Caledonia Mining Corporation Plc (CMCL) Q2 2019 Earnings Report, Transcript and Summary

Hello and welcome to the Caledonia Mining Shareholder Conference Call. My name is Lydia and I will be your coordinator for today’s event. Please note, this conference is being recorded, and for the duration of your call your lines will be on listen-only. [Operator instructions]I will now hand you over to your host, Steven Curtis, to begin today’s conference. Thank you.

Thanks Lydia and good afternoon. I’ll say ladies and gentlemen, I don’t know if there are any ladies there, but welcome to the second quarter results presentation and thank you for joining this call. I'm joined on the call by Mark Learmonth, Dana Roets, Maurice Mason, and we are all available for questions at the end of the call. So, let’s just proceed immediately. The presentation that we are going to be talking to is on our website and it’s the most recent one post there, the Q2 presentation. So, please use that, if you want to follow where we are talking.So, obviously, I'll just draw your attention to the disclaimer, which is on Page 2 and then I just like to lead into the conversation and then hand over to some of my colleagues. Basically, we’ve been through this discussion previously about the medium-term and the long-term strategy of Caledonia, and just to reiterate for those who maybe new to the conversation, the medium-term strategy, which takes us up to 2022 is for us to complete the Central Shaft project to Blanket and ramp up our production to a rate of 80,000 ounces of gold per annum. That will enable a large increase in operating cash flows.We will have lower unit cost because of the economies of scale, and obviously by then the project, which completes by mid-2020, the CapEx spend at Blanket would have declined quite dramatically by 2022. We will continue to do deep level exploration and the shaft is down to 1,200 meters and we will continue to do exploration to prove up and improve the confidence levels of our resources, and although we are already sitting with more than 10 years life of mine at Blanket, we have got shaft infrastructure that we have put in, which will give this mime many, many years to come.So, there will continue to be some resource exploration. And obviously as I have said with the reduction of the cash flow the reduction of the CapEx and the increase in the gold production we are anticipating quite significant increases in cash flows, and that rolls into the longer-term strategy, which is for us to look for opportunities to deploy that cash and there will be sort of a multi-faceted approach to that. We would obviously like to review the dividend policy and distribute more of that free cash flow from Blanket up into Caledonia and then from Caledonia out to its shareholders. The quantum of that is yet to be determined, but that is definitely part of our longer-term strategy.We will also be looking for opportunities to increase our foot print as a gold producer in Zimbabwe, and we spend quite an amount of time over the past few years. Looking at opportunities, Zimbabwe has been very much ignored from an exploration perspective for the last 20 years at least, due to the economic situation in the country and we believe that there are some rather attractive and significant opportunities that we know where the gold is, because the majority of these properties are brownfields and we consider ourselves fairly well placed to be able to pick-up new properties develop them.We know how to operate in the country, we know how to put teams together and internally we have got a very good team who are capable of taking a branch of operation and if it’s found to have the acceptable level of resource base, we’ve got the team that’s going to take it to the next level through a feasible study. And we will be looking for properties in the region of million ounces. We will be looking to produce a minimum of sort of 50,000 ounces a year, and the whole project needs to be financially viable, which results in an NPV per share enhancement for Caledonia shareholders and obviously a dividend per share.If we can’t find anything of that nature then we will be highly disappointed and we would obviously then just return money to shareholders as we make it, but we are pretty convinced that we will find something that’s attractive. Historically, on Page 5, I won’t run through this in detail, but some of you may have seen this slide before, it just shows where the gold zones are in Zimbabwe and what the magnitude is. But just to focus on the Gwanda Greenstone Belt area where we operate between us and the neighboring mine, which is only a kilometer or so away from us. Our resource basis and what we both produced over the years. This was a mining camp of 5 million to 6 million ounces.So, Zimbabwe isn’t out with areas of large resource basis and we believe that we potentially could slow find the next one of these in Zimbabwe. I think everybody is familiar with the Central Shaft project and we did make an announcement in July that we’re very proud to announce that we have reached the final stages of sinking and we’d actually completed the vertical sinking of the shaft down to 1,204 meters and that’s the next stage, which is 12 months in extent, will be the equipping of the shaft, which is all the steel work and obviously the electrics and all of that stuff, but don’t lose sight of the fact that all of the other infrastructure that is on surface in terms of winders, generators, compressors, all of that infrastructure is already onsite, it is already ready to go.The final operating head gear is at the mine. It is manufactured, it is waiting for erection and so we are well well-advanced in terms of all the infrastructure and support services that this new shaft will need and now I won’t say it’s just the equipping with the steel work. It’s a massive task 12 months, 1,200 meters of steel work, this is a full-compartment shaft and there is a lot of work to be done. But the heavy lifting of sinking is done and the mining team has done an incredible job to get us to this stage. We believe this significantly de-risks the project, the majority of the foreign expenditure and CapEx that we need has been spent. Blanket has generated the funds. We all know it is difficult to get your hands-on foreign currency in the country.We’ve managed to do that successfully for the last four and a half years, and we wouldn’t have reached the stage of having spent somewhere between $45 million and $50 million if we hadn’t been able to operate in the region. So, it is a very significant achievement both technically and managerially and I certainly take my hat off to the team. The next slide rolls us into the financial results for Q2 and the first half of the year. So, I’m going to ask Mark to take us through these numbers, which have got some significant opportunities for explanation. So, I’ll hand over to Mark.

