive feasibility study in June 2026. Bokoni hosts the second-largest PGM mineral resource base in South Africa, underpinned by a world-class high-grade UG2 resource. The project is expected to deliver an NPV of ZAR 5.9 billion, an IRR of 28%, and a payback of 6.3 years based on the capital expenditure of ZAR 15.2 billion. A phased brownfield-led approach de-risks execution and positions with Bokoni below the 50th percentile of the global PGM cost curve. Steady state production of between 350,000 oz 6E and 400,000 oz will be achieved and delivered at steady state. Following the acquisition of full ownership in July 2025 at Nkomati, we streamlined our governances and accelerated decision making, establishing a clear pathway to unlock value. In July 2026, the board approved the recommencement of open pit mining and nickel concentrate production, fulfilling one of the remaining conditions of the Boliden offtake agreement which was announced earlier. The restart is a low risk, immediately executable opportunity that leverages existing infrastructure and reestablishes South Africa's only primary nickel producer. The stronger rand and lower U.S. dollar index prices for manganese ore and alloys impacted profitability and free cash flow generation. Iron ore sales volumes decreased on the cessation of the local sales to AMSA, which was followed by the placing of Beeshoek Mine on care and maintenance. Improved rail performance taking into account the introduction of an additional shutdown. This was the first time that we had two shutdowns per annum, basically increasing it from 10 days shutdown to 20 days shutdown for the first time. We did communicate that this is coming as a measure of really making sure that over a period of time, over the next years, we will be able to catch up with the maintenance backlog that has been communicated. Also the considerable unutilized production capacity position offer us to unlock upside potential as rail availability improves. Khumani remains our tier one asset with a long life of high-grade ore. The water supply remained consistent during the year with no significant operational disruptions. Heavy rains and more rains did also help as well, even though it has a negative impact on the production as well. Despite adverse weather, Khumani increased production by 92,000 tonnes, demonstrating operational resilience. Unit cash costs increased by 10% on inflation and higher diesels, blasting power and labor costs. At Beeshoek, management is considering all value accretive options. A 1.2 million tonne offtake agreement was concluded with AMSA to sell down the stockpiles. Local sales decreased by 1.5 million tonnes for this year. Black Rock Mine increased production by 5%, reflecting the success of management targeted operational and technical improvement initiatives. Unit cash cost increased by 7%, driven by inflation, higher safety and compliance related labor costs and battery electric vehicle maintenance. Significantly, this number came down. At H1 reporting, this number was around 18%. There was quite a lot of considered effort that went into improving the volumes and really driving this cost increase down. Capital expenditure increased by 18% on a higher development capital against lower prior year base. While unit cost sales decreased by 1% on lower marketing and distribution cost. Production at Cato Ridge Works and Alloys ceased at the end of May 2025 following the permanent closure of the operations. Existing stock is being sold at the Cato Ridge complex. Sakura's production until 31 October 2025 was 81,000 tonnes. The investment was successfully sold, avoiding significant losses and liabilities. By taking decisive actions on loss-making operations, Assmang has strengthened its financial position and set itself up for sustainability. Lower coal price and stronger rand weighed on the coal results were partially offset by the higher export sales volumes on improved rail performance. GGV demonstrated a strong cost performance. Stockpile levels were managed across GGV and PCB. GGV and PCB remain well-positioned on the cost curve and continue to have long lives. The average realized USD export thermal coal price for GGV and PCB decreased by 5% and 3%, respectively. Saleable production at GGV increased by 2%, supported by a modest improvement in Transnet freight rail performance, enabling higher production and sales. On mine unit production costs at GGV increased by 5% as higher diesel prices were offset by increased saleable production. ARM's investment in Harmony was positively revalued by ZAR 388 million in financial year 2026 and is reflected at ZAR 8.67 billion based on the 30 June 2026 share price. Sorry. It's 18. 18? ZAR 18.67 billion. Oh, thank you very much. ZAR 18.67 billion, based on that 30 June share price. ARM received ZAR 512 million in dividends from Harmony. Subsequent to the year end, Harmony declared a final dividend of ZAR 7.50 per share. ARM owns 74.65 million Harmony shares. ARM remains fully committed to Harmony as a strategic investment and remains confident in Harmony and its management's ability to drive growth and value for shareholders. We are pleased with the progress in advancing the Berg Project, confirmed by the pre-feasibility study as a large-scale copper molybdenum development with a 28-year life of mine. Following the top-up offering and the private placement, ARM shareholding in Surge increased to 19.9% on a non-diluted basis. The project is progressing now into the feasibility level studies, environmental assessment, and permitting, with ARM assessing its participation through defined decision gates as it is de-risked. ARM's key focus areas: operating globally competitive, profitable, and safe mines. We are proud of achieving a fatality-free year and remain committed to achieving zero harm. On the discipline capital allocation, we will prioritize opportunities that deliver competitive margins and superior risk-adjusted returns and deferring or rephrasing capital where appropriate. Decisive action on underperforming assets. With regard to Bokoni, the board approved the development plan. With regard to Nkomati, the board approved the restart of the mine and the divestment of Cato Ridge and Sakura. Maintaining a robust balance sheet by generating profits, reducing costs, and deferring nonessential capital expenditure whilst running our current portfolio of assets profitably. Pursuing value-enhancing growth; the phased development of Bokoni, developing Nkomati's open pit operations, strengthening copper exposure through Surge Copper, and implementing the phase approach also to our Merensky restart. Collaborating with key stakeholders to optimize logistics and infrastructure constraints including rail, port, and water recovery, and private sector participation on the Gqeberha and the Saldanha Export Corridors. With that, I will hand over to Tsu who will come and take us through the capital allocation.

