Earnings Transcript for IMPUY - Q2 Fiscal Year 2021

Nico Muller : Welcome to the webcast presentation of our interim results for the half year ended 31 December 2020. I am Nico Muller, the CEO of Implats and I am going today by Mark Munroe, our Impala Rustenburg Chief Executive, Gerhard Potgieter, our COO, Meroonisha Kerber, our Group CFO, and Sifiso Sibiya, our Group Executive, Refining and Marketing. I am delighted today to present a stellar set of interim results on the back of strong operational performances across the Group, material increases in PD and metal prices and the successful navigation of the challenges presented by COVID-19 through constructive collaboration with key stakeholders, an improved and fatal free safety performance, underpinned operational momentum. We in addition, benefited from the full six months contribution from Impala Canada, as well as greater availability of processing infrastructure. The Group has delivered higher sales volume into a robust brand PD and pricing environment, which translated into very pleasing financial results. A record free cash flow allowed for active management of the Group balance sheet. We did a series of debt repayments and targeted transactions to strengthen financial flexibility and secure sustainable shareholder returns. An interim dividend of R10 per share has been declared. Before we commence, I withdraw your attention to our normal disclosure statements pertaining to any forward-looking statements that may be made today. I will start today’s presentation with a high-level overview of the Group’s performance including safety and the key features of the year. This will lead into a more detailed account of the operational performance of Impala Rustenburg presented by Mark Munroe, and the rest of the Group presented by Gerhard Potgieter followed by the financial results presented by Meroonisha Kerber. Sifiso Sibiya will provide an overview of the PGM markets before I conclude with our updated outlook for financial year 2021. Firstly, a few comments as an overview of the past six months. Zero harm is our key objective. At Implats we maintain a relentless focus on safety. We are therefore expressly delighted that Implats reported zero fatalities in the period under review. This was a result of a sustained increase in the initial focus on safety and mining discipline; the support of strategic Group-wide safety initiatives, technical solutions and training, as well as disciplined team work. Implats improved on all metrics other than the lost time injury frequency rate, which deteriorated by 6% to 5.13 per million man hours worked. This outcome reflects, to some extent the complexities created by the COVID-19 pandemic in managing our substantial labor force. 12 of the Group’s 17 operations achieved millionaire or multi-millionaire status in terms of fatality free shifts by periods by period end. Post the end of the period, Implats achieved 9 million fatality free shifts, a record for the Group, while Impala Rustenburg has worked more than 7 million shifts without a fatality. It is therefore what we believe that on the 14th of February, I call it as ZIMPLATS Mr. Kudzanayi Manyonganise died following a high wall failure at Ngwarati mine box cuts. No other employees were hurt in the incident and investigations are underway. Managing with COVID-19 pandemic remained a critical focus as second wave threatens to overwhelm many countries around the world. Best practice measures and processes we put in place during financial year 2020 have served the Group well and they will remain active through the course of the pandemic. Our significant in-house medical capacity continues to play an important role in managing the virus. Until large-scale vaccination has been achieved, COVID-19 will remain a prominent feature of our operating environments. We are ready to take a leading role working closely with all relevant stakeholders in rolling out an effective vaccine strategy. Post period end, the Group saw a pleasing reduction in active and the new COVID-19 cases. Sadly, 44 employees have succumbed to the virus to-date, 17 of which occurred in the period under review. Implats adopts leading ESG practices and aspires to create a better future through the metals we produce and the way we conduct our business. The Group maintained a record a record of zero major or significant environmental incidents and saw a 67% improvement in limited-impact environmental incidents. The Group surpassed its 44% water recycling target for 2021 to achieve 47% recycling. This was because of late rains in Zimbabwe, the inclusion of Impala Canada for the full period, as well as several water recycling projects. Our local procurement spend increased by 26% to R1.8 billion with pleasing increases seem in spend on local tier-1 and tier-2 suppliers. The external ESG ratings received post period end underscore our achievements. Our commitment to effecting change in gender equality was recognized by our inclusion in the 2021 Bloomberg Gender-Equality Index, one of only 380 companies globally to achieve this status. For the second consecutive year, Implats again achieved an A rating by the Carbon Disclosure Project for disclosures, awareness and management of water security risk in 2020, and we were awarded a B rating for climate change action and disclosure. IRS was recognized for the responsible delivery by the London Platinum and Palladium markets. Implats delivered a strong underlying operating performance in the first half of financial year 2021. I am exceptionally proud of the team and these results. Tonnes milled from managed operations benefited from the six months contribution from Impala Canada and increased by 14% to 11.8 million tonnes Overall, 6E concentrate production increased by 9% to 1.7 million ounces as a result of, first lead and 11% increase at managed operations that went up to 1.2 million ounces, a 9% gain at joint