Thank you, Steven. So, I am starting on Page 8 of that presentation, which – just include some key statistics extracted from the financial results. Let’s [start with] financial gold production in the quarter and in the half-year was broadly as expected Steve, perhaps couple of hundred ounces lower than we had expected and that was largely because of lower than expected grade and to a lesser extent was – it was lower than expected tonnage. So, the production in the first half wasn’t really a factor in leading us to reduce the production guidance of the full-year. That was really driven more by expectations, what was going to happen in the second half, and I’ll talk about that later.Nice to see that online cost per ounce for the quarter have come down by about 25% from just over $700 an ounce to $534 an ounce and that’s also reflected in for the half year and on the all-in sustaining cost level as well. It was pleasing to see that costs have come down and that really reflects two things, it reflects the fact that on the operating cost level we’ve benefitted from the ransoms and the devaluation of the Zimbabwe dollar against the U.S. dollar, which reduced the cost of particularly electricity in U.S. dollar terms. There was a certain amount of debate as to when we could be confident that that was a real reduction.Until the end of December last year 2018, we had an uninterrupted power supply agreement with ZESA, the local supplier in terms of which we pay $0.128 a kilowatt hour. Those cents in the contracts were never specified as to whether they were local cents or U.S. dollar cents and about time it wasn’t relevant because there was no such thing as a local currency, but as soon as the inter-bank rate was introduced in February 2019, it became a bone of contention, clearly we believe that the appropriate rate was [RTGS$12.8 cents] per kilowatt hour.ZESA from time-to-time try to argue that the rate should have been in the U.S. dollar price and that really only became right at the end of the quarter late in June when the government posted a statutory instrument, which specified that the Zimbabwe dollar was to be used as the reference of all local transactions announced. [Electricity] as a local transaction that gave the confidence to effectively write back a provision that have been building up for some time and that released about $5 million worth of value, which came through in the quarter. But the all-in sustaining cost level is also worth noting that we’ve made quite a strong effort over the last six months or so to reduce G&A, head off the G&A costs across a range of fronts, so that’s [indiscernible] 1.6 million to about 1.3 million per quarter. So that contributes to the all-in sustaining cost.The average realized gold price is what it is that references the LIBOR price that we receive and that does only have a little bit, say 1%, 1.5% and it just record that the gold price where you didn’t start to move until after the end of the quarter. We did receive a slight premium to the gold price through something called the gold stabilization price, which was a mechanism introduced by the Zimbabwe government to incentivize higher gold production, therefore higher gold exports and higher foreign exchange earnings.And so, initially their offering that we will be getting a 10% premium to the LIBOR price, but as the LIBOR price rose that premium disappeared, but that is not reflected in revenue, that is reflected in other income. So, gross profit was nice ahead from just over $5 million in the second quarter 2018 to just over $7 million in the second quarter 2019 and that’s a real number that genuinely reflects the strong underlying performance of the business. The net profit attributable to shareholders, that showed an 800% increase and about 2.6 million to 23.3 million.The vast, notwithstanding the underlying increase in profitability, a very, very significant component somewhat 26 million, or 27 million - $22 million of that incremental profit came as a result of some foreign exchange gains, which reflect the substantial devaluation of the Zimbabwe dollar. I’ll come back into that in more detail.On an adjusted basis, the earnings per share notwithstanding the increase in gross profit and the increase in operating profit, adjusted earnings per share fell by 20% and that really comes down to a sort of a very anomalous situation in the adjusted basic earnings per share is clearly after-tax. And the tax competition for Blanket mine in Zimbabwe was Blanket mine preparedness accounts in the basis of U.S. dollars, the tax competition is done on the basis of the Zimbabwe dollars and that means that the tax charge or credit in Zimbabwe has no relationship to the profitability in the U.S. dollars and that gave rise to all sorts of restoration adjustments, which meant that the – whereas underlying profit pre-tax went up, underlying profit post-tax went down.But nevertheless, the profit for the quarter and the profit for the first half year was 53.5 cents is towards the upper end of our earnings guidance for the year. So, we're very comfortable that we can stand behind the earnings guidance for the year of roundabout $1 a share. And then I guess, the most reliable measure of the performance of the business is cash, how much cash do we have and how much cash we have been generating, but at the end of the quarter we had cash of just less than $8 million, and cash from operating activities will remain strong at $2 million for the quarter, $8.4 million for the half year.So, those are the sort of highlights of the quarter and for the half year, which show a very robust performance for the business. Going to a little bit more detail on Page 9, there you see the profit loss account. So, they got revenue, the royalty is about $800,000 for the quarter. It is about royalty levied of 5%. The royalty is not in the quarter was not allowed for income tax. Since the end of the quarter, so in early August this year, the Minister of Finance made a medium-term budget announcement.In the middle of which there were various announcements relating to the calculation of the royalty going forward, and the government has gone some way to reduce the burden of the royalty on gold producers. So, whereas previously the royalty was not allowable for income tax, now it is allowable deduction for income tax. That’s very welcome. And also, the royalty is now in a sort of a tiered basis. So, as long as the gold price is about $1,200. The royalty remains at 5%, if the gold price was to fall below $1,200 the royalty rate was 3%. So, whilst that’s of no relevance towards this stage. It is a very welcome indication of the determination of the Zimbabwe government to try to improve the investment credentials of the country.Production cost, I have already mentioned $9.2 million for the second quarter of 2018 was to $7.5 million, $7.6 million for the quarter, the bulk of that reduction really comes out as lower electricity, but it is worth noting that across the board consumables, electricity, labor all well within budget. So, we’ve got a very good handle on the online cost that I have already mentioned at head office G&A, Harare, Johannesburg and St Helier. That’s also come down quite nicely. Depreciation up a little bit because of the [indiscernible] to production.The other income 1.7 million in the second quarter 2018 falling to $750,000 in the second quarter 2019, that reflects what previously was the export credit incentive program. Previously, we were getting a flat 10% premium to the gold price. In this quarter, initially, we were getting – the gold price it was the expo credit incentive as we place [indiscernible] gold support price, which was fixed at a price of 1,268. So, as the gold price moved up towards that level it meant the value of that gold support price diminished hence the overall reduction, but frankly we don't run this business benefit from handouts and government, whilst they are very well come [indiscernible] around the business. So, we don't rely on these.And you can see here the very significant foreign exchange gain of $21.6 million. The biggest component of that, with a revaluation of the deferred tax liability, and to a lesser extent the benefit of the gain arising on the recognition of the electricity approval as being dominated in Zimbabwe dollars and not U.S. dollars. So, by far the biggest component that was the foreign exchange liability. And that’s because Blanket had a very large foreign exchange and deferred tax liability about $25 million, and that reflects the fact that for the last five years or so, Blanket has been spending $620 million a year to which it has been receiving an immediate cash benefit in terms of having that sort of capital expenditure being recognized for the purposes of the income tax calculation.So, as mentioned every year, we will receive the benefit in terms of lower income taxes payable because that capital expenditure. For accounting purposes, we don't receive – we don't appreciate those assets until they come into production, which won’t be until 2020 onwards. So, the deferred tax liability, simply tries to recognize the fact that we’re getting a tax benefit now, which would be effectively repaid to the government in future years in future years.Now, the problem is because of the [d-value] it is not a problem for us, but I guess it is a problem for the government. As the Zimbabwe dollar d-values it means that that we will never ever extinguish that liability by paying higher taxes in future, and so it was appropriate to recognize this deferred tax liability as a monetary asset, which meant that it was substantially devalued from about $21 million to well $25 million down to about $2 million or $3 million. We have stabilized to a very significant foreign exchange gain. So, that is a real gain, but we will in due course, if these exchange rates stay where they are now in due course be recognized by shareholders, but it is not, I can't pretend it is a cash benefit arising in the quarter.I have already mentioned the fact that the tax charge for the quarter is somewhat distorted. So, it’s actually a tax credit of $223,000 instead of a charge of $1.8 million. The [whole sort of phenomenon] is in there, and then really arise from the fact that the Blanket's tax calculations are done on the basis of a local currency set of accounts and then we use those local currency accounts to turn in the tax liability, as well as tax liability is translated into U.S. dollars. And so that really means that the tax charge that you see in the U.S. dollar terms, there is no real relationship to the dollar profitability of the business.I’m afraid it’s extremely complex, but it is part of the best explanation that I could give in a short period of time. So, attributable profit. The number I would love to see is $2 million for 2019. Second quarter 2018 increased to over $20 million. IFRS earnings per share was $0.24 to $2.11, but I guess realistically we have got to expect that skipping out the unusual items, adjusted EPS for the quarter was [$0.26.8] a share, which as I said is pretty much in-line with expectations which is fine.Page 10, runs through the cash flows, and I guess the point here is that we’ve got the cash generated from operating activities in the quarter towards the middle of that schedule is 8.4 million - $8.4 million. The working capital movements, sort of a few lines above that was announced at $1.4 million, which is very normal, so the working capital from time-to-time in the past few quarters fluctuated quite significantly, but that seems to stabilize. And we continue to spend quite aggressively, spending $9.3 million in the half year, mainly on Central Shaft and in half year then we received the part proceeds on the disposal of the subsidiary in South Africa of $1 million, another $2 million to come early in the first half of 2020.So, coming for the cash at the end of June, was $7.8 million, which – and that’s a position that we are very comfortable with, so we continue to invest significantly. The mine continues to generate good cash and long way will continue for as long as we continue to spend quite aggressively on Central Shaft.The balance sheet is straight-forward in terms fixed assets go up, because you spend more money. Current assets don’t really move too much, that’s just in other words capital movements. Now you see the non-current liabilities for some $35 million to $7.4 million. The bulk of that, by far the biggest components in that is the movement in the deferred tax liability, which I’ll explain and you can also see that the trade and other payables. That falls from $10 million to $7.6 million and that reflects the effect of recognizing the amount there to ZESA in local currency terms rather than U.S. dollar terms, so that really explains the balance sheet.On Page 12, what you see is a simple diagram which aims to sort of show graphically or diagrammatically, I guess how you move from $38.7 million of consolidated IFRS earnings to the half year to adjusted profit of $5.7 million and you can see the biggest movement is $6 million, which is the non-controlling interest, that’s the minority shareholders in Blanket. The $6 million there, another $21.3 million being the unrealized foreign exchange gains and we would strip out also the $4.4 million profit that we realized in quarter one on the sale of the Eersteling.And I guess, just before we finish on the review of financials on Page 13, just another matter that came out of the quarter two, we did use the – released the quarter two results to adjust downwards production guidance for the year. That doesn’t reflect any significant underperformance in the first half of the year. It really more reflects some – our changes in expectations for the remainder of the year and there’s two elements. Now, the first was extremely severe interruptions to production in July and the first week of August arising from interruptions in the electricity supply and continued issues relating to grade, which continues to remain at the level where we expect it to be.Other issue is the gold spot price, I’ve already mentioned that. From – the government was paying a fixed price of [13.68] and as the gold price, the LBMA gold price increased, the value of that gold support price diminished, which explains why the overall size of other income diminished in the course of the quarter. I’ve already mentioned royalty adjustment, not relevant at all for the quarter two. And then you are really relevant in future quarters at this gold price in terms of the tax deductibility. The royalty – that’s still valuable [in the rate]. I think the key point for me here is that yes, there was a very significant tax benefit, but it just demonstrates the extent to which the Zimbabwe government is committed trying to encourage investment in the country.And last, but by no means least in my minds, we continue to stay in our dividend payment. So, the dividend to Caledonia shareholders is [$0.275] for the year, which puts us on a yield of about 4.6%, quarterly [$0.06875] a quarter, so we declared the dividend early in July and that was paid at the end of the quarter. But as we get close – as we move towards finishing the Central Shaft, we’re now really only 11 months or 12 months away from finishing the equipping on the Central Shaft and thereafter seeing production increase, costs diminish and CapEx fall away, we should – we are really within 12 months or so of seeing a significant increase in Blanket in Caledonia’s cash generation, which will create – will give management much more flexibility to reconsider the dividend policy in the light of rewarding shareholders, but also to – if we can get our hands on some to divert some of that incremental cash flow to evaluating and investing in new investment opportunities to create more grade for the business. That really covers the financial suspects.I’ll hand back to Steve and Steve can talk about operations.