Good morning, everyone. Chairman just asked that I also recognize Andre Joubert. He says he forgot to recognize you earlier. Hello, Andre. All right. During the year, we prioritized investing in our existing businesses, and we invested around ZAR 2.5 billion during the year. If we look at it on a segmental basis, that comes to around ZAR 4.9 billion. That would include our attributable portion of CapEx at the Assmang operations. In terms of how we allocated capital, we allocated capital to the deepening of declines, fleet refurbishment, and replacement to infrastructure and waste stripping at our open pit operations. During the year, as part of our capital allocation, we also sought to grow our existing business. This is evidenced by the recent announcements we made that Phillip referred to being the Bokoni 180 KTPM development project and the restart of operations at Nkomati. Both of those projects, we are confident will enhance shareholder returns. We remain committed to declaring dividends and returning capital to shareholders, which we continue to demonstrate in the form of the ZAR 7 final dividends that we've just announced. Okay. This slide illustrates how we generated cash and how that cash was allocated during the year. If we look at the cash generated by operations, we generated ZAR 4.2 billion, which is a significant increase in the cash generated specifically by our ARM Platinum operations compared to the prior corresponding period. Last year, same time, we generated cash of ZAR 45 million. ZAR 45 million versus ZAR 4.2 billion. Quite a marked increase. The cash generation also takes into account an increase in net working capital of ZAR 803 million. In terms of dividends received, we received dividends ZAR 3.4 billion from our Assmang JV with Assore, which is ZAR 1.1 billion lower than the dividend received in the prior corresponding period. During the year, we also received dividends of ZAR 512 million from our investment in Harmony. If we look at how we actually applied the cash that came in, we paid our tax to the tune of ZAR 445 million. We invested ZAR 2.7 billion in capital expenditure, which was the largest cash outflow in terms of our cash flow statement. In terms of our CapEx, it's relatively consistent with what we spent in the prior year. The majority of that spend was for stay-in business capital, totaling ZAR 1.5 billion, of which ZAR 718 million was spent on mine development at Bokoni and ZAR 524 million was spent deepening the declines at the main and north shafts at Two Rivers. Okay. If we look at our net cash, our total borrowings during the year decreased by ZAR 1.9 billion to a balance of ZAR 157 million as at the end of June 2026. The decrease was due to the repayment and settlement by Two Rivers of its term loan and revolving credit facilities, which had been taken out by Two Rivers to complete the Merensky plant. Despite that, ARM still has a relatively low interest-bearing debt from a group level and closed the year at a net cash to equity position of 16%. Okay. The capital expenditure for the reporting period was covered by Phillip in his sections, but I will just highlight a couple of things. Segmental capital expenditure on an attributable basis, this is segmental, was ZAR 4.9 billion for the year under review, which was ZAR 880 million higher than last year. Most of this was spent, as you will see there, ZAR 2.8 billion or ZAR 2,759 million, ZAR 2.8 billion, at our ARM Platinum operations, ZAR 1.8 billion at our ferrous operations and ZAR 299 million at our coal operations. In terms of the ARM Ferrous capital expenditure, it includes capitalized waste stripping costs of ZAR 400 million. That is on an Assmang 100% basis. Last year, that figure was at ZAR 848 million. If we look at the guidance for 2027, 2028, and 2029, if we look at 2027 firstly, it shows an increase of ZAR 2.1 billion, and increasing to ZAR 7.2 billion. That is compared to the guidance we had communicated in March wherein we expected that the 2027 CapEx would be ZAR 5.1 billion. The reason for the increase is obviously due to the approval of the new projects, namely Bokoni and Nkomati, that have now been brought into the guidance. Bokoni project capital between the period 2027 to 2029 will come to about ZAR 8.4 billion just for those three years, as the project ramps up. Also included in the capital guidance are waste stripping costs at our iron ore operations, which increased to ZAR 1.3 billion on an attributable basis in FY 2029. Thank you very much. Thank you. Then sorry, just an addition from chairman. He then also said feel free to ask anything ARM related. Do not have to restrict it to the financial results, but as long as it is ARM related. Thank you very much.