venture operations to circa 280,000 ounces due to the resolution of the milling challenges which impacted production at Mimosa, and Two Rivers in the prior comparable period and lastly, a 3% increase in third-party receipts that went up to 196,000 ounces. Gross refined output increased by 29% to 1.7 million ounces benefiting from the increased concentrate production, as well as improved processing availability following the furnace maintenance in the prior period. Total cash operating cost increased by 24%. This is attributed to, the increase in Group’s production volumes, the maiden full period cost contribution of Impala Canada, targeted spends to improve mining flexibility and asset integrity at Impala Rustenburg, the impact of the weaker rand on the cost base of Zimplats, and expenditure to mitigate the impact of COVID-19. The unit cost benefited from higher volumes and increased by 9% on stock-adjusted basis to R14,292 per 6E ounce. Capital expenses at managed operations increased by 39% to R2.7 billion, primarily due to the inclusion of spend at Impala Canada and the acceleration of the Mupani project at Zimplats. While production from Impala Canada was the greatest driver of the 9% increase in reported 6E concentrate production of 1.68 million ounces, operational delivery was pleasing across the Group. Zimplats continued to deliver at capacity with only Marula reporting a marginal and temporary ration in output due to COVID-19 related shortage of supervisory management in the second quarter. Higher refined volumes and sales were delivered in strong PD and pricing driving record financial results and free cash flow generation in the period. Group revenue more than doubled on the back of, an increase in the sales volumes, a more beneficial metal sales mix, which benefited from the higher palladium contributions from Impala Canada, and a 71% increase in our received Rand basket price. The cost of sales increased by 64% to R35.8 billion, mainly as a result of the higher production volumes in costs, as well as higher metal prices which impacted on the cost of concentrates purchased. Pleasingly, we successfully translated higher prices and sales into a step change in free cash flow generation, which increased fourfold to R20.1 billion. After a series of targeted transactions and debt repayments aimed at improving balance sheet flexibility and resilience, we reported a closing net cash position of R20.2 billion. Growing strength in operating performance has allowed rising metal prices to deliver substantial margin expansions across the Group. Each of the operations contributed to meaningful increases in both gross profit and free cash flow. Mark Munroe and Gerhard Potgieter will now share progress made in terms of operational delivery.

Mark Munroe: Thank you, Nico. The strategy at Impala Rustenburg remains focused on transitioning the business to a lower cost and sustainable operation. We are harnessing the benefit of improved profitability to strengthen and optimize the business group, investment in creating more mineable face length enhancing and derisking critical infrastructure and assessing a potential life-of-mine extensions to support sustained production levels in the medium and long term. Positive operational momentum was maintained during the period despite COVID-19. Infrastructure and capacity constraints at discount and the impact of rising socioeconomic pressures facing surrounding communities. COVID-19 caused constraints on labor availability and attendance. These were expected and mitigated by the ramp up strategy. Labor was increased during the period and mining activity at the major producing shafts was prioritized. The focus on development resulted in mineable face length improving by 7% to a seven year high and benefited from gains at the growth shafts 16 and 20, despite the closure of 9 Shaft in the period. Tonnes milled decreased by 3% to primarily due to the closure of 9 Shaft, a mechanical failure at 20 Shaft and reduced waste contamination at 16 Shaft. Milled grade benefitted from reduced waste reporting to the mill mainly due to the completion of ore-pass rehabilitation at 16 Shaft and operational improvements. Improved grade and improved concentrate recoveries, together with additional volumes from re-mining of the old tailings facility resulted in a 4% increase in stock-adjusted 6E volumes. In the prior comparable period, reduced processing capacity was offset by the benefit which occurred from a revised stock allocation policy between IRS and Impala Rustenburg, while refine volumes still indicated a reduction of the in-process inventory, they declined by 4% to 729,000 ounces. Cash costs including corporate and marketing costs increased by 13% to R10.6 billion, above CPR increases on utilities and labor are compounded by additional spend on labor due to COVID absenteeism and higher development and infrastructure improvements. On a stock-adjusted basis, unit cost increased by 9% to R15,754 per 6E ounce, in line with accelerated development to create sustainable mining flexibility. Capital expenditure declined by 2% to R982 million as major projects neared completion. Impala delivered R10.7 billion in free cash flow, a 50% increase from the comparable period. Turning now to the specific contributions to PGM production from the different operations. Rustenburg’s 9 Shaft was closed during the period as planned, while conversely, 1 Shaft benefited from increased activity to support the extended life of mine. The impact of COVID-19 on project advancement and labor availability across the Rustenburg complex resulted in a reduction in stoping teams at 16 and 20 shafts as mining activity at the major producing shafts was prioritized, while 16 and 20 shafts recorded increases in mineable face of 24% and 27% respectively. Production volumes were stable year-on-year. Gerhard will now cover achievements of the other Group operations.