Thank you, Mark and you make it sound very, very easy and I’m sure everybody understood the complexities of this quarter, which let me assure people that it is complex, but it’s demonstrated by what we believe are the correct monetary and economic policies that has been implemented by the government and there is a settling down stage and I think we’re in that settling down stage. We believe we’ve got our hands on the teller. We know which direction to go, so we – yes, we are excited to be able to manage our way as we go forward and Zimbabwe hopefully begins to prosper.So, now we’re going to go and have a review of the operations and I'd like to ask Dana Roets to take us through the operational slides in the details that he thinks necessary, and I’ll hand over to him to talk the operational and the mining aspects of our business.

Thank you, Steve. If we look at the production through the half year and, you know, I want to add to what Mark said, it’s not much different to what we’ve seen over the last three years and I just want to remind everybody that it was always said, while we’re building a new mine below the old mine, its maintaining the production labels and [indiscernible] once the shaft is in production, and that was a balancing act on its own if you don't have any issues in the country and so on. You know to maintain that is difficult enough and we’ve all had challenges we had, you know, ignited a bit more difficult.But what happened at the end of last year and I will go through some numbers just now, but as a little background, in the year, we had a slow start off of Christmas, and in the real production really comes up during the last two quarters, and what we see in this year is, and what we tried to do in the end of last year, we’re sitting stable trying to start slowly. We’re going to change our internal plan and trying to push the guys a bit harder during the first and the second quarter, and which will make it easier for us not to really push as hard during the last two quarters and then have this [autistic effect] in the year where you start slowly and then you end high and then you fall back and you start slowly again.So, if you look at the numbers and if you go to Slide 16, if you look at tons milled, 2017 quarter was 136,000; 2018, 132,000; and in 2019, 135,000 and that’s [indiscernible] there’s no real difference. If you go to the grade as well, quarter two, 2017, 3.08; 2018, 3.19; and quarter two, 3.11. And again, you can see it’s just more or less the same, and you know, so, I think management [become a bit impatient] than we wanted to do a little bit better during the first half of the year, clearly explains that during the second half. So, looking at those numbers and the answer is still the same story, nothing different to the last three years. But if you look at the last three years, the second half of the year, we knew what was coming our way in Zimbabwe, we didn’t have the same electricity problems that we have now, and, you know, we really pushed the button say guys, let’s go for it..Now, adding to that, we always have raised production days the first half of the year than more the second half of the year in a couple of public holidays where we really make our production. And we just saw all the uncertainty in the country, especially from a [indiscernible] point of view with the world situation [indiscernible] targets coming from and, you know, up till two or three days ago, the uncertainty of [indiscernible] is going to come from [indiscernible] and if that point of megawatts was going to be renewed and that is the personal, that South Africa will provide Zimbabwe with 400 megawatts [again]. It was really uncertain how we’re going to oppose the safety [Bakken] prudent to – just to all that uncertainty, you know, just as used to – the expectations for the second half. And if the [indiscernible] situation prove quite a lot and we can get a mine going again, who knows, might be we can be able to do a little bit better than the forecast. But for now, all the uncertainty, that is [why we change is done.]Now, I also want to just take a feedback, the end of last year when this whole thing with the U.S. bond storage, [indiscernible] fixed on the mind as far as morale is concerned. Suddenly, overnight people salaries dropped, you know, by 18% and we had our [indiscernible] to keep the guys motivated, we lost a couple of key people. On the long-hole stoping as well as our specific [indiscernible] and we had to retrain those people and [indiscernible] we interviewed, you know, after we had accident last year, the fatal accident for safety reasons and if you want to do long-hole stoping over our benches that are 15 meters thick, drilling activity is very, very important as far as dilution is concerned. And there’s been a lot of effort in that to ensure that we drill accurately and we reduce the dilution because the second problem is [grade]. We hope that by now that we would have reduced our dilution that would have showed a result in the grade. So, we expected a higher grade although, as I just showed you, over the last three years, it more or less the same for the second quarter. So, that didn’t materialize.If you look at our long-haul stopping, our drilling – quite a lot and we’ve got probably of to show that. [Currently] what happened was that after we – after the [indiscernible] over time, especially in the Blanket ore body, the hanging wall side deteriorated and we’ve got some flushing after the wind and [they] started coming down. So, it had nothing to do with accuracy of the drilling and the quality of mining when we’re breaking the ground. So, it’s after the wind effect, and that means that we have to have a relook at this, and we decided that, especially in the Blanket area again, that we’re going to change in the problem areas we reached [indiscernible] that we’re going to change back to underhand stoping. Now, in underhand stoping, you’re drilling two-meter round and you drill it by hand and you can’t drill a lot accurate – a lot more accurate because of the two-meter rounds and after every two meters, your exposure the reef again and you can follow the reef.After 15 meters, you estimate the reef in between the two labels and you draw as accurate as you can. Now, that started to show some effect, but again, for safety reasons we cancelled almost 30, now we put to people sort of backing the stuff, and for that reason, we had to start supporting the hanging wall and side walls to make sure that the people that we put back in the [indiscernible] now is working safe, and we are still experimenting with the best sort of on-strike distance for the base and to make sure that the cost we incur with the support is not significant, but safety comes first and you started by installing the support and you know, taking the [indiscernible] manually.And I just want to make a point that long-hole stoping is not out of the window. Blanket has done it, you know, for the last 13-plus years in the wider reef areas like [indiscernible] done very, very successfully as always has been done there very, very successfully. Where the problem came was the [indiscernible] reefs blocked the Blanket’s ore bodies and Eroica where we introduced it.Now, the beauty of long-hole stoping is that we successfully mined reefs as net of 80 centimeters. Now, if you had [indiscernible] do it manually, you can’t put people into 80 centimeters. You need at least 1.2 meters to put people inside that stop. So again, going forward for the, you know, where – especially where the reason is turning out, if we are in better ground positions and we’re not going through some [indiscernible] spots like we had at Blanket, we – opportunity [indiscernible] to take out [indiscernible] where we can’t, you know, put in people. So, it’s like everything in the Zimbabwe, you’ve got to think on your feet, and you’ve got to adopt and change all the time and make sure that you stay with the [Technical Difficulty].So, with that, if I then go to the next [Technical Difficulty], which is Slide 17 and I look at the resources, you will see that since 2010 it stayed constant [Technical Difficulty] and we started doing a lot more exploration and we grew the resource quite substantially, and since 2011, we mined 300,000 tons of – very, very successfully and the main reason for that was that we created more at that key points and we wanted to prove to ourselves that the Central Shaft that we are putting down [indiscernible] just a reminder for two levels because that does, you know what we could tell from our indicators and resources below the lowest level that we can motivate – we could only motivate two more levels.We started drilling, we improved our indicated resource by quite a lot, and then, we announced that we’re going to add more labels. But that was – all the time it was balancing act between maintaining the old mine and maintaining the production to make enough money to pay for the new shaft and also to make sure that we don’t heat the wall and run out of resource and going to keeping in mind that the ease of point in a time where we’re going to meet the Central Shaft in operation, and while doing this, you also will be [indiscernible] to start mining from the top from the bottom level to maintain this production profile, which is guaranteed the ton profile that we’ve seen over the last three year and we hope that the grade might increase slightly and that the ounces will be slightly better, you know, tons would [indiscernible].Now, as already mentioned before [indiscernible] and we’re going to start equipping and we’ve