Thank you, Phillip. Thank you too. We will start with questions from the floor. Do we have a question? Go ahead, Brian.

Thanks. Excuse me, thanks very much. It is Brian Morgan, RMB Morgan Stanley. Just a question on Modikwa, if we could just dive into that a little bit more. Last year, you started milling open cast material through the concentrator. I always get a little bit worried when mines do that because it tells me that there is not enough coming from underground. You are spending a bit more money, but it does not look like a lot of money at Modikwa. Could you chat to us a little bit about the way forward there, the guidance is about a 10% lift in volumes over the next three years. Can you give us a little bit of color there just to give us a bit of confidence that that is actually going to materialize?

Okay. Not three, chairman. Three. Okay. Brian, do you have another question? We are going to take three questions at a time. Thank you.

Morning, it is Thobela Bixa from Nedbank CIB. Just a couple of questions from me. I think the first one is on, I guess, the valuation of the company. If one takes into account your Harmony proportion, your Assmang attributable net cash, as well as also your net cash on the balance sheet, I think that accounts for over 90% of the valuation of the business. Could you just take us through as to what your thinking is with regards to the undervaluing of your PGM assets, and what is management planning to do about that? That is the first question. Then, just with regards to your ferrous division, even though perhaps Transnet did a bit better in the period, it does not seem to translate into some of your export sales volume numbers. Could you just talk to us as to what perhaps could have constrained your export sales? Thank you.

Thank you, Thobela. Okay, we will deal with those questions. Johan, can you please deal with Brian's question on Modikwa?

Yes, certainly. Good morning, everybody. Yes, your observation had been correct. We started producing open cast as a result of the lack of flexibility from the underground UG2. We had been suffering on the development side for quite a few years. We have, however, turned that around. So compared to last year, and I just want to give you an accurate figure, we have done 2,000 m more in terms of development this year than what we have done last year. That is a 28% improvement in the development. The open cast is essentially a gap filler. As soon as we have adequate reserves available from underground, we will switch back to underground. I must also add that the open cast at this stage is profitable. The grade is higher than the underground grade. This area is closer to surface where it is oxidized; you see lower recoveries than typical, but it makes good business sense to produce the open cast. So thank you.

Thank you, Johan. Phillip, will you take the question on the Harmony issue and the undervaluation of our PGM assets?

Yeah, thank you very much for that question, Thobela. I think firstly, just to acknowledge that we are a diversified portfolio, a conglomerate and not necessarily a pure player. To a certain extent, you do have that conglomerate discounting that you operate at. With regard to the undervalue of the PGM, I think if you have a look at the period, I would say over the past three years, you would remember that we have really mentioned on the performance side that there has been some constraint, especially on the Two Rivers. We mentioned that we are going through geological features. We are going through fault structures. As a result, the operation has not really been, one can say, on the optimal side. With the phase length flexibility, I did basically touch on that. With the phase length flexibility that is coming, we believe that we sort of going to unlock that potential performance. As Johan mentioned on the Modikwa side, there has been also a phase length flexibility challenge. We brought in that gap filler. You remember that last year, we took a decision to put the South One shaft on care maintenance because it was not economically viable. With that, one would say there are still areas of opportunity on the performance side, on the PGM side. We are not really on that full output. We do believe that also with that optimizing the performance, to a certain extent, we will also be able to sort of really unlock that value and be able to uplift the valuation on that. I will stop there.