Gerhard Potgieter : Thank you, Mark. Marula was impacted by reduced mining flexibility and the shortage of supervising and management due to COVID-related isolation requirements in the second quarter. A weak stoping performance impacted the ratio of development to stoping tonnes and resulted in lower head grades. While this was partially offset by improved concentrate recoveries, 6E and concentrate production decreased by 2%. Total cash cost rose by 9%, impacted by inflation and the additional cost associated with a change in shift patterns to accommodate COVID-19 protocols. Cost inflation was compounded by lower volumes and unit cost in concentrate increased by 11%. Capital expenditure declined by 49% in line with the progress we made at a new tailing storage facility and due to delays in the delivery of the new fleet. Sales revenue improved by 63% despite the impact of 5% lower sales volumes on the spec of strong Rand PGM pricing and the relative contributions of both palladium and rhodium through Marula’s nickels basket. Marula generated R895 million in free cash flow. The delayed return of foreign employees following COVID-related national border closures impacted the staffing levels at Two Rivers in the early weeks of the reporting period. But the mine returned to full staffing and production levels in the first quarter. Milled volumes declined by 1% and milled head grade was 2% lower, but improved plant stability and recoveries compensated for lower volumes. 6E metal and concentrate increased by 9%. Total cash cost increased by 15% as mining rates increased to build up the run-of-mine stockpile ahead of commissioning the plant expansion. Consequently, unit cost per tonne milled increased by 16% and by a more moderate 6% to R10,152 to 6E ounce and concentrate. Capital expenditure was 41% higher as spend was accelerated on several projects including the plant expansion with adding storage facility and a feet replacement program. Higher pricing for Two Rivers’ UG2 production, together with improved sales volumes, resulted in free cash flow of R721 million. Zimplats delivered another strong set of operational and financial results and continues to benefit from sustained operational momentum. Milled volumes were marginally lower impacted by the scheduled reline at the Ngezi concentrator. Grade and concentrate production volumes were stable. 6E matte volumes improved by 8% to 288,000 ounces as volumes in the prior period were impacted by the scheduled furnace rebuild. Total cash costs increased by 6% with mining inflation compounded by higher smelting costs and increased mining volumes. Unit costs per tonne milled increased by 6% but higher matte volumes resulted in flat unit costs of US$641 per 6E ounce. Capital expenditure increased by 21% as the Mupani Mine replacement project was accelerated to meet the planned milling capacity increase. Zimplats generated US$133 million or R2.3 billion in free cash flow. Mimosa operated well despite the worsening Covid-19 pandemic in Zimbabwe and the increasing socioeconomic challenges facing its stakeholders. Extended repairs to the milling circuit in the prior comparable period resulted in a return to normalized throughput in the first half of this year with milled volumes and concentrate volumes both increasing by 10%. Cash costs at Mimosa increased by 6%. Inflationary pressure was compounded by higher milling throughput and increased transport and selling expenses. Unit costs per tonne milled improved by 3% while unit costs per 6E ounce benefited from higher volumes and declined by 4% to US$798 per ounce. Capital expenditure increased by 29% to US$32 million largely spent on the plant optimization the concentrator plant. Robust pricing and higher sales volumes resulted in a material improvement in free cash flow, which increased to US$30 million. Operational and financial data from Impala Canada reflected a full six months of contributions versus only 18 days in the prior comparable period. Like all our operations, Impala Canada was impacted by challenges associated with COVID-19. Its operational results also reflect progress on the underground expansion including infrastructure enhancements. The operation delivered a 127,100 6E ounces in concentrate. Gross cost of CAD$131 million were impacted by the startup costs associated with the with the Sherriff Pit and resulted in a unit cost of CAD$1 033 per 6E ounce in concentrate. Capital expenditure of C$52 million was incurred on developing the underground expansion project, the tailings storage facility and strengthening critical infrastructure at the Lac des Iles mine site. Free cash flow generation of CAD$72 million or R952 million was affected by the negative working capital impact of delayed contractual payments from Covid-19-related production interruptions in the second half of financial year 2020. At IRS, 6E receipts in matte and concentrate from mine-to market operations increased by 18% to746 700 ounces and represented 79% of total IRS throughput. Receipts in the comparable period were impacted by processing constraints at Two Rivers and Mimosa and the temporary increase in smelter inventory at Zimplats following furnace maintenance. The backlog of concentrate inventory at Mimosa was also received during the period. Third-party 6E receipts increased by 3% to 196 000 ounces and in total, gross 6E receipts were 15% higher at 943,000 ounces. Reported operational and financial metrics for IRS in the comparable period were impacted by the reallocation of stocks between IRS and Impala Rustenburg in the second quarter of financial year 2020, which resulted in an increase in working capital. Refined 6E volumes increased by 54% to 845,000 ounces as a result, further benefiting from improved availability of processing capacity and higher pricing and driving a step change in free cash flow R4.8 billion. This concludes the operational review. Meroonisha Kerber, who will now handle Group’s financial performance over the past six months.