got a year left of [Technical Difficulty] during this balance [indiscernible] and another problem was maintaining right [flexibility] and we don’t have flexibility at this time. We can just maintain what we have and we basically mine what we have, so it’s very difficult to move around if you hit a low rate area because we don’t have a lot of those available at higher grade that we can move through. Now, the biggest distance is going to be what this central stock is up and running. We can really start developing, increase the development dramatically and do more than we need, create that flexibility that will help with increasing the grade, and of course, as you open more working places, your build-up will start and your tons will increase and we will increase our ounces.So, you know, first of all I think the management is the most impatient with all of this, but, you know, also long and about four years of [indiscernible] shaft I think we’re very close to do what we need to do. Steve mentioned all the equipment is [indiscernible] mine is just putting this performance together and getting shaft operational and we can’t wait for that to happen.And just a reminder again, it will be a four-compartment shaft. Our people, our material and our ore will come through the same shaft, and there the people will be [indiscernible] at the center of the mine and [clearing time to] reduce dramatically with [indiscernible] and we should have our people – within half an hour and getting material down will be a lot bigger. These ones will travel at about 60 kilometers per hour, which is faster than the current rate as we [indiscernible]. The gauges that we put people down is very, very slow and putting them [indiscernible] at this stage. And none of those economies of those have been bode into the new mine [indiscernible] and we’re looking forward to that and I can also add that the [indiscernible] at the mine and we hope it will be up and operational within the next three to four months and that should increase our company’s by, you know [indiscernible] and all of that will help to increase the recovered grade.So, you know, as a summary again, we need to develop more, we can’t develop as much as we want to now because of voice constraints. As soon we start developing more flexibility, we can do more selective mining and the grade should go up and as we showed in the graph, on the graph from Page 17, the resource grade at the Indicated [indiscernible] and we’re currently mining at about 3.3, so this [indiscernible] and that will only be [indiscernible] flexibility, which will happen in the future.And the last point I want to make on this slide is that for now, we basically draw what we could from that tracking point we have on the upper levels, but as soon as we get back into the levels created by Central Shaft, we will have [new executive points] and you will see a further growth in the resources as we’ve seen it over the last five years. And I just want to make another point, with the sinking of the shaft, we managed to do horizontal development of more than 800 meters, which will put us in good state when we installed this well, and we created the [indiscernible] system through [indiscernible] which was just over 650 meters. So, a lot of the infrastructure that you normally put in place after you finish the shaft, a lot of that has been put into concurrency during the shaft, which is at the score that we did it is the industry first, and this was done very, very safely and for five years we had no fatal accident.If you look at the challenges going forward, and I’m now moving to Slide 19, you know, [safety] to us is an issue. As we know the average size of the ore body is 2.7 and we’re mining at about three and we would like to keep that up and that will happen especially in Blanket ore body as we’re developing the Blanket and open our Blanket ore body and that’s the future of the mine. And before gaining the interests on development, having the extra capacity in Central Shaft versus those waste tons, and when we start up Central Shaft on commission, initially we will start with waste and then stop adding the [indiscernible] because we can handle the reef through the current ways in shaft.So, [indiscernible] we can start developing and getting [indiscernible] ore body and maintaining the other ore bodies that we – the known ore bodies that we’re currently mining. So, exciting times ahead of us and we need to get that extra capacity and get the development going. Electricity is a concern. The instability of the [indiscernible] apart from the fact that you [indiscernible] or you don’t have the power for a couple of hours and that seems to be – has been [indiscernible] with the new drillings that we put in place. We signed an uninterrupted electrical supply agreement again, and, you know, with the electricity coming from South Africa, it seems like we will have electricity, but the quality of the electricity is an issue and we’ve been working on this for the last three years.We’ve spent over $1.6 million putting in [indiscernible] new electrical [indiscernible] Blankets and putting in [indiscernible] that is protecting our equipment and that can handle the volatility, the sparkling electricity would drop in voltage, but it can cover only a certain way and [indiscernible] even with that you still get [stuck out] and when you have [just actually about] 40 hours off the production as we need to reach out everything. And that is to be considered to be at this stage. And going forward, we are – as already mentioned and as last stage to install the solar form that will be to make sure that we reduce these when we have these [indiscernible] because of the unstable electrical supply that we don’t lose on a day, three to four times about 40 minutes and that effects the production and that we can have a stable supply a little steep, and, you know, that will go through to production.Now, while all this happens, we also decide it on Slide 20, and with the safety problems we had that we got to change the policy with bankers and we said that [indiscernible] and we decided we wanted a culture by design and we started the initiative, which we called the Nyanzvi and the whole focus is safe production and I can say that it took us, you know, almost two years with all the teams has been through. It has taken us a week and take them through a lot of culture designs and behaviors that we want in this. This real focus is not that and – but with that, you know, that productivity increases will happen and we are a long way down the road of re-training everybody on the mine. We’re looking at some [ballpark] the culture these [indiscernible] 300 tons a day. That is the experience you get from the guard that you saw from other mines and even if you look at the Blanket comes from reorganizing to 2,000 a day to get to [80,000 ounces] and, you know, every now and then we hit 2,000 tons of reef.So, we’re well on our way to achieve the [indiscernible] as we’re talking about the 80,000 ounces just getting into the right areas, increase the grade and we’ll get there. But none of this would have happened. In the current environment, very difficult environment in Zimbabwe. We will be trying to keep them at all high if we didn’t have the help of Nyanzvi. We’re glad the platform for our self, we can talk to the people, we can get intel from right from the [indiscernible] what people think and they contribute and they [indiscernible] and Nyanzvi project was designed and co-designed by them, a team of 20 people [indiscernible] we simply like the guys. You know that they tell us what we can do, first of all to increase safety and safety to improve production. And we’ve got a world-class initiative in place and if you look at the slide there, you can see the in the slide, really took a wrong turn in 2017.We signed in a lot more people to increase the production, a lot of new comers and most of those new comers had accidents and we had to train them and re-train them and change their behavior and, you know, it – if you look at the trend of the draw, it seems like we’re on the right track and especially the first six months of all the [indiscernible]. If we didn’t have this initiative in place, it would have been a lot more difficult to maintain a good morale and keep the team going, and, you know, we’re very glad that we started this initiative and we are in the last phase of this initiative where we really – that the focus is to identify the weaker performing teams.We’ve got a system in place where you can identify the problems all alike – dilution problems and then [indiscernible] and re-train them in the workplace and start improving our weaker performing teams. You know from – first off from a safety point of view and then that will focus through Q2 and I think we’ve done a lot to make sure that the management replies to make sure that the work force are able to handle what is coming their way. Once Central Shaft is up and running and, you know, with that the Central Shaft is in a very good position to take on the challenges that we said we would like to target.Then, if we go to Slide 21, you can just see the head grade improvement will present huge opportunities and those increases in grades will definitely happen as we develop more and we grade more flexibility and get into the right area. Already – if you go to Slide 22, I already spoke about the electricity supply, and maybe at this point I must give it back to Steve. Steve, I don’t know if you want to add a bit more to what’s happening within electricity and the situation in Zimbabwe.