Okay. I will come back to you guys if you have any follow-ups on that. Maryke, could you please take the first question?

Yes. Under iron ore as well as manganese railings, we did result better year-on-year, specifically within ferrous on iron ore 2% year-on-year better railings and 4% on manganese. The total system delivered 1%. What is positive about that is we had two shutdowns, so we in effect had another 10 days out, but the result of that another 10 days out had a positive impact in more railings towards Saldanha. However, it is a very good positive for ferrous, but it is not only indicative of the maintenance. We did receive several trains that were allocated to us due to other mining companies and emerging miners that could not take up their capacity allocated to them, and that really assisted us where Khumani railed 12.6 million tonnes versus the 12.3 million tonnes of last year. Black Rock railed 3.8 million tonnes versus the 3.68 million tonnes of last year. It is a short-lived increase because the sustainability is not there due to the maintenance on the line having to be prioritized, having to be attended to, which is going to take time for the industry to up. Obviously that is our main target. For our business, manganese and iron ore, we need volume.

Thanks, Maryke. Brian and Thobela, I just want to ask if you have any clarifying or follow-up questions? Yep.

Sorry, just to press you a little bit on Modikwa. I am still not entirely clear how we are going to lift those volumes from 10% from where we are today to 2029. It is not a mine that survives through the cycle. It gets cross-subsidized by the other mines. Is there a way that this mine can stand on its own two feet? Or is it just this is always going to be Modikwa, it is always going to be a mine that struggles through the cycle. That is just a clarification on that one. Just to be cheeky, just add another one, if I may. We heard from Impala yesterday that Merensky Reef at Two Rivers has not been board approved. I would have thought in this price environment, and it looks like an attractive project from our perspective, that it would have been. Maybe just some comments from your side on what is holding that process up.

Thanks, Brian. Johan, can you please answer that again? On Merensky, I will ask Jacques to answer that one.

Yeah. Brian, yes, to clear up, the key issue at Modikwa had been availability of stoping areas. Through the additional development we are doing, we are opening up additional stopable reserves. We also invested money in real enabling structures, infrastructures. We are pushing the declines deeper, and as you push the declines deeper, you can move away from the upper levels with a longer trimming distance. We have introduced level costing models. We can have a look at the profitability of every level. If it is making sense, we will continue to push it. If it does not make sense, we cut back. We are also looking at other things that helps us to get better results. You look at the cost control, the cost had been very close to budget, the actual expenditure. The volume had been the thing that impacted on the unit cost. We've maintained the grade very well, so grade control is absolutely well controlled. In the concentrator, we are doing a lot of additional work to push up the recovery. We've looked at statistical process controls, so we know where the sweet spot sits in the concentrator, and we've also started investing money in advanced process control so that you automate the adjustments in the process and that you ensure stability in the concentrator. I'm very confident that looking at the team we have, looking at what we've achieved compared to what we planned, we are on the road to success at Modikwa. I must also mention that in the past we had some issues with instability in the community. That is something of the past. The communities are very supportive. Labor relations are very good at Modikwa. It is a good team, and you will see the success coming from Modikwa. Thank you, sir.

Jacques.

