Caledonia Mining Corporation Plc (CMCL) Q3 2023 Earnings Report, Transcript and Summary

That's Maurice. Right, okay. So I'm, as I said, Mark Learmonth, Caledonia CEO. Joined by Victor Gapare, Executive Director. He is in Harare today. Chester Goodburn, the CFO, is in Johannesburg. Maurice Mason, Vice President, Corporate Development, and Camilla are both based in London. And Dana sends his apologies. He's traveling in Zimbabwe today. Okay. So as you know, we'll go through the slides. There will be plenty of time left at the end of the presentation for questions. And so let's just -- so let's get going. So by way of summary, the production, we've already previously announced. It was 22,900 ounces for the quarter. Of which, Bilboes was about 1,000. So production for Blanket was just under 21,800, which was a production record. I forgot to inform, after a great [Audio Gap] gold price, which supported the revenue. The gross profit was a big improvement to what it has been in the previous quarter. It actually did -- through this presentation, you'll see that we do need to pay some attention to 2 specific areas in the cost line being our use of electricity and labor costs. Both of which, we need to pay some attention to. And again, the other thing I'll take away from this sheet is the very strong net cash inflow from operating activities of $14.4 million, $14.5 million for the quarter, which is pretty much nearly a quarterly record for CapEx. And in the quarter, we were continuing to spend a lot of it primarily on the new tailings facility, which I'll talk to in a moment. That's a summary of the results. Can we go on? Yes. So I mentioned that there's a quarter of production -- in the quarter, a kind of record of Blanket. Consolidated on-mine costs are better, but we can do work to improve them further. During the quarter, we announced some very encouraging drilling results from Blanket. And that work continues. But pretty much 2/3 of every hole we drilled came out better in terms of width and grade. In due course, that will then be fed into a revised resource statement. And then in due course, that will flow into a revised life of mine plan. But we would expect the most positive trending results to flow through into incremental resource and an extended life of mine. The reasons, perhaps we can discuss later. I really don't think Blanket's -- it's probably more likely that Blanket will extend its production rather than increase its production. And perhaps, we can come back to that too in a moment. Bilboes was returned to care and maintenance, as we previously indicated, with effect from the 1st of October, when the mining contractor's [ testing ] period run out. We expect that to result in a significant reduction in the cost of Bilboes, about $1 million a month to $200,000 a month. For the next quarter for Q4, we're hopeful actually the business -- that Bilboes will be cash neutral as they continue to collect gold from the heap leach. The EIA at Motapa has been approved, so we'll be able to mobilize on the ground in Motapa early new year as the drilling season starts. Then we've also received an offer to purchase the solar plant. Again, perhaps we can discuss that perhaps a little bit later on. Terms not disclosed yet, but we were confident in -- we're confident we can sell it for more than we pay for it. But we don't need to own that solar plant. We only need to do credit a benefit from the cheaper electricity producers. We don't need to have our capital tied up in that. And then the tailings facility, the new tailings facility, that we've already been spending about $25 million this year and next year, we started pouring on that a couple of weeks ago. which now takes the pressure off the existing tailings facility, which was reaching the end of its useful life as we increased tailings throughput from 1,900 tonnes a day to 2,400 tonnes a day. When completed by the end of next year, the new tailings facility will have a life of about 14 years. So it's a long-life asset. Again, just in operational terms, as this is not an easy one to talk about, you can see quite clearly towards the right-hand side of the top graph, the gray line. That's the tonnes. You can see from quarter 4 to quarter 1, the tonnes took a fairly sharp dip and have now recovered in Q3 to where we expect them to be. The increase in grade is as planned. So the increase, that's not something we weren't looking forward. It was -- that was in accordance with the mine plan. So as I mentioned, the return to tonnes milled and target grade is behind the return in production to where we expected it to be, which is good. If you move on, let's go to the financial section. So I'll hand over to Chester, CFO, to take us through these following pages dealing with finance. So Chester, over to you.

