Perth Aug 12, 2015 (Thomson StreetEvents) -- Edited Transcript of Aquarius Platinum Ltd earnings conference call or presentation Wednesday, August 12, 2015 at 9:00:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Jean Nel Aquarius Platinum Limited - CEO ================================================================================ Conference Call Participants ================================================================================ * Patrick Mann Deutsche Bank Research - Analyst * Richard Hatch RBC Capital Markets - Analyst * Tony Lebon Oddo Securities - Analyst * Edward Sterck BMO Capital Markets - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, ladies and gentlemen. Welcome to the Aquarius Platinum 2015 annual results conference call. (Operator Instructions). Please also note that this conference is being recorded. I would now like to turn the conference over to Mr. Jean Nel. Please go ahead, sir. -------------------------------------------------------------------------------- Jean Nel, Aquarius Platinum Limited - CEO [2] -------------------------------------------------------------------------------- Good morning. Thank you, Chris. My colleague, Willi Boehm, and I are here together on the call. And we'll be using the presentation which is loaded onto our website as the basis for the presentation, for the discussion. Afterwards, we'd be happy to take any questions that there might be. Starting the presentation with slide number 3 marked -- or numbered at the bottom right, the 2015 financial year in summary. The year in which we think Aquarius continued to deliver on pretty much all the parameters within our control, but against the backdrop of a very challenging macro environment. Specifically, in short, operational delivery track record continues. We think it's now very well established and engrained in our DNA. The highest-ever annual production from both Kroondal and Mimosa in the history of the Company. It's the third consecutive year in which mining unit cost inflation was managed well below respective country benchmarks and respective country inflation benchmarks. Our labor relations continue to be -- the stability thereof continues to be a feature which we're very proud of and is not easily obtained. It's a lot of hard work that the team has put in to deliver that. Despite that though, because of falling metal prices, EBITDA down 9% from the previous year. But, both our mines operating consistently at the lower end of the cost curve. The non-core asset sales, which we had earmarked 18 months to 24 months ago, delivered up to day $60 million in free cash flow in the bank, which has helped us to strengthen the balance sheet to a position where there's significant net cash. Good progress was made on our two incremental projects, which we had previously defined, and we'll share some more details with you later on. Then our corporate cost base continues to reduce and continues to be the lowest in the sector. Turning the page to the 2015 financial highlights. Revenue decreased by 9% to $213 million, despite increased production because of lower metal prices. Also, resulting in mine EBITDA down marginally to $26 million from $29 million in the previous period, less than expected in terms of a reduction, given the low metal prices. That's because of excellent cost management, in my opinion. Reported net loss significantly influenced by a significant number of one-off items, the detail of which I'll go through later, results in a $98 million accounting loss. Group cash at the end of the year, on an attributable basis, just north of $201 million. Operating highlights on the next slide. In essence, what this demonstrates is consistent disciplined production, consistently reducing costs in US dollar terms, and well-provisioned operations. Specifically, safety improvements across the board at both Kroondal and Mimosa. And to note that Mimosa is now the safest platinum mine in Southern Africa. Attributable production increased by 5% to just short of 350,000 [full-year] ounces despite the impact of the strike on PlatMile. Unit costs at Kroondal increases by 1% in rand terms, and drops 9% in dollar terms. Kroondal mine life extended again by 4.8 million tonnes. A reconfigured mine life now constitutes a 10-year life of mine at current production rates. Mimosa cost savings starting to kick in and we saw a 9% reduction in unit costs. Stable labor relations, which I've already referred to. Slide 6 shows you just how metal prices have reversed and reduced. South Africa, the dollar basket down just on 7%. Zimbabwe, the dollar basket is down on 5%. In essence, in our view, and my view, dollar metal prices today at an unsustainable level. If this was to prevail for any period of time over the medium term, I have no doubt that primary supply will start to drop off. It is just not possible for the sector to continue to produce the volume that it's currently producing at prevailing dollar metal prices. That said, it's been my view for some time, and it still hasn't materialized. So I do continue to maintain that, until such time as we see supply restructure in the short term, it's very difficult to get positive about dollar metal prices increasing materially. So I would look at dollar metal prices increases to being a medium-term future. The graph on slide 7 tells you, or shows you, the picture for the year, and also confirms the dollar metal price is now at a decadal low. The next few slides move into a review of the individual mines, starting with Kroondal as usual. You'll note that we have changed the format, or the graphical illustration of production cost to revenue, just to give a more balanced view of medium-term performance. What you see there on the graph is 10 consecutive quarters of 105,000 ounces per quarter. Unit cost increases at Kroondal over the last three years are 3% per annum, compared to a mining cost inflation environment of pretty close to 8%/9%, in my view; so a very competent performance. That notwithstanding, we are assessing a number of alternatives, a number of measures aimed at further reducing Kroondal's unit cost, given the marginality of this mine at spot prices. I'll talk about the specific measures a little bit later. Slide 9 just breaks down the operating cost lines into the different cost components. I don't want to spend too much time on it; it's there for analysts' consumption. Slide 10 sets out the Mimosa performance in the same way as we did for Kroondal. Also, over the last 12 quarters you'll see the feature being consistently incremental improvement in production. You clearly see the gray line there, the impact of the cost-saving initiatives and efficiency improvements, which the mine has delivered over the last year, in the drop in the gray line. What you also see very specifically and very clearly there, the revenue line coming down, the drop in dollar metal prices over the last year. Mimosa's unit costs over the last three years, a reduction of 1% per year for each year, three years consecutively. Slide 11, again just an illustration -- or breakdown of the unit cost performance. Turning to slide number 12. Maybe just to give a bit more detail on two initiatives currently underway at Mimosa. The Mtshingwe shaft CapEx, which we had previously referred to -- or previously had informed shareholders. Effectively, for Mimosa to continue mining for the next 20 years plus, it needs to access a new block of ground; we were originally going to sink a second decline. You will recall last year that we said we have changed that to on-reef development from the existing Wedza block at 14 level. That CapEx is included in our stay-in-business CapEx. For the year, we developed 305 meters versus a budget of 300 meters, so costs are in line with budget and development slightly ahead of plan. A lot has been said about in-country beneficiation in Zimbabwe. What Mimosa is currently doing, in conjunction with the other two platinum producers, is looking at a number of alternatives aimed at assessing the viability of increased in-country beneficiation. Those studies are not yet completed, but they are well advanced and I expect to be able to give shareholders some more detailed feedback by the time that we do our interim results in February. We have noted the comments attributed to the Minister of Mines in Zimbabwe, in terms of which the royalty has officially been deferred. But, at the time of us preparing this account, that deferment had not yet been gazetted. As such, we felt prudent -- we felt it appropriate to make provision for that royalty. Platinum Mile, very briefly on slide 13. Whilst it's performance has improved year on year, it's not yet at a level that we are satisfied with. We are expecting Anglo to bring on stream it's Western Tailings dump retreatment project before the end of this calendar year. In which case, PlatMile will receive a significant boost in volumes, enabling it to produce more ounces at a lower cost. Very briefly on slide 14, a project update. Our view hasn't changed year on year. We said last year that we will not pursue projects unless they reduce the unit costs; unless they have low capital requirements; and unless they preferably lever off existing infrastructure, so as to further reduce unit costs. If anything, our view has strengthened in this respect. I will talk you through, on the next slide, just an update on the progress that we have made on the two projects which we had identified. But I'll point out the second-last bullet on that slide and, specifically, given the existing macro environment, we'll be very, very careful before we part with any capital. We'll make sure that it stacks up from a returns perspective relative to the prevailing macro environment. We will not reduce or increase unit production for the sake of volumes. We will only do so if we think our shareholders are going to receive an appropriate return. Turning to the specific projects on slide 15; the Kroondal tailings retreatment project. Essentially, the technical specifications and parameters, which we have previously shared with you, have not changed. What has changed though is that post-yearend, the Department of Water and Sanitation approved the designs and technical specifications required to implement the project. We do, as a consequence, expect the integrated water-use license now to be issued in the coming months, upon receipt of which we can proceed with detailed project implementation planning. So still around 15,000 to 20,000 ounces per year at a unit cost, which won't be too dissimilar to PlatMile, at a capital cost on a 100% basis of $23 million. The Mimosa expansion, we shared with you the pre-feasibility outcome in February. The bankable feasibility study is under way; it is scheduled to be completed this calendar year. I will share with you the outcome thereof at the interim financial results presentation in February. We remain optimistic about this project, specifically as it meets all the requirements, which we have previously set. So it will lever off existing infrastructure; it is short lead times; it is a business that we understand the geology, metallurgy and mining cost base of extremely well. We think it's relatively low risk and very good returns. No decision, however, will be made until such time as the feasibility has been completed, and I will update in this respect in February. Very briefly on asset sales, just to confirm the current status. On Everest, we have received Part A proceeds, ZAR400 million; that's in the bank. Part B is subject to the approval by the DMR of the Section 11 submission, which has already been made. The timing thereof is uncertain, as are most things dealing with regulators. But I do expect conclusion, successful conclusion by the end of this calendar year, following which the residual ZAR50 million becomes owed to Aquarius. The Kruidfontein transaction was completed this year; that money is in the bank. And the last remaining non-core asset, which is for sale and which we have tried to sell for some time, is Blue Ridge. We have not, to date, signed any agreements, but I can say that we've made substantial progress in this respect. I am hoping to give shareholders an update before the end of this calendar year. Turning to the financial slides. Slide 17 sets out the key highlights and presents a high-level view of the P&L. Starting on the first line, mine EBITDA for the Aquarius operation, that's principally Kroondal, $26 million for the year. JV entities would principally be Mimosa. But bear in mind, Blue Ridge also plays a small part negative role in the JV [giving us] $42 million, to provide an attributable EBITDA of $68 million. But as you may know, Blue Ridge and Mimosa is not consolidated into our accounts, so that comes out on consolidation, representing a Group EBITDA in the income statement of $26 million. Revenue $213 million and cost of sales including amortization at $211 million, resulting in a net loss of $28 million at an accounting level before one-off transactions of $70 million. Those are big numbers, and I'll go through exactly what those non-cash impairments relate to. The next slide sets out the P&L in more detail. Running through the specific numbers that are more material, financing cost includes about $10 million-worth of non-cash accruals. Note, the financing cost significantly reduced from the previous year, which is a consequence of buying back the convertible bond to a great extent. Next line, impairment loss of $29 million, principally represents the impairment of Platinum Mile by $28 million. We felt it's appropriate to reduce the carrying value of this asset, given current metal prices, given feedstock concerns around PlatMile, and given current performance. The profit on the sale of assets, $21 million, $19 million of which related Kruidfontein; the residual $2 million to Everest. Then a reversal of the foreign currency translation reserve, again relating to the Kruidfontein sale. The last significant number on the slide is the loss from joint venture entities, represents the further impairment of our Blue Ridge asset by $20 million. And then, we have taken -- we took the decision at the interim stage to discount the RBZ, the receivable at Mimosa level, by $28 million; those obviously both being non-cash items. Looking at the balance sheet analysis on slide 19. Reduction in total non-current assets from $533 million (sic - presentation slide 19, "$535 million") to $361 million, effectively a consequence of the impairment and discounting the RBZ receivable. Increase in current assets to $233 million represents principally an increase in the cash levels, following the non-core asset sales. Reduction in total non-current liabilities represents the movement of the residual $124 million-worth (sic - presentation slide 19, "$123 million") of convertible debenture from non-current to current assets, seeing as it's payable in December. And again, the reversal, or the other side of the coin, at total current liabilities. Cash flow statement on slide 20. $18 million net operating cash inflow. $39 million net investment inflow, resulting a 13 -- sorry, a $69 million increase in cash levels. The boxes below speak to the contributing factors in those. But, essentially, the non-core asset sales representing substantially all the net cash inflow, so for approximately $10 million. Slide 21 and slide 22, the last two slides that I'll speak to in detail. Briefly, on the way forward, we think we've established a very good, very credible track record for operating performance, cost management, production discipline and safety improvements. We're proud of our track record, and we're going to continue with it. That said, in the current macro environment simply being there is not enough to ensure sustainability and generate returns. There are a number of measures which we are currently assessing, principally around Kroondal, in terms of which we would be looking to reduce unit costs further. These include looking at changes to the shift system. They also include an assessment of the synergies that are there to be extracted between ourselves and neighbors, but which, to date, we have not found agreement on. We will continue with this, and we will share the details with you as and when we are in a position to do so. We are of a view that each operation has to be sustainable, and we don't take a view that we will continue to mine through the cycle, burning cash. We have to produce from each shaft at a cash-sustainable level, and that is the work that's currently being done. The balance sheet strength will remain a key objective. Despite the fact that we have net cash -- substantial net cash in balance sheet as at year end, we do remain of a view that we are able to carry a limited level of interest-bearing debt, probably substantially less so than what the view was a year ago. But in my opinion we could carry $30 million/$40 million-worth of interest-bearing debt on a sustainable basis. We have not yet managed to conclude a transaction that we think is in the interest of our shareholders in that respect, but we continue to look at alternatives. Then, we'll continue to do the work insofar as the project development is concerned. Both those projects will reduce unit costs, and will generate margins, even at today's metal prices. We think we should carefully consider -- continue to assess the viability of those projects. But, of course, we are getting to be even more protective of our capital. The last slide represents a guidance for 2016, in the same format as we provided last year and the year before. In essence, just to recap. Insofar as our 2015 guidance is concerned, we met and exceeded each one of the thresholds that we set ourselves. The future for 2016 is a theme of consistency. So from a stay-in-business CapEx perspective, you'll see that we have reined in capital even further, both at Kroondal and Mimosa; and to note that the Mimosa $30 million includes the development into the new mining block. From a production perspective, we're forecasting stable production levels at Kroondal and at Mimosa. And then lastly, from a corporate cost perspective we have reduced corporate costs even further, through a number of measures. These are tough times, but our operations are producing well. We remain focused, and continue to try and improve the business on an incremental basis, quarter in/quarter out. Those are all the slides that I wanted to refer to in detail. There are a number of annexure slides, which provide more information on principally certain accounting issues that you can work through in detail. Willi and myself are available on telephone and on e-mail for the rest of the day. Now, Chris, I'm also happy to take any questions, which any of the people on the line might have right now on the call. Thank you. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions). Patrick Mann, Deutsche Bank. -------------------------------------------------------------------------------- Patrick Mann, Deutsche Bank Research - Analyst [2] -------------------------------------------------------------------------------- Just wanted to touch on the restructuring that -- or potential, or what needs to happen, particularly in the western limb. Is there any possibility of Aquarius participating in the disposal of Rustenburg by Amplats? Are there other opportunities for consolidation and reducing current supply? You guys are now building up a track record of very good operators, doing a really good job from that side. Are you looking at that, or are you holding tight and letting the industry play out how you see it, it has to -- and kind of keeping out of it? Thanks. -------------------------------------------------------------------------------- Jean Nel, Aquarius Platinum Limited - CEO [3] -------------------------------------------------------------------------------- It's a tough question. The first thing I would say is that the restructure that is busy playing out from the western limb is principally driven, as per your question, by Anglo Platinum. We respect that those assets are theirs and are theirs to do with as they see fit. It's not for me to comment on whether -- what they are planning to do, and what they have publicly said is appropriate or not. What I would say, though, is that there are synergies. If you're operating a long strike as neighbors, clearly there are synergies. What we haven't managed to do substantially yet is to reach agreement on how those synergies are exploited. Whether we are able to do so remains to be seen; I don't have anything to announce. I am of a view that there are synergies. We've shown over the last three years how those -- how one can continue to improve performance if you focus across above-ground and below-ground, in terms of further cooperation. Whether that plays out in a manner in which we, fundamentally, can extract further synergies, I don't know; it takes two to tango. But, certainly, we are of a view that the operators in that area should continue to speak to each other, and to exploit the synergies that are patently there, much more aggressively. We don't have a metal price environment where people can afford to just continue operating in silence. It just doesn't make any sense to me. -------------------------------------------------------------------------------- Patrick Mann, Deutsche Bank Research - Analyst [4] -------------------------------------------------------------------------------- And then, sorry, just maybe a quick follow-up, if you don't mind. The PSA agreement, does that -- if Rustenburg is -- let's say, it's IPO'd and it's a separate company, does that go -- is that PSA with Amplats? Does it stay in place? Is there anything that's triggered by a kind of disposal of Rustenburg by Amplats, or is that agreement remain with Amplats? -------------------------------------------------------------------------------- Jean Nel, Aquarius Platinum Limited - CEO [5] -------------------------------------------------------------------------------- My -- again, you're asking me what Anglo is going to do with any -- so I don't want to comment on that specifically. The only thing I can say is, in our conversations with Anglo the Kroondal asset is ring-fenced from anything that they are planning to do in Rustenburg. So the best information I have is that if they were to IPO Rustenburg, or were to sell it, it does not impact on Kroondal in any way. -------------------------------------------------------------------------------- Patrick Mann, Deutsche Bank Research - Analyst [6] -------------------------------------------------------------------------------- Perfect, thanks. That was my question. Thanks very much. -------------------------------------------------------------------------------- Jean Nel, Aquarius Platinum Limited - CEO [7] -------------------------------------------------------------------------------- Sure. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Richard Hatch, RBC. -------------------------------------------------------------------------------- Richard Hatch, RBC Capital Markets - Analyst [9] -------------------------------------------------------------------------------- I don't see any kind of seasonality in production over the course of the year? Should we just assume that you basically do 2016 much as -- as the way that 2015 went, just in terms of production guidance? And then secondly, can you -- thanks for the production guidance, but just in terms of costs, what kind of inflation are you expecting to see in your OpEx for the coming year, please? Thanks. -------------------------------------------------------------------------------- Jean Nel, Aquarius Platinum Limited - CEO [10] -------------------------------------------------------------------------------- Okay, on the first question in terms of seasonality, the Zimbabwean operating environment is so enabling that they don't have much seasonality. So, unlike in South Africa where there is a formal break over December resulting in third quarter production pain across the mining sector, let alone the platinum sector, that's happily not the case at Mimosa. Hence, insofar as the production guidance is concerned, you wouldn't be too far off if you were to just divide the annual guidance by four to get to a quarterly forecast. Insofar as cost guidance was concerned, our policy has been, for many years, that we don't guide costs; it's a very dangerous thing to do. But I did illustrate in the presentation what the average cost increase or decrease has been in recent years. Our objective would be to continue to maintain unit cost increases below inflation. Obviously, the longer you keep doing that the harder it gets, but that's our job: is to continue to make sure that we manage costs below inflation. I would not want to give you a specific number, though, [Nic]. -------------------------------------------------------------------------------- Richard Hatch, RBC Capital Markets - Analyst [11] -------------------------------------------------------------------------------- Okay, cool. Thanks very much. -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- [Tony Lebon], Oddo Securities. -------------------------------------------------------------------------------- Tony Lebon, Oddo Securities - Analyst [13] -------------------------------------------------------------------------------- Just more questions on the financing side. Could you give more details on your cash position? Maybe if you can split the cash between your different subsidiaries, and tell us if some of this cash amount is restricted? I'm thinking of the guarantee that exists in South Africa, the bank have a currency on the assets. So I was wondering if the cash was included in the assets that were held as a guarantee. So if you have more details on that it would be nice, thanks. -------------------------------------------------------------------------------- Jean Nel, Aquarius Platinum Limited - CEO [14] -------------------------------------------------------------------------------- The cash that we represent on our balance sheet, $196 million, plus $5 million attributable to us in joint venture entities to get to $201 million, is all unrestricted. So, every cent of the cash is accessible at the discretion of the Company. The cash is held in different currencies in different companies. The South African operations' cash is held in rand; and the corporates cost is held in dollars; and Mimosa's cash is held in dollars equally. That is -- our discretion is if and when we convert rand into dollars. But what I would say to you is it's all accessible and it is all, as at closing FX rate at June 30, and amounted to $201 million. -------------------------------------------------------------------------------- Tony Lebon, Oddo Securities - Analyst [15] -------------------------------------------------------------------------------- Okay, thank you. So, just to [rebound] on that, so basically you intend to use your cash, your balance sheet -- your cash on your balance sheet to repay the convertible bond in December, right? -------------------------------------------------------------------------------- Jean Nel, Aquarius Platinum Limited - CEO [16] -------------------------------------------------------------------------------- Yes, there are $124 million due in December. -------------------------------------------------------------------------------- Tony Lebon, Oddo Securities - Analyst [17] -------------------------------------------------------------------------------- Yes. All right. Just another question, if I may ask? You talk about a disposal of Blue Ridge. Is it possible to have the color of the disposal amount you expect from a potential transaction? Will it be double-digit or single-digit amounts in US dollars? -------------------------------------------------------------------------------- Jean Nel, Aquarius Platinum Limited - CEO [18] -------------------------------------------------------------------------------- It's not appropriate for me to tell you now what I think we will realize. What we have said for some time is that the asset is for sale. We are in discussions with an interested party; advance discussions, for that matter. But these things are -- you should never count your chickens in this respect before they hatch. So if and when we have an agreement that we think is credible, we will release the terms thereof. And, until such time all we are prepared to say is that the asset is for sale. There's a plant there; there's infrastructure there; so there's value, but as to what we can realize for it time will tell. -------------------------------------------------------------------------------- Operator [19] -------------------------------------------------------------------------------- Edward Sterck, BMO Capital Markets. -------------------------------------------------------------------------------- Edward Sterck, BMO Capital Markets - Analyst [20] -------------------------------------------------------------------------------- So, I'd just like to go back to the question of the PSA at Kroondal and the potential disposal of Rustenburg by Amplats. Just to be very specific, have all of the reserves been put into the PSA from Rustenburg? There is no way under the disposal that they can be extracted again. -------------------------------------------------------------------------------- Jean Nel, Aquarius Platinum Limited - CEO [21] -------------------------------------------------------------------------------- Correct. -------------------------------------------------------------------------------- Edward Sterck, BMO Capital Markets - Analyst [22] -------------------------------------------------------------------------------- Okay, thank you. And then just a follow-up on that. You talk in the presentation about examining all of the shafts or declines at Kroondal. What kind of scalability and flexibility is there? How easy is it to put those things on care and maintenance? Can you give us some kind of indication of what the expected care and maintenance costs on a per shaft basis would be? -------------------------------------------------------------------------------- Jean Nel, Aquarius Platinum Limited - CEO [23] -------------------------------------------------------------------------------- So we are doing a review of all our shafts. We have no intention at this point in time to put anything on care and maintenance. But Kroondal is a five-shaft, two concentrator plant complex, and each shaft has to wash its own face. That is our position, as I would hope the position would be of any responsible mining company. But, just to be clear, we don't have an intention to put things on care and maintenance, at this point in time. What we are saying is that we have to make sure that -- we have to assess all the alternatives available for us to further reduce unit costs, so as to ensure that they are sustainable at what, we think, will be prevailing metal prices. -------------------------------------------------------------------------------- Edward Sterck, BMO Capital Markets - Analyst [24] -------------------------------------------------------------------------------- Okay, thank you very much, that's very clear. -------------------------------------------------------------------------------- Jean Nel, Aquarius Platinum Limited - CEO [25] -------------------------------------------------------------------------------- One can look at shift change; you can look at sharing infrastructure above ground; you can look at sharing infrastructure below ground. There's a number of initiatives. What we're just saying to the market is we understand that metal prices, at this point in time, and that the cycle is tough and we are not going to just carry on and hope for better days. We are going to take action and we are going to do everything in our ability to make sure that we have a sustainable operation. That is what we're going to do. -------------------------------------------------------------------------------- Edward Sterck, BMO Capital Markets - Analyst [26] -------------------------------------------------------------------------------- Excellent. Thank you, Jean. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- Richard Hatch. -------------------------------------------------------------------------------- Richard Hatch, RBC Capital Markets - Analyst [28] -------------------------------------------------------------------------------- Just another one. Just on your Q4 production report you just talked about challenging conditions at K6. I just wonder whether you could just expand a bit more that and just talk about how you're getting on there, please. -------------------------------------------------------------------------------- Jean Nel, Aquarius Platinum Limited - CEO [29] -------------------------------------------------------------------------------- K6 is our newest shaft, if you recall, at Kroondal; and hence, it's pretty close to surface. We have encountered more potholing than what we had anticipated, and so development cost and development timelines were not what we anticipated, and it took a bit longer. What we are experiencing is, as we increase depth, conditions are becoming more favorable, so less potholing and hanging wall conditions are more stable. These things are hard to predict. What I would say to you is that the performance that we have delivered was notwithstanding those problems that we encountered. The production forecast, which I shared with you on that last slide, again take into account our view of what conditions will be going forward. So, yes, we did encounter some geological problems at K6, but nothing that we felt required us to reduce guidance. -------------------------------------------------------------------------------- Richard Hatch, RBC Capital Markets - Analyst [30] -------------------------------------------------------------------------------- Thanks very much. -------------------------------------------------------------------------------- Operator [31] -------------------------------------------------------------------------------- Gentlemen, it appears we have no further questions. Would you like to make some closing comments? -------------------------------------------------------------------------------- Jean Nel, Aquarius Platinum Limited - CEO [32] -------------------------------------------------------------------------------- Thank you very much for dialing in, appreciate the time. Willie and I are available on email and on phone should you have any follow-up questions. Looking forward to seeing some of you on the road soon. -------------------------------------------------------------------------------- Operator [33] -------------------------------------------------------------------------------- Thank you very much. Ladies and gentlemen, on behalf of Aquarius Platinum, that concludes this morning's conference. Thank you for joining us. You may now disconnect your lines.
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