Thank you. Good morning everybody. Morning, Brian. On your question with regards to Two Rivers Merensky, that project was placed on care and maintenance in August 2024. Since then, we have invested resources to better understand the geology based on the infill drilling that we have done. A revised, updated block model was completed as well as analysis of the 1.2 million tonnes that we did mine during the Merensky Project itself. That then informed a restated feasibility study restart plan that was completed in May this year in 2026. The outcome of that was that to ensure the optimal mining cut, we are transitioning from high-profile fleet to low-profile fleet to provide a bit more flexibility for the teams to be able to follow the optimal cut, which we do believe will provide us with the increasing grade. The overall outcome of the feasibility study was positive. It exceeded our hurdle rate. What we have, what the Two Rivers board has approved with both partners in last October, we commenced with the Merensky decline development. By June this year, we've deepened it from four level to five level. That development crew for the decline development has now transitioned to a stoping crew. Emphasis and we'll introduce a second stoping crew in November. That's progressing very well. In July, we had one stoping crew, did 22,000 tonnes, and last month in August they did 23,000 tonnes. The emphasis over the next couple of months is to really just see the changes that we've done in the mining cut as well as the low profile fleet that we've introduced, what sort of grade can we achieve out of it. The plan going forward that was approved is in March next year, we will introduce another sinking crew. Going forward, we would progressively ramp up the stoping crews to a total of minimum requirement of six to be able to get 120,000 tonnes, which is the minimum required to restart your Merensky concentrator plant. We anticipate that we will reach that level in about two years from now. In the meantime, the stocks that the Merensky stoping crews are generating, we are milling a proportion of that through the UG2. We have also recommissioned the crushing plant of the Merensky circuit which can crush finer than the UG2, and that increased our ability in terms of processing Merensky through the UG2 concentrated plant by about 10%. So overall, the Merensky project is looking quite positive. We are taking a disciplined, staged approach in terms of how we ramp it up. The key intention is that we need to get to that minimum 120,000 tonnes sustainably per month before we can recommend some start-up of the concentrate plant.

Thank you. Do we have more questions from the floor?

Good morning. David Roche-Kelly from Phoenix Research. First of all, I would like to offer congratulations for your fatality-free year. That is always a great achievement. Congratulations there. Secondly, I see that Bokoni, you are mentioning a number of ZAR 15 billion. Now, it is a long time since any of us have seen something over ZAR 10 billion, so that is a big number. If anyone would like to say something about that, it would be much appreciated. Then just some small detailed questions on Modikwa. As per your previous announcements, the vent shaft at North Shaft, is that finished now? Secondly, your underground to surface conveyor belt at South 2, is that commissioned? I seem that you wanted to go up to 100 kilotonnes per month there. So just those two questions. Thank you.

Okay. Johan and Jacques.

Yes, I can go for the Modikwa one. The ventilation shafts at North decline had indeed been completed. We have picked up a few issues with water ingress closer to surface. That has been sealed properly, and the shaft is functioning the way it had been intended to. Ventilation conditions at north has improved significantly. The Damara Belt at South 2, that is due for completion in October, and that will also take pressure off from the overland trimming at South 2. Ramping up ideal yes to go to 100,000 tonnes-120,000 tonnes but that is being delayed by the sinking operations. With a focus on development, we will see that sustainable build-up at two shaft.

Coming to the Bokoni Project, you are quite right, ZAR 15 billion is a substantial amount of capital, and that is certainly not an investment that the board has taken lightly. But we do believe if you look at the quality of the asset and the return that that asset through the cycle generate, it certainly justifies that capital investment, and it will generate very good returns for shareholders. I think if you look at the quality of the asset, and it is something that we have reiterated many times before, in terms of the grade of the asset focusing specifically on UG2 as well as the lower mining complexity of the UG2 relative to the Merensky that was mined before. We do believe that we can deliver a consistent superior grade into the mill relative to other mining operations. What that enable you is that for a relatively lower volume at 180 KTPM with that higher grade feed into the mill, we can produce 350,000 oz-400,000 oz per year, actually it is higher than what Two Rivers currently produce, and have to mill more than 300,000 tonnes per month. All of those qualities combined then ultimately lead to, at steady state, a very competitive cash cost position which we certainly believe based on benchmarking going forward in terms of the PGM sector will be in the lower half of the cost curve, which for the PGM industry, is quite important given the volatility of historical PGM prices. You need a PGM asset that is very competitively positioned on the cost curve, so that even during periods of difficulty where the PGM prices are lower, that you can still sustainably generate profits for the shareholders. It's a long life asset. It's a high grade asset, and we believe that with the appropriate capital investment after a lot of rigorous work that we have concluded over the last four years, that it is an excellent project, and we've got a very high confidence level in our ability to be able to execute on that project. It will generate very good returns for shareholders. Thank you.