Dana, thank you and that was a very comprehensive and detailed report back, and I'm sure our listeners got a lot of value after that, thank you. I think we’ve spoken about the work that Zimbabwe government is doing. The slides that we've incorporated in the pack on Slide 23 just gives you sort of focal areas, so I’d refer you to have a look at that. I think you – what I would ask shareholders and listeners do is spend some time looking for some of the good news that comes out of Zimbabwe because unfortunately a lot of what we read is mainly the bad news. We need to look behind that and say, why are these actions being taken? And when you understand where Zimbabwe came from and what it needed to rectify the path it is on, unfortunately it's not just like switching on the lights and its all sunshine and roses.There is some pain that has to be taken, but Zimbabwe is working its way through and IMF staff monitoring program for the next 12 months, which is a significant commitment from the government to subject itself to rules and regulations to show that they are determined to turn things around and the government should be given credit for that. So, let’s watch space that they do the right things; they get the right guidance; and our job as a management is just to make sure that Blanket continues to operate as effectively as it can, and we finish this project, which is 12 months down the road.If we look just briefly at the outlook and we’ve spoken a lot about this that – the slide on Page 25, just gives you a snapshot of where our thinking is at the moment and I’ve spoken about it in detail, so I won’t go into a lot more detail there. But I’ll just draw your attention to the last box, which says, you know, in a period sort of from four to five years on from now, where do we want to be? Do we think that's a possibility? We already do believe it is a possibility because Zimbabwe is an undiscovered and an underutilized gold frontier and it has got good infrastructure because it's been very, very mildly used for many, many years.We've got to secure electricity; we’ve got good people and the government can put an economic structure in place that creates the opportunity for business. I do believe that there will be major opportunities. So, we see a bright future; we see opportunities. We do have to make it happen. But I am trusting that we’ve got our timing right; we've got the mother-ship of Blanket mine generating good cash; and we’ve got to bounce off that very exciting platform.So, that’s the presentation and I think it’s appropriate now to hand over to the listeners for questions and the team here will answer any questions you’d like to put to us. So, Lydia if you would open up the call for questions please.