Meroonisha Kerber: Thank you, Gerhard. Higher sales following the inclusion of Impala Canada for the full six months period, together with greater refined production in South Africa were delivered into rising Rand PGM pricing and resulted in revenue more than doubling to R58.1 billion. The R30.1 billion increase from the previous comparable period benefited from a 22% increase in PGM sales volumes, which contributed R6.4 billion in additional revenue, a 55% increase in dollar metal prices, which provided an R18.2 billion benefit, and the 10% weakening in the rand to $16.22 per dollar, which resulted in revenue increasing by R5.4 billion. Our metal sales mix benefited from increased contributions from palladium and together with the rising rhodium and palladium pricing resulted in a 55% increase in dollar revenue to $2197 per 6E ounce sold. Together with the weaker rand, the rand revenue per 6E ounce sold improved by 71% to R35,635. Group cost of sales rose 64% impacted by increased pricing and volumes on the cost of metals purchased, higher refined and saleable production, and inflationary cost pressures. The R13.9 billion higher cost was driven by, increased receipts at IRS together with the higher prevailing rand PGM pricing resulting in a R7.7 billion or 92% increase in the cost of metals purchased. The inclusion of Impala Canada’s six month cost of sales of R2.3 billion, a R1.5 billion increase in royalties across the Group’s managed operations in line with higher revenues and improved profitability. The credit to cost of sales arising on the changing stock remained relatively flat due mainly to the higher production costs and the value of metals purchased during the period. During the period, the Group’s financial performance was impacted by two material ones of non-cash adjustments. Other expenses include a R1.5 billion Marula IFRS 2 BEE charge. This charge rose on the refinancing of the BEE partners in Marula and establishment of an employee share ownership trust. In addition, sustained improvements in operational performance and prevailing unexpected rand PGM pricing resulted in the Group reversing prior impairments of R14.7 billion. This comprise the partial reversal of the impairments on property, plant and equipment of R10.4 billion and the prepayment of the Royal Bafokeng royalties of R4.3 billion both relating to Impala Rustenburg. The BEE charge is non-cash and has no tax impacts and is included in both EBITDA and headline earnings, whereas the R10.6 billion after tax impact of the reversal of impairments are included in basic earnings. Group EBITDA of R25.1 billion, more than tripled from the prior comparable period resulting in a 43% EBITDA margin. Group headline earnings improved to R18.55 per share from R4.36 per share. If the Marula IFRS 2 BEE charge was excluded, headline earnings would have been R20.49 per share. Group’s stock-adjusted unit costs increased by 9% or R1135 per 6E ounce to R14,292 per 6E ounce impacted by inflationary pressures, higher bonus expenditure in line with above budget production levels, as well as additional developments to improve mining flexibility and targeted spend on asset integrity at Impala Rustenburg. Contributing to the R1135 per 6E ounce increase were; mining inflation of 6.7%, comprising South African inflation of 5.9%, and Zimbabwean inflation of 0.7%, which contributed R633 per 6E ounce; the impact of the weaker rand on the translation of Zimplat’s U.S. dollar cost, which added R248 per 6E ounce; and lastly, COVID-related spend which accounted for approximately 2% or R237 of the increase. The decision to move the scheduled asset plant maintenance forward to May 2020 resulted in a closing position of approximately 100,000 6E ounces of excess inventory at the end of the 2020 financial year. This was in addition to the circa 45,000 6E ounces of Mimosa concentrate, which was stockpiled at Mimosa due to the declaration of force majeure by IRS during the national lockdown in H2 of the 2020 financial year and expected to be delivered to our processing operations in Rustenburg during the first half of the 2021 financial year. In line with our forecast, all of this backlog material was delivered to our processing operations in Rustenburg and all excess material pre-smelters was treated during the period. However, higher production receipts and the impact of impurities into the BMR feed resulted in the 6E in purchase stock remaining flat at the end of December 2020. The Group expects to process and refine this excess stock by the end of FY 2021 despite scheduled maintenance end at two smelters in the next six months. At closing rand metal prices, the gross profit impact of this excess stock is estimated at R2.1 billion with an associated cash flow impact of R2.6 billion. Robust PGM pricing and higher sales volumes have generated strong cash flows for the Group. Cash generated from operations increased to R27 billion from R6.9 billion. The Group realized a working