Thank you, Mark. Our revenue is up 15% quarter 3 2022 to Q3 2023 after the increased production from Blanket mine. Blanket mine, this quarter, is increasing production, so it's a very good quarter for us. And that shows a turnaround from what Blanket then [ previous ] result. Overall, we had 2.5% more ounces that we sold during the quarter. And we had an increased gold price from 12%. Unfortunately, our production cost increased. As Mark said, the production cost at Bilboes oxides was about $300,000 per month. That's $600,000 per quarter. And we are quite pleased to see that $3.3 million that we spent on Bilboes for Q3 come down to about $600,000 in [ India ]. Blanket started to increase our costs by $1.1 million. That was due to high interest usage as well as overtime spent on labor. And we'll come on to that in a little bit later. Go down to our tax expense, looking at our tax expense for the quarter. You see a high effective tax rate. That's due to the -- predominantly due to Bilboes oxides that are re-enhanced and cannot be deducted from the tax expense. And if we count back to all those operating costs, you'll see that our tax expense should normalize. So we expect that to normalize to effective tax rates that we've seen in prior quarters. Adjusted EPS is lower on a consolidated basis, predominantly due to the buyer costs, and we'll get on to the production cost on the next slide. Next. Looking at our salaries and wages. At Blanket, that very much increased due to head count and overtime. We should be able to look at that over time and utilize our labor force more effectively, like we've done producing the same amount of ounces and similar tonnages in 2022. We'll use that. And we'll get back to the markets and inform you about our initiatives that we will implement for the overtime and the head count. The issue in our kilowatt usage has been increasing over the year, and that's predominantly due to new shafts that we've -- the new Central Shaft that we've commissioned. And we're running 3 shafts at the moment. We're also looking at reducing our kilowatt per hour usage. What's good about these 2 [ uses of solvencies ] is that it should be coming out in full. So it should be [ premium ] before that and enabled to operate at lower cost. And we should be able to find initiatives to reduce these costs. On the Bilboes oxide side, as I've said, that cost should be once-off. That should be reduced to about $600,000 for the quarter from next year, significantly reducing our cost to what we see in our life of mine estimates. Turn a page, please. From administrative expenses point of view, to highlight the big increases. There were some really big spend increases on advisory services fees for [ $3.1 million ] an ounce, all the way up on Bilboes sulphides. That was the stated advising fees on the completion of that deal. Listing fees increased throughout the year, and that is due to the successful lines of dividends that we had on Q1 and Q2. Wages and sales increased due to additional staff members that we've been taking over the -- we took over in the Bilboes deal. And they're currently helping us with things like the feasibility study. And I'm quite pleased to see that we're making some progress in that. Further, we've added some of the additional governance structures and increasing our internal audit department and also bolstering up our IT resources. Now if you look at the total there, if you exclude once-off payments like advisory fees on Bilboes and the position of Bilboes, we should be able to reduce our administrative expenses to very close to what we've been spending in previous quarters and years. Turn the page, please. This is a illustrative example of our on-mine costs. You see the contribution of Bilboes oxides on the green block on the on-mine costs to the left. That, we believe, should come down to about $600,000 a quarter. So we do have a plan for that. Reducing our online costs enable to find solutions to reduce our kilowatt hours to what it used to be. Similarly, labor, that should come out. And if those 3 costs increases come out, we should be able to get our on-mine costs down to what you've seen in the life of mine between the [ $815 to $850 ] per ounce. The outstanding cost was mostly influenced by on-mine costs. And if we fix the on-mine cost, you'll be seeing that similar to what we re-estimated on the life of mine. Turn the page, please. You can see the tax. We've got a higher effective tax rate predominantly due to the Bilboes oxides operation losses being ring-fenced and being not deductible against our tax charges. We map our taxes on -- or are calculated on denomination of RTGS and U.S. dollars, depending on what the transactions they normally fit in. And that sort of puts it a little bit off from what you expect due to the RTGS devaluations. But if we take out the Bilboes oxides costs out of the profit before tax, you could see our effective tax rates normalizing to what you see in other quarters. Throughout all this, the Zimbabwean tax -- enacted tax rate remain at 24.72%. Moving on. Looking on the balance sheet. Firstly, our long-term assets. We increased that due to the Bilboes acquisition. Our current assets will increase due to the solar sale. We plan to sell the solar plant and then move the solar plant from about [ $14.2 million ] down to the current asset strategy from our owned assets. And we have to make a good profit on the sale of the plant and use all of that from the sale of the plant. We should be able to use that, the proceeds from the solar plant, and investing that in our future gold businesses, which yield a high return. On noncurrent liabilities, liabilities have been fairly flat. And noncurrent liabilities increased because of the issuance of the solar bonds earlier this year. Turn the page. Our cash is in the right places. We expect these cash balances to go up. Currently, we are exchanging all our RTGS balances, and we are in mechanisms to exchange our RTGS balances. We are not holding up any cash balances in Zimbabwe that we cannot move outside. Can you turn the page?