Absolutely. [Operator Instructions] We have some questions coming through. Our first question comes from the line of [Howard Sinclair of Sinclair Company]. Howard, please proceed.

She almost had the name right. Hi, guys.

Hi.

Hi.

I maybe your only fan, but that will change. You just keep delivering that will change. One, to clarify, your wages to your employees [were after each], while the Zimbabwean dollar was collapsing, basically stabilize at some kind of formula against the US dollar, is that correct?

Hi. Yes, we simply pay them the inter-bank rate. So, if they were earning say 1,000 local dollars in January, when the exchange rate was [1:1] that’s means – and say June, when the exchange rate says, [6:1] that the earning 6,000 local dollars, which goes a long way to pushing them from the effective inflation.

Right. So, that allows them to come to work. At $1000 after devaluation of 10:1 or 6:1…

Yes.

...with [indiscernible]. Second, in electricity – as to electricity, are you paying, it wasn’t clear, are you paying in Zimbabwean dollar at their rate? Or some FX adjusted rate?

Now, the new – okay, so it was a very good question. In quarter two, we were paying them in local dollars, RTGS dollars, okay?

Yes.

Then there was a debate about whether they should be getting local dollars, RTGS dollars or U.S. dollars we are done with that now. But the agreement that we signed last Friday is that we will pay them in [SCA], which is the effectively U.S. dollars in country.

Is that the essential franc, essential African franc?

No, [SCA] is just the foreign currency. So, but as you said, no that’s the franc foreign currency – that’s the best foreign currency. It is actually [to end some of the] purposes. It seemed that we are paying them U.S. dollars in country, okay?

Okay. That’s okay. And to add solar power, would that cost you $1 million or $2 million?

Well, the solar – it costs about – if we were to put in a 14-megawatt plant, which would cover the needs – the peak requirements of the whole operation that will cost approximately $14 million. So…

One four?

Yes, $14 million. We’re not using batteries, we can’t batteries, they so far too expensive. We’d probably do a – we’re thinking of a phased approach.

Sure.

So, we’re thinking of doing say 8 megawatts as soon as we can on the basis of the mine you can undertake to take a 100% of that’s on a take-or-pay basis. To do the extra 6 megawatts, we would need to put in place a mechanism to sell the surplus production, which will be generated from time-to-time into the grid and that will be a much more complex negotiation, and so, that will take time. So, rather than delay to agree this sort of what we call the banking agreement with view to get a 14-megawatt project that’s the eight now, while the basis we can use a 100% of production and then deal with the balance later. Just to be clear, the solar project would be owned by Caledonia. We’ve done a 100% of that project and Caledonia would then sell the electricity to Blanket.

Oh! I see? Well, when your CapEx – when next year comes around, your CapEx will decline probably around springtime, and at the same time, if we take the current price of gold, which we can debate up and down, wouldn’t the current price add about $2.5 million or $3 million of cash flow to your quarterly income?

Well, you can – I don’t want to start making detailed…

No, no, no. Let’s say more than $2 million so that by next year between the decline in CapEx and hopefully the sustainably higher price, you would have internally generated cash to pay for these [solar self], is that a fair assumption?

Yes, that would be.

Yes, okay. And I wasn’t sure about the graph on reserves and resources. Did I – did I interpret it correctly so that you have about 1.6 million ounces of resources yet on all four categories? Or are they overlapping?

No, no. That’s $1.6 million in each individual category.

Okay.

And the point is that, as we get more infrastructure at deeper levels, we can do more deeper exploration to improve the inferred, but also as we get more infrastructure depths, it means that we can then convert some of the inferred to measured and indicated. So, it is both.

No. What you did not mention was – if anybody else is listening besides one guy on this phone right here, is that you know you told me and I have also read that there are some local minors who would love to get out with hard currency, and they course, it’s Zimbabwe, so they’re having an extremely hard time to find buyers. It’s a buyers’ market. Are those properties still available? And what is the potential size of the resources that those owners have discovered or previous owners?

The – if you look at the cost of potential side, because that then stop promising what we don't know is there yet. But…

Of course, of course.

…but we will look to – we must have looked at about a dozen opportunities. We've narrowed it down to three that we really like. I've got to say, of those three, in every case, we focused our work on technical due diligence, in only one of those three cases, is there an actual resource base to purchase at the moment.

Okay.

And I – and then I thought if you want to one compliant resource base, that actually of itself is relatively be small. So, we're not buying existing. We're not proposing to buy existing resources. We're proposing to buy things that have historical drilling, which gives us a very good sense as to what may be capable of being identified to 43-101 standard, in due course. And of the three identified, we can comfortably see a target – a reasonable target resource of anything between 8 million and 12 million ounces. But I have to caution you…

Yes, that’s just a shallow guess, I understand.