Thanks, Jacques. I don't see any more hands up on the floor, so we will move on to Corpcam questions. I will read two questions from Tim Clark and then from Hlengiwe, and then we'll address the Investec questions later. Tim says, "Good morning. Please may I ask how you think about capital allocation going forward, balancing quite a deep list of cash requirements for Bokoni, ZAR 15 billion, Nkomati, and Surge Copper, $3.7 billion, and potentially capital for Modikwa." His second question is, please may I ask how you think about potential synergies with Khumani and Sishen? If you see an opportunity for realization of these synergies. So I'll ask you to answer the first one. The second one, is it going to be Phillip or Maryke? Phillip? Okay. The third question comes from Hlengiwe Motaung from Dow Jones. "Thanks for the presentation. How is ARM navigating the high iron content on the manganese product?" Maryke, you'll take that.

Thanks for the question. Am I audible? Okay. Thanks for the question, Tim. I think in terms of capital allocation and the number of projects that we'll be embarking on as a company, I think what is important to realize is that all of these projects are not going to be happening at the same time. So they will be phased. Let me just give you an example. You have Bokoni. Yes, you've got a ZAR 15.2 billion bill, but that will be spent over seven years, right? With the majority of the spend being in the first three years, and then it tapers off to basically nothing come year seven. In terms of how we plan on funding Bokoni, that would be a mixture of cash, as well as cash generated by Bokoni itself. That cash that is generated by Bokoni then also contributes to the peak funding of the project dropping. Instead of that ZAR 15.2 billion capital bill, the peak funding is actually only ZAR 10.2 billion. Then obviously as Bokoni ramps up, that cash generation comes through and therefore, it then is able to then that cash be divvied out to the shareholders. In terms of Nkomati, very low capital amount. The infrastructure is there so that build is not a lot. We are looking at ZAR 1.9 billion to be spent over the next two years, but very quick pay back period. That cash then will be generated and we do not foresee issues there. Surge is a bit long dated. Surge Copper, I think, is the other one that Tim mentioned.

Yes.

Just to remind you, we hold 19.9% of Surge. The pre-feasibility study results that we showed was on 100% basis so you need to look at what we would be in for as a 20% shareholder. In terms of the expected expenditure or requirement for us to put in our portion towards the project Berg development costs, that is only expected to come through financial year ending 2030 and in 2031. Those amounts are around ZAR 2.2 billion for each of those two years. Again, by that time, the Bokoni would be generating cash; Nkomati would be generating cash. We are quite cognizant that it is very important that these projects are phased to ensure firstly that there is no undue pressure on the ARM balance sheet. There is sufficient room to be able to fund these projects comfortably, but also that they are able to generate cash so that we can actually see that come through in the dividends that get declared and paid over to shareholders.

Thank you very much. Just to clarify, that ZAR 2.2 billion, it is in rands and not U.S. dollars.

It's in ZAR, 2.2 billion. Over two years.

Tim also just asked on Modikwa, do you perhaps want to touch on the planned CapEx for Modikwa? It's just normal run of business there.

Yeah. Maybe.

Jacques.

I'll hand it to Jacques-

Okay.

-in terms of the amounts, then I will speak to possible methods of funding.

Funding. Okay.

On Modikwa, the capital guidance, it is just over ZAR 1 billion on 100% over the next year. As Johan correctly, there is a big focus currently on development performance to increase that so that we can ramp up and increase our underground production levels over the next three years. We have seen a 46% improvement in year-on-year production. Going forward, we would like to carry that momentum forward so the majority of that money is spent on the development increase as well as trackless fleet, TMM fleet required to support and increase their development.

Thanks, Jacques. Anything you want to add?

In terms of how it would be funded, it would be funded by cash that is generated by its own, by the actual operation. For Modikwa, that will not require any type of external funding. The estimate right now is actually won't require any funding from the shareholders either. Yep.

Thank you two.

Sorry, Thabang, if I can just, one correction on what I just said. That Two Rivers was a 46% improvement. Modikwa was 28%.

Thank you. We don't want to mislead the market. Phillip, on potential synergies with Sishen and Kolomela.