Can I -- sorry, can I interject here? So I just want to, before we go too much further, just reiterate more clearly something that we've said for a long time. We're going to -- we'll always have capital allocation decisions. But as we move forward with the evaluation of the Bilboes opportunity, we have to be very clear on how we're going through this capital allocation process. So as I mentioned before, our primary objective is to come up with a commercialization approach for Bilboes and indeed all of our investments, which optimizes the net present value of Caledonia share, so the net present value of future cash flows attributable to a Caledonia share. And that takes into account any dilution that will be needed to fund the new project. Again, so as we said previously, we're not interested really in doubling production or tripling production or doubling or tripling the number of shares on issue because that just effectively means that we've stood still. I'm going to talk a little bit later about where we are in terms of the Bilboes feasibility study. As Chester mentioned, we are fairly advanced in discussions to the solar project, which will release capital for the non-core asset at a premium to what we paid for it to recycle into our core business, which is developing and running coal mines. In respect of the Bilboes transaction, we are considering a phased approach. So refreshing the initial feasibility study is a relatively straightforward exercise. But preparing a new feasibility study for a smaller phased approach is a brand-new piece of work, which requires new pit designs and also some other stuff, which will take slightly longer. And it's also fair to say that whilst we have an appetite for some gearing in our overall capital structure, we, I suspect, will be relatively conservative when it comes to that. So I just thought it's worthwhile just explicitly saying a few words in respect of our capital allocation policy. Maurice, could you move on to the next page? As mentioned, the Bilboes gold updates. This quarter just finished, quarter 3, will be the last one to be affected by the negative contribution or the large negative contribution from Bilboes. And we expect the monthly costs to reduce from $1 million to $200,000. And for this quarter, Q4, we'd expect that to be broadly cash neutral as we continue to harvest some of the gold that is on the heap leach. It's disappointing. The disappointing production from the oxides has no bearing on the quality of the underlying sulfide resource. We entered into the Bilboes transaction to acquire and develop the sulfide resource, about 2.5 million ounces at 2.3 grams a tonne. The oxides was just fueling incidental. So one of the things we'd hope to avoid doing was having to retrench a considerable number of our employees. We hope to hold that, but I'm afraid we couldn't avoid that. And so we have had to let quite a lot of people go, which in context, especially in the context of the recent elections, was -- well, something we'd hope to avoid doing. But we are where we are, and we couldn't sustain that cash drain for any longer. Work continues on the revised feasibility study, as I just outlined. The work in terms of updating and refreshing the existing large-scale project is relatively straightforward. The new work on a phased approach will probably only get completed in the first quarter of next year, and we need both bits of information to be able to make the appropriate capital allocation decisions. So we'd expect to be able to get some further guidance early in the next quarter. Could we move on? Okay. So in terms of outlook, hoping we're going to continue producing at Blanket in the targeted range of 75,000 to 80,000 ounces and pretty much similar going forward. As I mentioned, the encouraging drilling results at Blanket will certainly flow through to an increased resource base, which will probably result in an extended life of mine rather than increased production. To increase production at Blanket will require probably a disproportionate investment in things like mills, stray old tanks and nonproductive social infrastructure, which means that it is becoming -- it will become more expensive just to have an extra sort of 5,000 or 10,000 ounces. And we could use that money to better effect elsewhere. I mentioned the feasibility study at Bilboes. And having got the EIA approved at Motapa, as we get through the rainy season in Zimbabwe, then that would be an appropriate time to actually connect people, connect resources to the ground at Motapa. Can we move on? I think we're finished. Yes. So I think that's the end of the formal presentation. We're very happy to open it to questions. Any questions?

I have some questions. Hold on a second. We've got to wait. Just give me a sec. Just give me a minute.

This is [ Ernie Molesh ]. I've got a question concerning the electricity supply. How much is the electricity actually costing you? Is it -- you said $2.6 million per quarter. And then could you break down how much of that is really fuel cost in South African rand maybe? And then how much is coming off the solar plant?