capital benefit in the first half of the year on the lag in the IRS contractual payments for metals purchased while in the prior comparable period, $2 billion in proceeds from a metal prepayment facility were received. Net cash generated from operating activities increased to R21.8 billion after deducting R5 billion in taxes paid. Capital cash outflows increased by 39% to R2.6 billion due primarily to the inclusion of Impala Canada spend, the impacts of a weaker rand, and the planned acceleration of Zimplats project spend. Free cash flow increased fourfold to R20.1 billion from R5 billion. Other notable cash flows in the period include; R3.2 billion in payments related to the final dividend for the prior year; the repayment of borrowings totaling R2.4 billion; approximately R1 billion spent on the repurchase of bonds; and the acquisition of circa R1.3 billion of Implats shares to settle the Group share scheme obligations. Consequently, gross cash increased to R24.7 billion from R13.2 billion at the end of June 2020. Gross debt excluding leases declined to R4.6 billion from R7.9 billion due to; the scheduled repayment of the Standard Bank, Marula BEE debt, the accelerated capital repayment of the Impala Canada term loan and a decrease in the ZAR bond liability following a combination of bond repurchases and conversions to equity by bondholders. As a result, net cash after debt increased to R20.3 billion from net cash of R5.7 billion at the end of June 2020 and a net debt position of R1.9 billion in the prior comparable period. Liquidity headroom at the end of the period increased to R28.5 billion and comprised of an undrawn revolving credit facility of R4 billion and gross cash net of restricted cash of R24.5 billion. After the period end, the Group successfully refinanced its existing revolving credit facility with group of various South African and international lenders. The new dual tranche unsecured committed facility comprises a R6 billion and a US$125 million tranche, as well as an accordion options to increase both tranches by R2 billion and US$50 respectively. Implats pursues value creation by maintaining and leveraging a strong and flexible balance sheet within a prudent capital allocation framework. Proactive balance sheet management is key to repositioning the Group as a profitable and sustainable business with the ability to deliver meaningful returns for all stakeholders through the commodity cycle. Strong free cash flow generation has allowed the Group to further strengthen its financial flexibility and provide attractive returns to our shareholders. The integrity and sustainability of our business is a key focus. Stay-in-business spend of R2.5 billion increased in line with the acquisition of Impala Canada and project progression at our managed operations. Although several studies for mining and processing expansion is underway, growth capital was minimal in the period under review. Other material cash flow items included R1.3 billion on the purchase of Implats shares to settle the share scheme liabilities and they also accounted for a loss of R600 million on the translation of our offshore cash tier in closing rates. Implats ended the period with reduced debt, and a stronger balance sheet following scheduled and expedited debt repayments, together with the provisioning for future rehabilitation obligations. Post the period end, the restructuring of our revolving credit facilities allowed us to capitalize on; improved profitability, a stronger balance sheet, and positive market conditions to increase committed facilities on more favorable terms, to diversify our lending base, and to add a dollar component to further reduce our potential cost of borrowing and maximize the flexibility of the facility. Our capital allocation framework prioritizes, attractive returns to shareholders, and we have declared an interim dividend of R10 per share, which equates to approximately 40% of free cash flow generated. In addition, in December, we launched an offer to repurchase up to 50% of our outstanding 2022 Rand convertible bonds. In total, we had approved R5.8 billion to both reduce a material debt obligation of R1.6 billion and to mitigate the potential issuance of equity associated with credit instruments. Take up of the offer was impacted by equity movements during the period, and in total, 8% of the bonds were repurchased. We continue to assess our ability to deliver value through on market purchases of bonds and equity. Our business is performing well and we remain confident in PGM market prospects and our operational momentum, which underpins the rational for pursuing these avenues of returns. We have made meaningful progress in repositioning our balance sheet. Gross cash, after allowing for the interim dividend will be approximately R17 billion within reach of our previously signaled targeted cash buffer of R20 billion. This amount takes cognizance of the working capital intensity of our IRS business, particularly in a period of increased receipts and pricing. The payment of the remaining balance on the Impala Canada term loan of circa R2 billion will be expedited during the second half of the year. This should result in a balance sheet position to allow a meaningful shift in capital allocation priorities to enhance shareholder returns to accommodate value-accretive expansion of our business. That concludes the financial review. I will now hand over to Sifiso Sibiya, who will take you through the market review.