Thank you very much for that very good question. If you look at our operations in terms of Khumani and Sishen, those are basically one can say next-door neighbors. We all basically challenged with increasing cost challenges. Is there potential value that can be locked synergies with most probably collaboration? I think the answer is certainly there is a potential but at this point in time, it's not something that we basically doing or evaluating or actively evaluating. We are currently focusing on things that we need to sort out from our own business as Assmang. But should most probably the opportunity come our way in the future, it's something that is worth really exploring. But potential opportunity unlock from any neighborhood, there's most probably that opportunity of value unlock.

Thanks Phillip. Maryke, do you want to talk about the high iron ore content in our manganese?

Yes. Sure. The gods are coming down on us. We do not have a general high iron ore in our manganese. We're going through specific batch in seam one which has got a higher Fe, iron ore. In the application of manganese in smelting, it is not about how high the iron ore is, it's the ratio, the manganese iron ore ratio. We have, with one specific client received some complaints and what we've done with that specific client is to implement a value use based blending application where we use special low grade which we call R5 which then brings down the MnFe ratio and then still allows our customer to get the same benefit in the smelters. So definitely, I just want to clarify it's not a general thing, it's just the pocket we're mining through.

Thank you very much Maryke. I'm just going to scan the room quickly to see if there's any questions on the floor. No? Okay. Then I'll move on to Ntebogang Segone from Investec. Maryke these questions are for you. So he's saying on iron ore CapEx, FY 2027 guidance has come down by around 10% versus the previous guidance, but FY 2028 has increased by around 23% and spend remains elevated into FY 2029. Can you unpack what is driving this elevated CapEx cycle? More importantly, should we expect this higher level of capital intensity to continue beyond FY 2029? So that's his first question. Second question; with Khumani unit cash costs up 10% in FY 2026 particularly reflecting higher diesel and other above inflation cost pressures and the iron ore business entering a relatively capital intensive period, how are you thinking about cost reduction across the ferrous business particularly against a muted commodity price outlook and a stronger rand? Where do you see the key opportunities to structurally lower the cost base and protect margins?

Okay, thanks Ntebogang. Let me start with the increase in capital. The increase in capital is due to KM15. It's a specific pit that we need to strip which we starting to strip this financial year. It's got a stripping ratio of over 6 and about a reserve of 70 million tonnes of very high-grade iron ore. The stripping is starting this year so the year that we just finished we had a stripping ratio of 2.26. Our average stripping ratio is 2.86. We moving into this year's stripping ratio to 2.4 gradually up and the next five years average stripping ratio is going to be 3.4. That's the reason for the capital increase. It was planned. It's always within the life of mine of Khumani and you would also see that's why Khumani's year-on-year capital went up by 7% because of fleet replacement. We were getting the operation ready, getting in the new fleet as well as. On the cost question, I just want to answer one thing in this section. We decided not to buy new equipment and rather used Beeshoek equipment so we moved that over. So we had quite a bit of a cost saving there. With regards to the next five years, the answer is yes. The capital expenditure will remain the same for the next five years and then it will go down. Our total rock on ground tonnes this year was 63 million tonnes. It goes up to 73 million tonnes this year then 90 million tonnes-95 million tonnes and then stabilizes at 90 million tonnes. So yes, Khumani is going to be capital intensive for the next five years to ensure we do have ore available. On cost saving, as we've communicated numerous times before, 33% is within our control. Within that 33%, we've got an extensive efficiency project called Bokamoso where we are targeting reducing of cost. When we get the opportunity as we've gotten this past year, we will export more volume and that will assist us during this five years. Lastly, I also just want to say yes it is a difficult market for iron ore but Khumani's got a niche market. We've got a very high-grade ore and secondly, the lumpy premium is really benefiting Khumani as you've seen it sitting at $18 a tonne. Thank you.

Thank you very much, Maryke. We have two more questions on Corpcam from Shashi Shekhar, who is from Citibank. Are there any plans to increase ownership in the Surge Copper project? The second one is from Hlengiwe Motaung, again from Dow Jones. Seeing flat volumes at lower earnings on manganese, can you elaborate on challenges you experience there? I think Jacques, you can take the Surge Copper question, and then Maryke will answer the second.

Certainly. Thank you, Thabang. Certainly we have the potential to develop a tier one world-class copper asset. It is a long life open pit asset with significant byproduct credits. If you look at the molybdenum, silver, and gold contribution, that pays for the total operating cost more so it has actually got a negative C1 cash cost once it is an operation. Your copper that you produce essentially comes for free. The volumes also and the work that the Surge team has done, it has become a much larger project. Total copper production for the first five years has gone up from copper equivalent from 120,000 tonnes to 200,000 tonnes. However, with that, there has been quite a big increase in capital costs as well, going up from CAD 2.1 billion to CAD 3.5 billion. Certainly a big project. We currently have 19.9% interest in Surge Copper which is the limit in terms of the rules on the Toronto Stock Exchange where Surge Copper is listed, to prevent you from becoming a controlled person. What that means if you want to go beyond 20%, you have got to make an offer to all minorities to acquire it. Currently, we are very pleased with the work that the Surge Copper management team has done. We really think they have done excellent work up until now, and also their plan going forward now with the submission of the environmental approval process, which is a big milestone that they plan to do over the next couple of months, as well as the completion of the feasibility study which is essentially their DFS. That is all planned to be completed over the next three years with the environmental assessment in British Columbia taking the longest period of time there. There’s no fatal flaws that we've identified in that EIA process. They've got a very good relationship also with their First Nations engagement and we anticipate that that work would be completed by 2030, 2031. For us to be able to, as ARM, we always pride ourself firstly as a mining operator which has got a big contribution towards the actual management and operation of the mines. And certainly in time to come, we would consider how it's possible for us to go beyond the 20%. But at this stage, given the capital priorities and development in our platinum portfolio that we are focusing on, it's not something that will happen in the near term. But at the appropriate time, I think closer to completion of feasibility study as well as the environmental approval process, we would see from a strategic point of view working with the Surge Copper team in terms of how we can be involved in the further development of that asset. However, given the significant capital size of that asset, it will most likely be in some form of joint venture. At this point in time, the capital would just be too much for us to consider on a 100% basis as ARM. Very pleased with the progress done to date. The asset is actually surprising us on the upside compared to our original investment case and it's looking very promising going forward in metals that are continuously going forward in significant demand; copper, molybdenum, silver, and gold have got very much a positive demand outlook with regards to the energy transition and critical metals worldwide. Thank you.

Thanks, Jacques. The short answer is we will decide in future as to-

That is right. Yes.

Thank you very much. Maryke?

Yes. On the manganese, firstly, I just want to say we are extremely proud of Black Rock. We had a 5% year-on-year increase in production, 7% year-on-year increase in cash cost per ton, which is excellent. It was mainly because of inflation, and Phillip said the other 3% was diesel. Diesel explosives and freight, and the compliance portion. The question on volumes remaining flat is pertaining to export volumes, if I listened to the question. Yes, the export volumes were 3.66 million this year, 3.66 million versus a 3.7 million, so about a 50 kilotonne difference. However, the earnings were almost ZAR 200 million lower. The reason for that is twofold. The first reason is the stronger rand. The rand came in at ZAR 16.88, which was 7% stronger year-on-year. That had a huge impact. The second impact that is more material for Black Rock is the high-grade manganese pricing. On your 44 lump and your 44 fines, the index price year-on-year was 5% lower. However, the realized CIF pricing for lumpy under 44 grade was 11% lower and on fines was 7% lower. That impacted us materially. However, we have gone through our commercial team, thank you Kajol, and did some extensive work to look into the future and we foresee a stabilizing in that price and a growth in that price. We do not expect to see it in this year again. I hope that answers the question.

It does. Thank you very much, Maryke. I guess we will always be constrained by rail when it comes to-

Yes.

Black Rock. Those are the constraints we have to work within. I do not see any more hands from the floor and I do not have any more questions from Corpcam. I want to thank you all for attending our results again. Please just note for investors and analysts, we will be having a roundtable as we usually do at 2:00 P.M. We look forward to hosting you to answer your more detailed questions and modeling questions. Thank you to the management team for doing an excellent job. Before I conclude, I would like to hand over to our Chairman, Dr. Patrice.

Sorry. There is nothing to hand over. Thank you.

I think that is the best outcome. Thank you everyone. Join us for lunch.