That's a guess. But I have to caution you that when we focused on technical due diligence, obviously, that we don't want to buy moose pasty with nothing there. As we, in every single case, there are some quite significant technical legal difficulties relating to proof of ownership. And that really comes down to very poor housekeeping on the part of the people who own or claim to own these assets. And correspondingly very poor delivery from government in terms of recordkeeping and that sort of stuff.So, we can't deploy shareholders money to buy stuff, unless we're absolutely sure that what we buy, got good legal title. And that has become extraordinarily difficult in Zimbabwe. I mean, just so frustrating. And I guess that really comes down to where Zimbabwe was 10 or 15 years ago.

Okay.

But also, even right now, just trying to get government officials right now to focus on the here and now and doing stuff today is extremely hard, because if you're a government official living in Bulawayo or Harare, you've only got power for four hours a day and that's between sort of 1 o'clock and 5 o'clock. And you're not benefiting from a generous blanket employee remuneration package, which basically tries to bring sense your purchasing power. You're suffering from very, very high inflation. So, they're mitigating reasons as to why we're in this mess, but it does make it very, very hard to make progress than anywhere else in the world. This sort of stuff will be done in an afternoon or two days or something.

Is there any possibility that previous owners in Rhodesia could come back and say, wait a second, they took away our property? You own it now Caledonia, but it's really ours [indiscernible]. Is there any possibility that’s going to rise, or while there’s always a possibility, but I guess, some large possibility?

If you’ve got as long as we get adequate proof of legal title then, that's fine. There's no – that’s not relevant.

Okay. And finally, I don't think I heard. And if I say, if there's more than one listener, in your written commentary, you mentioned that the Government of Zimbabwe has a balanced budget.

Yes.

That is really encouraging for a longer-term point of view. And I don't know if it’s unique in the world, but it may be – maybe the only one?

We think it is and they're running. Mark is much closer to this than I’m. But government's been running a budget surplus central sort of October, September last year, and it's running at a rate of hundreds of millions of dollars a month. And you're quite right that it must be – so they're running a budget surplus and actually, the government is embarking on the opposite of QE.So, a lot of what the opposite of QE is that the government is sucking liquidity out of the banking market instead of pumping liquidity into the banking market. And that gives us still the same, that gives us comfort and confidence that provided the political environment doesn't become unmanageable. They just objectivity the economic policies that are being followed by governments are on the path to redemption. But that's not to say that for people on the ground, it is extremely painful.

Who would have said that the exchequer in Zimbabwe is in better shape than the exchequer in Europe or United States?

Well, I’m going to say talking to getting [Dana] years ago. I mean, [getting Dana] when he did quantitative easing just cruising about printing more money. He was the Finance Minister under the – many, many years ago under [indiscernible], And I remember him crowing and chuckling at the QE that was introduced by the western banking system after 2008. And he claimed to have tasted and perfected that mechanism himself. So…

He preceded them by a factor maybe 1,000 times when he said the pattern?

Yes. But having said that, I think the critical issue relating to the rehabilitation of the Zimbabwe with the West is one – is more one of credibility.

Yes, that will take time.

And credibility is that that's what, that's subjective and it's in a number – numbers play a part in it. But there's a high – there's a big subjective element to that, which is going to up in the challenge that we are hopeful that we’re hopeful.

What happens is, investors will recognize that Caledonia is an extremely cheap business.

Yes.

And what it happens? It happens. I don't know what's going to happen today at 11:15 Eastern Time, or 75 years from now, but it'll happen?

Yes.

All right, thanks for your nice work.

Howard, just to give you a little bit more context around electricity. The Minister of Finance announced that electricity tariffs across Zimbabwe and all the sectors would increase dramatically to take account of inflation. He did also announce that the mining sector would be required – all miners would be required to pay for their electricity in foreign currency. And this is important, because the agencies that articulate the power and generate the power in Zimbabwe are hugely cash strapped and are subject to the inflationary factors.

Well, that’s our thinking as to…

…pricing.

Go ahead.

That the mispricing their electricity for many, many years. And that's why they’ve actually run out of cash and that's why the infrastructure is struggling. So, we're at a stage now where people who – and it's going to make things difficult, are going to have to pay a fair price for the power in Zimbabwe, and miners will pay a U.S. dollar base price for electricity, because we are U.S. dollar earners. And that will enable the country to input power to augment the very, very low self-generation of electricity. They've got generation problems in terms of aged coal-fired power stations. And they've got a huge reliance on the Kariba dam, and that is got very, very low water levels at the moment.So, although it's painful, it's the right structural change. And without power, although we've got gensets, you can't run the mine efficiently on diesel power, it's too expensive. So, this for me is significant that the government again has recognized the needs of the country and the productive sector. And they are putting methods in place. And the mere fact that South Africa, Mozambique is re-delivering power to Zimbabwe is a very good signal for me. So, it's significant how we deal with it.

Well, from the point of view of opportunities or competition, this squeezes the owners of those other properties even harder, because they don't have even if they're not producing, they won't have foreign currency to pay for the electricity if they ever decide to build it or create a joint venture. That's better for you. It just intensifies the buyer – intensifies the buyer’s market. That's really good.

Yes. Howie, thank you for your questions.

Yes. Thanks, guys.

We have some more questions in the queue. Our next question comes from the line of [Zachary Sharpe]. Zachary, please proceed.

Hi, guys.

Hi, Zack.

Hello, Zack.

Hey, yes, those are really good questions, Howard just asked. I think he covered about half of mine. One of the other things I was going to ask is, you mentioned the sale of a subsidiary. Do you guys have other ones or other assets that you own other than Blanket Mine?

No.

And then, I was reading about the purchase of 15% more at the mine in some of the past reports. And I was wondering if there's an update on that? And I know I read that you guys would use an equity sale of shares that do at least part of that transaction?