Sifiso Sibiya: Thank you, Meroonisha. Good day. Palladium and rhodium prices remain the key drivers of PGM basket strength in the reporting period. These two metals were supported by persistent physical tightness as the post-lockdown recovery in South Africa refined output was met by a recessioned industrial demand and constrained market liquidity given processing constraints across the peer group and the net impact of lower secondary scrap collections during the initial COVID-19 lockdowns. Platinum delivered modest gains with ongoing investor interest supported by an improving medium and longer term demand outlook and substantial discounts to both palladium and gold. The rand remains vulnerable to domestic and international macroeconomic factors with the low rate of vaccine roll out creating the risk of additional waves of COVID-19 infections and substantial economic scaring during – due to the lingering impacts of restrictions on vast sets of the economy. This is countered somewhat by increasing optimism around the global economic recovery increasing risk appetite and the still attractive relative yield offered by the domestic currency which resulted in strengthening into period end which has persisted into 2021. Our annual contractual negotiations completed during the period confirmed continued robust appetite for our products and increasing awareness of future supply constraints. At the margin, we continue to believe we have benefited from the preference of customers to source metal on contract rather than increasing exposure to over-the-counter or spot markets, which has been characterized by a poor liquidity and wide bid offer spreads since the onset of the pandemic. The result of strong pricing and weakening rand resulted in 68% increase given our rand basket price of R34,305 per 6E ounce produced. Pricing has remained robust in the first weeks of 2021 with seasonal strength in underlying demand from industrial end-users giving given impetus by fears of potential supply constraints given ongoing Covid-19 restrictions and the residual impact of inventory accumulation across the peer group. We continue to benefit from a diversified portfolio of assets which gives us broad exposure to Merensky UG2 and [Indiscernible] With traditional palladium contributions due to the benefit of six months of sales from Impala, Canada, palladium revenue contributed 37% of the Group’s total with platinum and rhodium revenues contributing 18% and 36% respectively. The unique characteristics of our products they are varied and involving end-use recyclability and our commitment to ensure we produced them in a safe, socially and environmentally sensitive and responsible way underpins their appeal for use as the world increases its focus on the environment. Implats remains committed to meaningful, targeted market development to defend the markets or we may transfer fundamental support is – and there is expected and potential growth by ensuring the successful adoption of PGM-bearing technologies and uses given the long lead time of investment and production in PGM mining and the evolution of PGM demand over the past decades and our expectations for future changes. These efforts can be planned over a short, medium and long-term. Where possible, we seek to collaborate with our customers and peers to ensure evolution of sustainable and growing demand. The global focus on decarbonization has been intensified by COVID-19 with increasing morning time for the establishment of the hydrogen economy, while water electrolysis and fuel cell technology has been developing for many years, to-date, commercial deployment has been slow and hydrogen’s share of the global energy mix remains lower. Unlocking and developing the hydrogen economy is expected to be a key driver of PGM demand over the course of the next decade and the combination of competing technology and exponential growth potential motivates Implats’ role in market support, promotion and defense. In December 2020, Implats announced that it become a Limited Partner and Advisory Board Member in AP Ventures Fund II with a multi-year total committed investment of US$61 million. This investment increases Implats focus market development on key evolving end-use for PGMs including hydrogen, fuel cell mobility and energy storage. AP Ventures’ core linkages and strong developmental commitment to South Africa supports the potential to harness the benefits of PGM demand growth for all our stakeholders. Turning now to our view of the fundamental supply and demand picture for platinum, palladium and rhodium. All three major PGM markets recorded fundamental deficits during 2020, COVID-19 related market shocks were considerable with PGM is facing significant demand destruction balanced by a similarly reduced primary and secondary refined supply. While resurgent automotive and lower South African refined supply drove fundamental industrial deficits in palladium and rhodium, robust physical investment absorbed the