Okay. Well, 25% of the power use comes from the solar plant. The same -- I don't know if I explained this before. It's a little bit complex, but I'll do it again. The solar plant is owned by Caledonia, not by Blanket. So Caledonia is 100% of the solar plant. Caledonia only owns 64% of Blanket. We, Caledonia, funded the solar plant. And so the benefit arising from the solar plant is crystallized at the Caledonia level, not the Blanket level. So the solar plant sells its power to Blanket at, correct me if I'm wrong, Chester, it's about $0.13 a kilowatt hour. It only costs about $0.01 or $0.02, if that, to produce it. So the profit arising on the -- the benefit arising on the solar is crystallized in Caledonia, and that's reflected in the all-in sustaining cost per share, not the on-mine cost. So it's a bit of a wrinkle, but I think you'll understand why we're doing it. Chester, the cost of the grid power, is that about [ $10.08 ]? is that correct?

Yes, [ $10.86 ].

Now that is -- we import the grid power we import through a facility called the Intensive Energy User Group, which was a, let's say, a sort of industry body, which sat upon the [ aegis ] of the President actually. And that imports power directly from Mozambique and Zambia, which means that we benefit from a cheaper rate of the imported power than we would if we were buying grid power in Zimbabwe. I think the grid power, it always just goes up. Is it right now about [ $0.16 ] now, Chester or Vic? The grid power is in the numbers spent, isn't it?

13-point-something cents.

Okay. I didn't -- I thought I read something yesterday, which said it was going to go up even further. So we do get the benefits of -- from grid power but we're getting it at a cheaper rate. But we still suffer a very unstable grid power supply because the Zimbabwe grid is very dilapidated, particularly in so far as it serves Blanket, which means that we continue to experience power interruptions and voltage spikes and troughs, which then means we have to fall back on to the diesel generators. The diesel generators, I think, will cost about $0.45 a kilowatt hour. Chester, do you have at handle to memory the approximate split of the power usage just between solar, grid and diesel? Do you have that at hand? This often -- so I know where it is. I just can't remember what it is. If you don't, we can provide it later. But do you have it now?

Hold on one sec.

All right. Right, whilst we're talking. There are some very technical things that we could try and do with the solar farm to improve the quality of the power we receive through the grid, and that's called power factor correction. And that's something we're exploring with the proposed buyout of the grid, which would mean that on the one hand, we would get less direct power from the solar project. But on the other hand, it would mean that we could use a higher proportion of the grid power that we get into the [ IEG ] and thereby displace the use of the diesel. So we'll be losing some -- the use of some solar but in certain forgoing solar for displacing diesel, which will be a very powerful benefit for us. So we're exploring that with the purchaser of the solar project. So sorry, that was a very complex long answer to quite a simple question. Did I answer everything? Or do you have some other question?

Yes, that answers most of it. Just out of curiosity, -- is the solar farm already paid for? Or how much profit do you expect to get after the sale of that?

It is always paid for an equity, we've not disclosed the price because that's an ongoing negotiation. So it's a very reasonable question, but very easily [indiscernible]. But we are expecting -- but we are expecting to sell it more than we paid for it.

Okay. Let me turn it around. Is there a prospect of doing another solar farm if you get another 25%?

Yes, there is. I mean the buyer for some project is interested in developing its footprint further in Zimbabwe. So very much there is the option to do more so I'm going to say maybe we have a smaller top-up planned Blanket, maybe it won't be very big. But Bilboes -- if we can get -- and there's no reason to believe we wouldn't be able to. If we can get power through the intensive energy user group for Bilboes because Bilboes is in a much better position geographically vis-a-vis the Zimbabwe grid. Bilboes could probably manage very effectively with imported power with relatively little in the way the power interruptions. And so the benefit of total power for Bilboes may be much smaller than the benefit is a Blanket. So it's not altogether clear towards whether we would actually need to put a solar project in a Bilboes. So again, that will come out of the evaluation. But much the buyer is the sort of buyer who is there to get bigger? Are they using this -- the purchase of the blanket seller project as sort of a startup -- starter in Zimbabwe.

That answers my question on that. I've got another question on Bilboes sulphide project. On the -- are you contemplating using other approaches other than by for processing that. I know there's quite a few projects coming online in Africa, where they're having different sulphide projects being exploited and a lot of the technologies are not using Bi ox. They're using some kind of oxidation method that's cheaper and more effective than Bi ox.

Yes, Victor, are you able to address that, Victor?

Thank you very much. Here during the feasibility study, which we did, we did look at the various options and the option which seems to give us the least capital costs and also in terms of treating the material itself seems to be Bi ox. There are some other options, which are our consultants have suggested that when we do the feasibility study going forward, maybe we may look at and review. But pretty much a lot of wait was done during the feasibility study, and Bi ox seemed to be the most logical one from a CapEx point of view, plus also from a probability of other operations, which are using Bi ox in South Africa.

It's also fair to say only that there's been very, very limited prospect to export concentrate from Zimbabwe. [indiscernible] red line or policy red line in-country beneficiation. So our ability to export concentrate, so I don't how much we get it to the face. So we've got to have something in country, which you're going to get into 99.5%. Does that answer question, Jay?

Yes, it does. Thank you.

Okay. Any further questions come on?

Yes. There are a few. I'm going to deal with the [indiscernible].

This is a direct question. Can you may take us through any changes in legislation and regulations that might have affected Blanket and Bilboes, I think over the last 6 months. And obviously, we've been through -- you guys have been through -- Zimbabwe has been through an election. Has that had been a reflections?

Not that I am aware of. I mean the elections all seem to -- very, very calmly actually, we compared to what we are expecting. Victor, do you want to -- do you have anything that you're aware of, Victor?

No. The usage anything really from a policy perspective, which has changed. The election isn't -- in terms of continuity of policies, we expect the policies to continue. And maybe everyone which we may point out is the fact that -- there are the set of legislation, we say the U.S. dollar regime or the multicurrency regime currently in place would end in 2025. They've actually extended that by another policy instrument which as it does in 2030. But the way we look at it as so in terms of most of the officials, they're looking at it from the point of view that they -- maybe the multicar disappears is well seen economic conditions have been met. For instance, the inflation, the input cover in terms of ForEx, those are the critical things for the board's current regime to end. And obviously, the confidence in the public currency.

So clearly, you have some more because you won't I doubt you asked that keep answering -- you must have something in mind.

Well, what you should have been saying, Mark, is that you may be the first company to get gold through the [indiscernible].

Yes. That was the reason. [indiscernible] I mean just to reinforce the point, we felt -- we've been exporting gold directly from Zimbabwe since, I think, April. So that's not new. One of the -- and actually, I think really, I'll turn around, I would say that the -- we've seen quite a welcome period of policy stability actually in Zimbabwe in recent months. I pray shouldn't say that because , but pretty much we've seen things to be relatively same. And long way that continue. Because, frankly, that's the biggest -- the hardest thing for us to deal with is roughly changed the policy, which in the past have caused quite a lot of dislocation and caused us some headaches. But all seeing relatively stable now.

Okay. Excellent. Just over time, your go-to solution for shortfalls in production.

No, it didn't. Over time, since really go to physicians, people are looking at production benefits. So now we've got more -- we've got to have a much, much closer attention to the scheduling of labor so that we get people down the shops into that place of work more effectively and more efficiently minimize the time they spend waiting to own shaft or that's that scheduling. And again, it's not difficult, okay? So no, we shouldn't be using over time.

Harry, I'm not sure -- I know you had a written question. I'm not sure if you've got an additional question that you want to...

Can you hear me? I'm looking at your diluted earnings per share and your regular earnings per share. If I take $5.6 million of profit and divide it by 19 million, that's $24 million -- $0.24 a share. Do you have more than 19 million shares?

No, that 19, 19.1 million shares.

So how did the diluted earnings become $0.15. What's the dilution? It looks like a miscalculation?

Chester?

Yes. The movement in quarters and how it makes look -- if you look at the [indiscernible] effect for the 9 months, a lot smaller.

So it's a sort of quarter-on-quarter presentation. I think. I'm sure Chester will be delighted to take you through a little more detail on. But I think it's a reason asking that question in this forum.

Even quarter-on-quarter, you still only have 19 million shares, no matter what quarter you're taking?

Just I don't believe it's -- I don't believe there's no, I'm confident that Chester can take you through it on a sort of a detailed calculation basis. I don't think he's able to do it sort of quite off the cup like this.

But just send me a note. Second, do I understand correctly that by putting Bilboes on care and maintenance, you're going to save $800,000 a month or $9.6 million a year pretax. Is that correct?

That's correct, yes.

Well, that's $0.45 a share after tax. That's a lot.

Yes, that's what we're doing it. Well, put it the other way about it was also cash and is unsustainable and we have this call.

That's all right. As for the proposed sale of the solar plant, will you pay more in rate to the buyer than your cost is now?

No. The reason is just truly their cost of funding is lower than ours, hence, the payment is purely that's all in this.

That explains it. And finally, and because that Bilboes, the ore that you thought was there is not there. Is there a way for you to clawback some of the sales transaction in -- the price of the transactions?

No, because actually, Victor the vendor is [indiscernible]. You can ask him. And I think that will be this can we claw some money back from you for the oxide.

Yes. So -- most of the ore is actually transitional. What we thought was outside this transitional. And this is our plan. We were always going to mine the ore. But the issue is when we do the credit trade for the [indiscernible] project, that we will bring to mine. Basically, it come almost like a free or in the fat the mining cost, they were shipping, they are already borne by the sulfide project. That's how it was going to contribute. So that's all is still there with mine, some areas, okay, some areas we didn't quite get the ore, most of the transition on or what we thought was outside is actually transitional. So it is there.

And the other ores, it is oxide or sulphide [indiscernible]?

The sulphides, obviously, between the oxide and the sulphide you normally get a transitional zone. So is that transitional ore from the transitional zone, you can't really protect it is oxide, your coverage will be poor. But when we actually do the sulfide project, we're able to process that by blending it together with the sulphide in certain proportion so that you give maximum recovery out of it.

Okay. And the main ore body, does that have what you think is 4 million or 5 million ounces?

It's 2.5 M&I, another 0.5 million that's inferred but it's fair to say there is exploration potential, but we're not pursuing that at this stage.

So 3 class at this time.

Yes. M I, M I. Yes.

We've got a few written questions. So the first one is, how do you expect Bilboes in the [indiscernible] to add to total revenue and profits for the next 5 years.

Well, it depends very much. It's impossible -- well, on the top up, I think it's like in the top and we'll start production in the next 5 years. I don't know. Bilboes, that depends entirely on whether we go for a big buy approach or a place approach and until we have an answer, it's just [indiscernible] I just can't answer that question until we've got a clearer route on commercialization. So I mean it's fair to say that when we bought Bilboes, we worked on the basis of a big bang approach. And we could still do that, but we're looking to optimize the assumptions from those which we use when we bought. So we're looking at a further improvement. There's nothing wrong with the project as it currently stands with a big project approach, which we find something better. Better than that. So the -- I can't translate that -- I can't answer that question in terms of dollars revenue. I just want to go back to that comment a bit earlier on about our approach to capital allocation is we're trying to find a smarter way to commercialize this asset, which balances growth and minimize dilution to the benefit of shareholders, not chasing revenue.

Next question is, can you talk through the rough expenditure on Bilboes various feasibility studies? And could you go through any planned exploration programs at various site?

So just read that again. I couldn't just -- read it again.

Can you talk through the rough expenditure on Bilboes various feasibility studies?

Victor, what's the cost of the feasibility study?

Okay. The work which we are doing now are probably to get to feasibility study-- probably spend something. I think in budget we put something at USD 5 million.

Okay. And that is a very broad -- it includes an awful lot of, becomes many areas, doesn't it. It's quite a complex project so it does cover many areas. Do you want to talk.

Yes, it does cover many areas in the sense that the way we're looking at it is in terms of fair approach. It can be purely a new project at the end of the day, you have to do new designs and things like that. So unlike where we look at the bigger project, we still look at the bigger project to see whether we can find it. So then we update on the cost. And also, in the last few months, as we've been looking at it, there are a lot of areas which we already identified as areas for optimization. So that's the kind of point which we're doing optimization in terms of various waystream and also in terms of maybe managing the capital expenditure.

So do you want to go into a bit more detail on those various extents.

Okay. I'll just pick a few. For instance, the big one way we're expecting to made quite a big saving on our capital will be about the tailings facility, for instance, in terms of how we construct it and also taking a fair approach which then reduces our peak capital funding when we start the project. So that's a big one. We expect it to be quite a big one. Plus also if we go with a smaller project is we go with a smaller tailing facility. Also in a way so that will reduce the CapEx. And then from a mining point of view, the way the pit have been designed, obviously, by i.e., managing the way you do your waste stripping when you start. We do expect to reduce maybe the capital expenditure at the beginning. These are the major waystreams which are on. We've also at the issue of the electricity. If we are drilling the big project for et we'll have to build a new power line, which is about 75 kilometers. But we have to look at that. If we do the smaller projects, we drill some way to see whether the existing line can naturally be upgraded or can naturally take the amount of power, which we need. We're working very closely with the power utility that we point net. But I think obviously, the other issues that are maybe the contractor will be doing the mining. We're looking at optimizing that in the sense that if that contract is also mobilized to do the tailings facility for instance, we only pay one mobilization here and things like that is we shops to let to look at these wishes. So there are many areas which we're working on at the moment, they're we're quite optimistic in terms of maybe coming up with a better capital estimate for this project and also better operating cost for the project.

So let's [indiscernible] anything else?

Yes, there is what are your thoughts on near-term future CapEx in 2019, 2020? We obviously thought that was going to go down and CapEx is roughly doing the amount of operating cash flow. Do we expect that to decline free cash flow to increase and a larger dividend?

No, we do expect CapEx to go down, but I think to increase the dividend in the context of a very substantial investment program would be I can't see how we could possibly justify that. Although we do expect CapEx to come down and therefore, free cash flow to go up. But I can't at this stage and give you the dividend given the fact we've got a large, quantified CapEx program coming towards us.

And then there's one more, which says, when will the current recovery at Bilboes oxide be completed?

Victor, we secondly ended this quarter. I mean outright the end of this quarter, it doesn't trickle on into I want to say, first of all, let's be clear, we're not talking [indiscernible], okay. So let's put it in contracts. My understanding was that we thought that the continuing heat leach would go for quarter 4 and then not into next year. Is that correct?

It should really end at the end of the year. unless if we -- if the recoveries are showing still in showing that we can recover any more gold, but I think that has developed with the cost of doing host.

Yes. But I really would encourage you not to start focusing on the heap leaching from the oxide that really is going to be done in the [indiscernible]. Any further question?

Yes. There is one more that just come in. How is the South African rand affecting your supply cost, especially with fuel and materials.

It's not. I mean, Chester can probably talk about this better but South African suppliers typically charge us in run sort of a trough dollar price. And so we're not -- I mean lots actually in the cost analysis that Chester put up. We've not seen any increase in our consumable input costs, which is still very pleased to see. So the simple answer is that we are not -- that the answer is not having an effect at all.

There's one more. Do you plan to increase the spend on exploration at Blanket?

The Blanket -- not substantially. I mean, the cost of the exploration program at the Blanket isn't particularly significant, it is more constrained by logistical just get billing excavating the drill copies they're working for us, but it's not particularly expensive program. And we're very comfortable that the results we've seen so far and the results that we're expecting to see to the ongoing exercise will give a very substantial uplift in resource base and life of mine. For us to go the other exploration area that we could we do plan to do in due course of Blanket will be a long strike to the north and the south, but also to the east at 800 meters to the east on the [indiscernible]. But again, we've got many competing needs for capital. And there's a limit to how much cash we can spent. It's not a lot amount of money expense. At the moment, I'm comfortable that the exploration activity of blanket is more than fit for purpose. And I think the other area we have to spend a lot of money at Blanket is not direct an exploration that's related. It is upgrading the IT systems and the software packages that we're using in the own department which has actually paid dividends very expensive, but is paid dividends in terms of improving and making much more real-time our mine planning system, which we think that we can adapt to changing circumstances as we see them. And actually, that we are expecting will probably crystallizing a modest reduction in some of the capital programs that we have planned for 2024 which now using the better mine planning software we've got, they mean that we actually don't need to do some of the stuff that we would do. So that is paying for itself. So again it's quite a long answer to quite very short question, but I think that answers it properly. We just give a pause to give to see if anyone else wants to -- just a minute or so to see if anybody else wants to ask further questions. Victor or Chester, do you have any final observations you'd like to make based on the questions that we've received and my attended answers.

Not for me, Mark. Thank you.

Okay. Chester?

None for me. Thanks. No.

Okay. No more questions?

Nothing. None.

Okay. Well, thank you all for attending, and we'll do this again or we can publish our next quarter results, which will be towards the end of March to be Q4 numbers talking [indiscernible] the auditors get involved. Okay. Thank you all for attending. Thank you very much.