Yes. What you are referring to is the agreement that we reached about a year ago with Fremiro. Fremiro, 15% of Blanket and the dealers that we will buy that 15% off of them Caledonia shares and that also write-off the balance of their facilitation lines. That is just simple bit of house-keeping, which gives us clear access to 64% of Blanket, which is really important because people over this obstacle in their minds that were very good [minority position] in Blanket and it is modestly NPV per share enhancing at the Caledonia levels. So, once taken to account the bigger statement we take in Blanket offset by the diluted effect of issuing more shares in Caledonia and net effect in small ways is beneficial to Caledonia shareholders. And also, we value the participation of some of the people within the Fremiro structure who have helped and continue to help us in Zimbabwe. So, that will work.To make that agreement happen, we need two things. We need a Reserve Bank approval of the Reserve Bank of Zimbabwe approval for the Fremiro shareholders to own Caledonia shares offshore outside of Zimbabwe, and we’ve been around and around in circles with the Reserve Bank, and I'm afraid the situation that we now have is that they keep on giving approval for transaction that we’ve not asked them to approve. They keep on approving a different transaction to the one that’s on the table. And Zimbabwe being Zimbabwe, whilst they say they have approved it, we cannot proceed until they have actually approved the real deal that is here. And that really is just a question of misunderstanding on their part and we will continue to work with them to get them to prove the right deal.The other issue really relates to capital gains tax for the accounts of the Fremiro people and the people around Fremiro realizing on this deal. So, again that is a very complex situation because of the currency environment, I mean. The deal was initially done in an environment, which was effectively U.S. dollars, but you know now it is any capital gains tax had to be calculated in local currency terms or the U.S. dollar terms and the resulting tax is that payable in local money or U.S. dollars. It is somewhat complex and again if it goes back to a point, I made earlier, given the difficult situations for ordinary people mainly in Zimbabwe.I think it is to some extent is a little bit understandable why the regulatory – the regulators in the Reserve Bank and the regulators at ZIMRA the tax people just can't - haven't got the energy perhaps to pursue this with the same sort of [indiscernible] to expect elsewhere in the world, but I'm going to say from our perspective, we are going extremely frustrated of this very slow pace that’s being adopted here. It is important for us to do this deal and we are going to have to try and find a way to focus people's attention and make this happen because we have ended [indiscernible] some embarrassing, so the announced deal sort of a year ago and still not have completed it for reasons outside our control. So, I hope that answers the question.

Yes. That was great. Thank you. Sounds like it is a thing that [indiscernible] keep approving along transaction. My last question is around the dividend policy, you mentioned that a lot of trends in the reporting that you had raised the dividend when gold production goes up, would you guys also consider buying back shares [or do you mind] instead?

We will do whatever makes sense to shareholders. So, the dividend is the easiest way. We find that is one of the easiest ways for us to differentiate ourselves from other gold companies is to pay this quarterly dividend. If we were to increase the dividend and didn’t find the [shares]. If we were to say double the dividend and our share price didn't double, so if we double the dividend and our yield doubles, as a CFO I would find that a very poor use of money, and I would effectively shake the shoulders unless they bid the shares up, but no more dividend increases, and buy our shares back. So, we will use whatever levers we have to try and make sure that we deliver the best returns to shareholders both in terms of yield and capital return.Having said that, we also hoped that we are in a position where some, but not all of the incremental cash flows coming out of Blanket could be redirected towards new growth opportunities. Because the last thing we want to do is become a high-yield ex-growth company, because then you will find that the, if Blanket is ex-growth, Caledonia is ex-growth then you would invest in new growth projects, you will find that our yield goes up inevitability. So, yes, we are open to anything that makes sense at the time, but it would be premature I think to commit to anything or to rule anything out.

Okay, yes. That’s great. The dividend, that makes sense that, you would think that would double the price, but I think as of right now the business is very undervalued and that would be advantageous for shareholders to buy back stock at this point, but who knows what can happen as you guys move forward with the Central Shaft or as you continue exploration, but obviously I'm personally in it for the long-run. So, I would like to see more exploration for sure, I’m not planning on selling my shares as planned. I’m actually planning to expand so that’s really good to hear.

Yes. Thank you.

Alright. Yes, that's everything I had. Thanks guys.

Thank you.

Thank you, Jack.

Our next question comes from the line of John Bailey of [indiscernible]. John, please proceed.

Hi, good afternoon gentlemen, hope you can hear me. Just on the, with the gold stock price about $1,500 would you get a full benefit of that in H2 or are you putting a more hedging in place or what are you thinking?

No, I think the hedging was in forward selling. The hedging that we put in place was just simply [buy-out] the money put option. So, there was an option premium, a cut under $1,000 and that was it, but we’ve always had full upside participation in the gold price. What we would do is just protecting the downside.

Have you – and obviously are you. doing that for H2 or?

We are not doing it, and the genuine lack of clarity we have is, say the gold price fell to 1,300 right, we don’t know at this stage. If the gold price fell to 1,300 would the government reintroduced the gold support price mechanism, you know, which guaranteed the share price of 1,268 because the last thing we want to do is to spend good shareholders money putting a place to hedge and that now turns out to be unnecessarily because the gold support price, but it is certainly at this stage we have not hedged, those were the hedges.

Okay. And just on the July numbers, it is in the bottom in – grade was 3.01 and production just below 4,000, is essentially that that probably would be the worst month – is there any visibility that it’s just edging away from those low numbers?

I would let Steve to answer.

Yes. John, the July month was a short production days month. So, it’s very difficult to compare month-on-month, but it was only a 28 a month where the other months from our production perspective are 30 or 31. So, that counts again. So, and the grade, yes, the grade was lower. What we are seeing is [tons] are increasing and we are working very, very hard to remedy the grade situation. And as Dana has already said, traditionally, you go into Q3 and Q4 where you get better production. There are less public holidays and therefore less disruptions. And traditionally for many, many years Q3 and Q4 have been our best quarters. So, yes, we would certainly not like to see July repeating itself and we consider it a low point.

Okay, great. And then on the workforce, I mean in terms of the employee absences, again that’s improved I think with the – as you have tried to support the workers?

Yes. As Dana also said, the effect of the inflation and our inability to pay in U.S. dollars which had become a bit of a norm among some of the mining fraternity and some of the commodities like platinum and the other gold miners were able to pay in U.S. dollars when there was an open multicurrency system. We didn’t. We never went that route because number one our foreign currency was committed to the expansion project and therefore our staff were being paid in the local currency and a 1:1 basis and as Mark already explained, we’ve remedied that because we have the ability to remedy it and we are finding a very much better situation.We are not losing highly skilled people like we did before. We do unfortunately still have the sort of unexplained [indiscernible] that becomes part of the Nyanzvi program where we re-educate and motivate people. So, a lot of effort has been put into staff and staff morale.

Right. Thank you very much. Well I look forward to the 70,000 plus ounces in the future.

So, do we.

Great. Thank you.

This concludes today's Q&A session. I now return the call to your host.

Well thank you very much. And looking at the list of people who’ve dialed-in, it’s been one of our better attended calls, and we thank you for that, and yes, we will be publishing our next set of results as we usually do. And as announcements are available to us, and we progress through the equipping stage, we will keep shareholders involved. So, just on behalf of my team, I just like to thank everybody who has participated today, and Lydia thank you very much for hosting and goodbye to everybody.

Thank you for joining today's call. You may now disconnect your handset. Host, please stay connected.