industrial surplus in the platinum market. A strong rebound in both demand and supply is expected in the PGM markets in 2021 while the expected short-term deficits in palladium and rhodium has been moderated by the anticipated release of the in-process constrained inventory accumulated in 2020. They remain meaningful and lends support to elevated pricing. Conversely, the recovery in South African supplies is likely to outpace underlying platinum demand and in absence of meaningful investment flows, the market will likely revert to surplus. The factors driving the current and future PGM demand and the characteristics of the economic impact of the pandemic continue to support our view that ultimately, the impacts of COVID-19 will be cyclical rather than structural in nature. Our view of the supply outlook is likely unaltered, while we continue to monitor industry inflow and developments. There has been negligible meaningful PGM project releases over the past year. Constrained processing capacity remains an impediment to material supply growth in South Africa and an increase in levels of capital expenditure are first required to stabilize and extend the current producing base in the region. Platinum fundamentals are set to improve in the medium-term, but the near-term trajectory of the price will likely be dictated by investor sentiments and flows as our view remains of a market in fundamental surplus. Resurgent automotive production in excess of sales will underpin the near-term demand recovery in both, palladium and rhodium and tight physical markets should continue to lend price support. The long-term demand outlook for both iridium and ruthenium due to applications in the hydrogen economy has increased interest in these minor metals with South Africa supply constraints well anticipated by market commentators and customers seeking to secure long-term suppliers. With that, I would like hand over to Nico to conclude the presentation. Thank you.

Nico Muller: I believe Implats is exceptionally well positioned to create meaningful value through harnessing the potential of our portfolio and the robust outlook for our primary products. I am increasingly excited about the possibility for all metals we produce, be it titanium demand tailwinds from nascent hydrogen economy, to the underpin of automotive demand for palladium, the exceptional chemical properties of rhodium, iridium and ruthenium and the outlook for nickel and copper presented by the electrification of the light-duty fleets. As Meroonisha has confirmed, our balance sheet is strong and we now have the flexibility to shift our capital allocation priorities to enhance shareholder returns and accommodate the value-accretive expansion of our business. The Group is actively pursuing several opportunities to both drive mine-to-market growth and enhance business sustainability through life-of-mine extensions. Our internal pipeline is well advanced and we are in the final stages of evaluating and approving three key projects that will contribute an additional 370,060 ounces to Group mine-to-market reduction providing organic growth of circa 15% from the 2020 base. In addition, the Group is evaluating through a purposed feasibility studies, various options to meaningfully increase capacity in critical areas of our metallurgical processing to derisk and support further growth. Completion of these studies are expected in early 2022. I must reiterate that any potential growth, be it internal or external will continue to be evaluated relative to our strategic imperatives of achieving a portfolio of low-cost, low-risk, mechanized operations. I wish to conclude by providing an update on our outlook for financial year 2021. Our operational focus for the rest of this year will be on the continued optimization of Impala Canada; the production ramp up of growth shafts at Impala Rustenburg, as well as strengthening the existing business and examining project options to support sustained production levels in the medium and longer term; advancing processing projects at Zimplats, Mimosa and Two Rivers with the aim of capitalizing on inherent mining efficiencies and flexibility, as well as completing the definitive feasibility studies for the life-of-mine extensions through existing infrastructure at Marula and Mimosa. Implats has successfully navigated the impact of Covid-19 during the period and is well positioned to deliver as planned into robust rand PGM pricing. The focus is on maintaining operational momentum, leveraging the windfall on pricing to reward investors and securing future growth and sustainability for the business. We are pleased to largely reiterate the operational guidance provided with the financial year 2020 results release, with upward adjustments reflecting the strong operational performance delivered in the first half of this financial year. This concludes our interim results presentation. I thank you for taking the time to listen to this webcast. Thank you.

End of Q&A: