Q4 2023 Anglogold Ashanti PLC Earnings Call
Participants
Stewart Bailey; Chief Sustainability and Corporate Affairs Officer; Anglogold Ashanti PLC
Alberto Calderon; Chief Executive Officer, Executive Director; Anglogold Ashanti PLC
Gillian Doran; Chief Financial Officer, Executive Director; Anglogold Ashanti PLC
Raj Ray; Analyst; BMO Capital Markets
Josh Wolfson; Analyst; RBC Capital Markets
Leroy Mnguni; Analyst; HSBC
Adrian Hammond; Analyst; SBG Securities
Presentation
Operator
Dear, ladies and gentlemen, and welcome to the Anglogold Ashanti full-year market call. (Operator Instructions) Please note that this event is being recorded.
I will now hand the conference over to Stewart Bailey. Please go ahead, sir.
Stewart Bailey
Thanks very much, Chris. Good afternoon, everyone, and to those of you joining us from the Americas. Good morning and welcome to 2023 market call. You have Alberto, and the full ExCo team here to help run you through our performance. But before we start, let me call your attention to the fact that we'll be making forward-looking statements, and we will reference certain non-GAAP financial information during the course of the remarks.
Slide 2 is our safe harbor statement that's important and I would ask you please to refer to it. I'd also just like to apologize for the delay in releasing the report today. We had a glitch on our side that was a little tricky to overcome. So thanks for your forbearance on this, and we hope this call will be fulsome enough to talk you through the details in a way that's helpful. Over to you Alberto.
Alberto Calderon
Thank you, Stewart. Good day and welcome to our results call. Before we get into the details of what has been a very good year for us I'd like to address an issue you may have picked up in our release today. During our year end audit, AGA, AngloGold Ashanti founded potential error in the calculation of a deferred tax asset at full velocity in 2022.
This potential error could impact our earnings by up to $146 million between 2022 and the first half of 2023. The error is noncash and has no impact on production costs, cash flow value of the asset or anything related.
Let me be clear the facts and the numbers are very clear for all practical purposes. This is an impairment of $146 million. However, there is still an ongoing discussion with our previous auditor, Robert Weather and how much of this error should be accounted for in our eventually reinstated 2022 accounts.
Any potential restatement is a time-consuming complex process make so more about the fact that we're working with two sets of auditors, all parties must agree on the nature and quantum of any adjustments before we are able to issue our 2023 results, which we will do as soon as possible, such that.
Now let's move to what really matters a strong set of results. We are all very proud of. Again, since I joined AGA in late 2021 was simple, but also a value gap with our peers to do. And we've worked to address several interlocking initiatives that together will substantially improve our business.
We still got work to do, but we've made good progress on our original priorities, most important of all because the cost stack with our major peers we've done in safety, we're now among the safest mining companies anywhere in the world. We've improved predictability, again, achieving guidance on production and cash cost.
This increasingly sets us apart in the peer group. We've been decisive on loss-making operations and projects that don't fit our portfolio that allows us to narrow our focus on the things that drive value, but will assist. Recovery strategy is progressing to plan with declare the new 9.1 million ounce inferred mineral resource at Merlin, which almost doubles our resource position in this new gold district.
Well, more than replaced reserve depletion. The past five years, we're building on a strong climate track record with a series of new emission reduction projects. And finally, last but not least, our primary listing on the New York Stock Exchange gives us exposure to the world's deepest pool of capital.
We recorded a strong H2 performance after a series of challenges in H1, gold production was up to 15% with a standout performance from a Iduapriem, Tropicana, Geita and Kibali. Cuiaba exemplify the resilience we're building in the business, even after losing much of Q1 in the table to concentrate production.
It delivered ahead of budget, which in turn drove a 9% improvement in cash costs. And overall asset recovery from poor ground conditions in Q3 is proceeding to plan. Perhaps more importantly, the better production results, have tried $314 million in free cash flow in H2, showing the much improved health of the underlying business.
The much stronger H2 ensured we ended the year on a solid footing. We reported a record safety performance, achieve guidance on production and cash costs are re-domiciling process is complete. We've taken decisive steps to place CDS on care and maintenance center, sold Gramalote.
We've made a major discovery of emerging, which translates into a fivefold increase in our Nevada mineral resources in three years, and we've maintained our robust balance sheet on safety. We have a clear safety strategy that bears risk awareness with robust controls to manage the most critical workplace hazards.
Our ranges the frequency rate remains well below industry peers have been around for long enough to know that we can never afford to be complacent and that we're only ever as good as our last injury-free shifts. Without going '23 it is important to get the basics right that starts with meeting our commitments we delivered just under 2.6 million of production within guidance cash costs were also within our guidance range.
All-in sustaining costs increased to 1,038, an ounce that reflects the higher cash cost and our plan increasing sustaining CapEx. Full Potential is working exactly as intended. We will show a detailed graph of $215 million savings realized in 2023 played a key role in helping to offset inflation and also to increase impact of production disruptions.
Free cash flow was $109 million for the year. That's a big turnaround. After 205 outflow in H1, we took the decision to pay a dividend above our payout policy, declaring a dividend of $0.19 per share. Following the strong age performance, the strong balance sheet and our confidence in the future. The payout demonstrates confidence in the robustness of the business and our commitment to return to shareholders.
We showed you a different view of portfolio at the interim results. Steering lens shows more clearly that your logical realities of each side, their flexibility and performance and potential for growth in both production and margins. This in turn determines their place in our capital allocation hierarchy.
Tier 1 assets have scale life or at least a potential to increase life, there was a lower end of the internal cost curve or have the potential to get there. Tier 2 have our steady performance for body says what are well understood and operations are reasonably well optimized or are on their way to be there. (inaudible) on the higher end of the cost curve, but they're all well-run, predictable and steady cash contributors.
The Tier 1 assets produced 1.6 million ounces of gold last year at a cash cost of $980 grams an ounce. Geita had a strong finish coming back strongly from the Q1 shutdown. In fact, Q4 ounces were 45% higher than Q1 of last year, recovered very well. As you see Q4 production was a third higher than Q3. I'll talk more about that shortly.
Kibali made a solid contribution of 343,000 ounces and higher grades drove an increase at Tropicana. Turning to Tier 2, Cuiaba, I mentioned had a stellar recovery from a standing stock generating $78 million free cash flow in H2 even Obuasi. In accounting, the coal price being this a concentrate operation of $1,790 an ounce.
The mine is fully converted to a concentrate operation. Sunrise was the poster child for full potential with cash cost and all-in sustaining well below the year end. Security has a steady second half as it recover from the two times tax collapse quarter 2 time collapse by year end, throughput rates have normalized, and the team is now working to calibrate the plan to lift recoveries.
(inaudible) production was lower year on year in line with its mine plan. Full asset potential program has started to gain traction across the asset base. At Sunrise, we've seen a step-change in underground ore tonnes, which are now consistently above 220,000 tonnes a month. The better haulage performance was underpinned by improvements in stope availability and a fleet utilization will look to sustain these levels in 2022 Tropicana underground ore tonnes were up around 25% in H2.
That initiative has been successful so successful that now we're working on solving ventilation constraints before we can achieve further improvements later this year. There's better availability and utilization of stone augers and quicker reentry for crews, which has increased effective work time in the plant we made improvements to the high-pressure grinding rolls were equipped to support our throughput increase of 9.5 million tons.
Iduapriem had an excellent year. We've driven improvements in drill and blast as well as processes to get better fragmentation. We've optimized the load and whole process just to get better on delivery to the plant. And we've sharpened our maintenance practices to achieve better overall equipment availability.
At Geita underground tonnes from Nyankanga were 29% ahead of our full asset potential target. We've delivered backfill directly to stopes the drill holes from surface rather than using trucks. This in turn, have de-bottlenecked our underground materials handling capacity and improved overall stope availability. We've also redirected volume from Star & Comet to Nyankanga, bringing forward production into Q4.
The full asset potential, what you see in the graph is either as $215 million of an incremental EBITDA that was driven by improvements across four sites. Cost savings are adjusted for uncontrollable economic factors, including inflation, exchange rates and royalties as well as oil and other commodity movements.
Benefits include both productivity improvements measured as incremental gold production and cost reductions compared to the flex or expected costs. Incremental gold production includes increasing plant throughput, metallurgical recovery and mine tonnes, the dollars of benefit of $215 million is very significant.
As you are well aware of, but this program has been this year, absolutely vital in offsetting the massive both inflationary pressures you've seen erode margins right across the center and also providing additional resilience to the business to counter the production interruptions we had at Siguiri and Cuiaba.
In sum, the reason why we have delivered cost guidance is we have a similar sort of issues than our peers, but we have a program that helps up that helps counter those costs. Brazil update our Brazil operations have been a drag to earnings and cash flow.
Last year we took a decisive step forward to address this, and the results are clear in our numbers. The most important step was to restructure our leadership team. We reduced senior management roles by 25% and introduced new experienced talent at the same time with carefully to properly locate accountability and drive performance we will not indefinitely cross-subsidize underperforming and lost market assets.
And we made that clear when we saw no return pathway to profitability for CDS, we took the hard decision to place it on care and maintenance. In August, we've reviewed capital made reductions and ensured no stone unturned in order to safely reduce costs. The cumulative benefit of these initiatives have greatly stem the cash bleed, and we're looking to a significantly better performance this year.
We're prioritizing full asset potential of which will further improve production stability and increase efficiency. Let's take a step back to look at Obuasi. This remains one of the world's greatest gold ore bodies. It has grate well in excess of 8 grams per tonne over its life. It has size over 17 million ounces of resources and 7 million ounces of reserve, and it has slightly lower closings.
This is a flagship mine in Ghana in Joe's on license borrower we're also regaining momentum in arrival. So the run rate of more than 400,000 ounces a year by 2026, you'll see in the slide, we are forecasting a range between 275,000 ounces and 320,000 ounces in '24 and between 325,000 ounces and 375,000 ounces for '25 and then plus 400,000 ounces in 2026. So let's look how we get there.
The V30 reamer is doing exactly what we said to recap. We're establishing our conventional stores with a much wider reamer head which is showing itself more capable in soft higher grade rates. We've already getting better results after the place blast for the past four months. You can see our mining, but rates have stabilized and are now around a 28% higher than for the first nine months of the year.
And by the way, February paced going very well. Also, we expect another increase to around 110,000 tonnes to 120,000 tonnes from during this year. The underhand drift and field trial will show how to safely mine the high grade areas with poor ground conditions that we saw towards the end of last year, it's going very well.
We've shown that we can develop through pace backfill in and also which demonstrates pace competencies. We've developed the top provider from 3,300 level and install ground support. We've established the base reticulation line show some levels with bulkheads and completed the pace back fill.
We are focused now on developing a parallel driver alongside the pace field trials will allow us to expose and test the pace trends after that we'll develop our first drift on pace. What is very important. We continue to use the data from the trial to inform our cost models. And at this stage, we have we see a $50 per ounce improvement at steady state from under hand versus sub-level open stoping.
With higher mining costs more than offset by significantly better extraction completions. Phase 3 is the refurbishment and return to service of the KMS shaft and associated infrastructure. This will provide direct access to the very high grade Block 11 and other areas, it will double our current underground materials handling capacity to around 12,000 tonnes per day.
If you look at the red block on this slide, it shows a significant advantage we'll have when we can move waste ore and other materials down the shaft with no congestion rather than transporting it via a 12 kilometers decline. The added flexibility would be a significant benefit. We estimate completion by about end of this year.
The next key milestones in some areas, especially in the bench. It will be some rail system, a new pump stations as well as ore passes between the upper mine and rail transport levels. What progress is being made to pay a margin between 5,100 levels can share of its move to Nevada. A picture is worth 1,000 words.
This is a picture of a gravity concentrate from a high grade intercept at Merlin in Nevada as we continue to progress with our drilling and metallurgical programs. We are finding strong indications of visible gold in multiple areas of the project. We have moved quickly to build a world-class new gold district in southern Nevada.
We'll dig into the details of our new 9.1 million ounce discovery at Merlin in just a second. But as you all put the pieces together, we have a number of new deposits and merging that now we have a number of new deposits emerging that now together contain more than 60 million ounces.
Our focus for now is mainly on near surface oxides with simple metallurgy, first of the smaller North Pole for projects in the northeast of our property, and then at the new Merlin discovery, which is a truly spectacular piece of geology in the heart of the world's best gold district.
We believe costs will be extremely competitive and have number of potential development scenarios that we will test the master project through our own capital return and needs. In short, the continued exploration success we're enjoying suggests the potential at this stage for this resource to support peak production of around 500,000 ounces over a multiyear period.
And this is a multi decade gold district, not all for August. Our starter project is the most advanced in our current Nevada pipeline already in the permitting process, and we declared a first time mineral reserve of 1 million ounces today. The feasibility study is complete and detailed engineering is underway. Aside from the new low cost ounces.
It will contribute to the group. Not Bullfrog will provide a practical understanding of the permitting process, the opportunity to build a best-in-class project team and current experience of building and operating a project in Nevada, all of which will be invaluable as we roll forward to the much bigger Merlin development. This project has a very attractive return profile.
Our updated estimate of first production is around mid 2026, assuming all goes to plan. This is based on correspondence from StarTech, the BLM agency, which, as I said time, none of the record of decision to be around April 2025. We're engaging closely with the regulators to ensure we're best able to support the process on their time line in the best way possible.
Our study, which has been approved by our board pending receipt of the necessary permits, assumes totaled about 800,000 ounce average recovered grade of 0.44 an initial life of 13 years. We expect Q1 all-in sustaining cost of around $854 an ounce when you amortize the project capital of around $370 million, you will get an all-in cost of about $1,300 an ounce.
We assume a conservative gold price of $1,600 an ounce for the study, which would give us an IRR of 13% and a payback of just over seven years. However, at the spot, the return just to 30% and the payback shrinks to just four years. The expanded silicon project covers the silicon deposit roughly in the center of our landholdings and Merlin immediately south. Today, we reported new 9.1 million ounces of inferred mineral resource at Merlin.
As far as we can tell, this is the largest greenfield discovery gold discovery in the US in well over a decade. It's the fruit of a 2023 exploration program that beat all expectations. We drilled 144 holes totaling more than 100 kilometers of drilling. There is still significant upside, particularly in the West.
At first passed in our concept study. The economics that are very strong this year were focused on the PCS, which is already PFS which is already underway. This includes infill drilling to test the significance of high-grade mineralization within the inferred mineral resource study.
This slide shows clearly why this is a potential game changer for us in this section, you see the extent and size of the deposit along with some very exciting intercepts, which validates the extent and quality of the ore body. You will obviously looks at this cross-section in your own time, but I'd like to just highlight. There's 103 meters of 7.3 gram a tonne, on this 185 meters of around 4 grams a tonne, and there's just over 236 meters of 3.4 grams a tonne.
Mineralization remains open primary to the west of the inferred mineral resource. This breaks down -- we're moving to exploration performance last year. Exclusive mineral resource additions totaled 10.3 million ounces from exploration and modeling and of course, the introduction of Merlin. There were offsets with resulting in a net gain once again to the gain of the year of 5 million ounces.
Mineral reserve additions totaled 2.5 million ounces to came from exploration, including the addition of the 1 million ounces at North Bullfrog. After depletion and other changes, we saw a net reduction year on year of 0.7 million ounces.
This slide shows exactly why we're excited about the potential within our portfolio. We're in the midst of a program to increase investment in mineral resource development and brownfield exploration. This will aid reserve conversion, extend mine lives, improve operating flexibility and supplement knowledge of our ore bodies.
We're making strong progress over the past four years. We've added 14.4 million ounces of mineral reserve, which have come into our inventory at only $62 an ounce. When you compare that to multiples being paid even for resource ounces, you can see the enormous value that we've been able to generate organics.
Now to Gillian on the financial vision.
Gillian Doran
Thank you, Alberto, and hello, everyone. Let's first take a look at the macro environment and the impact on our business. The average gold price received last year was up around 8% compared to 2022 at around $1,930 an ounce. We hedged just under 5% of production with a zero cost collar between $1,950 an ounce and $2,029, we had a positive realized gain of $2 million.
For this year we've used the same structure to hedge 347,000 ounces with a floor of $1993 an ounce and a ceiling of $2,132 an ounce. It provides downside protection for our assets in Brazil. In May where the fall we anticipated inflation of 6% in 2023. As we look back, that was a little optimistic as we ended the year at an average CPI of 8%.
We're seeing inflation easing somewhat, although it does remain sticky in Ghanian and Argentina. And we also believe the labor increases are structural and this impact 40% of our cash costs. We see continued weakness in the Aussie dollar, the Argentinean Peso and the Ghana Cedis. Currency weakness will not help inflation going forward and this is something we'll continue to watch.
Oil continued to drift lower, and our year-end position on the hedge was a realized loss of $7 million. We have no oil hedges in place for 2024. As Alberto mentioned, we saw strong sequential quarterly performances from a number of our key assets in 2023. As you can see, in aggregate, 15% production growth half-on-half with all regions delivering stellar performance in the last quarter, particularly bolstered by a (inaudible), Tropicana and Cuiaba.
Stronger have to production performance had a commensurate impact on our cost base. Total cash costs were 9% better half-on-half at $1,060 an ounce. Our cash costs for the full year were $1,108 an ounce of 11% year on year with lower production, higher operating costs fueled by the sustained inflationary pressures, planned higher waste stripping at Tropicana and one-off costs related to Brazil and the tank failure at Siguiri.
When we flex for macro factors, which we don't control the increase, almost half to [6%]. And that includes the big disruptions we saw at Cuiaba and Siguiri, we would say we're really quite pleased with this performance, and it really demonstrates the value delivered from our full asset potential program.
On AISC, we did see an increase year on year as a consequence of investments made in three key areas [Ord] and waste stripping as we access new areas and Geita, Iduapriem and Tropicana. Mineral resource development in our underground mines, supporting greater mine flexibility and stability and of course, infrastructure development and tailings facilities, particularly at our Brazil operations.
We also increased investment in exploration and evaluation to comfortably replenish mineral reserves as well as additional investment required in environmental rehab. Moving to cash flow or free cash flow, the strong cash flow performance despite the higher CapEx in the second half by a specific (inaudible) has by a specific focus on optimizing working capital, higher sales volumes, improved cash costs and higher dividends from Kibali.
As a greater focus on working capital management and cash conversion, which we highlighted as a strategic priority last year. As expected, most of our assets saw stronger operating improvements in the second half with tailwinds from higher price.
Importantly, as Alberto mentioned, decisive action taken in Brazil played a key role in managing cash outflows. With this strong free cash flow performance in the second half. Today, we announced an interim dividend of $0.19 per share, incremental to the first half of $0.04 per share, bringing our 2023 dividend to $0.23 per share.
Our focus on maintaining a strong balance sheet and decreasing debt levels remains intact. Long-term balance sheet improvement achieved through disciplined capital allocation and the self-funding of our redomicile glossy expansion program, Corpus incur Sterling acquisitions and our major US exploration program.
Moving on to guidance for 2024, gold production for the portfolio is expected to be between 2.59 million ounces to 2.79 million ounces. At the midpoint, we expect production growth of about 4% relative to 2023. It is driven mainly by a step up for the Black Sea and security, where we expect year-on-year recovery from the CIL tank failure.
Total cash costs for the group are expected to range from $1,075 an ounce to $1,175 an ounce, which at the midpoint is the reduction in real terms, given where current inflation sits. We are able to do that, given the traction we are seeing in our full asset in our inside of our business and specifically our full asset potential program.
Sustaining CapEx is expected to grow slightly, mainly because of increase in investment in mineral reserve development year on year. AISC is also little changed despite the inflationary pressure, the increase in growth CapEx, it's due to additional investment in Nevada.
For 2025 guidance. Gold production is anticipated to grow 2% year on year, driven primarily by the expected continued ramp-up of glossy and modest gains across multiple mines. Total cash costs are expected to decrease as continued full asset potential maturity and production efficiencies are anticipated to drive unit costs lower.
The expected increase in non-sustaining capital expenditure reflects the anticipated incremental investment in the construction of North Bullfrog. It does not, however, include capital for the construction of the project.
I will now hand back over to Alberto to conclude.
Alberto Calderon
Thank Gillian. This is another year for delivery. Safety is our priority. We have two large climate projects to complete this year, which will significantly reduce our emissions. We're focused on driving operating improvements and delivering more consistent, predictable results. The full asset potential program is working as intended.
Our Tier 1 assets are performing well with improvements in the pipeline. We're focused on further optimizing our future mines and determining the best path forward for our remaining assets. There is a good pathway for overseas ramp up with clear milestones against which we can judge our success. Our technical team is progressing or they have other opportunity to surface the enormous value.
We have discovered our world-class exploration team continues to add value through the drill bit across our properties. So why AngloGold for our US company and one of two primary listed senior gold producers in the New York Stock Exchange. We are one of the industry's largest resource space supported by high reserve grades.
Our safety performance is among the best in the industry in the mining industry, and we have a strong climate record. We have true partnerships in our host remote communities where we deliver tangible benefits. We have a highly motivated leadership team with world-class technical expertise and experience across developed and developing jurisdictions.
We have a diverse portfolio and are rapidly closing the margin gap with peers with lower costs, balances in the pipeline, our track record and competitively replenishing our mineral inventory is among the best in the industry. Our balance sheet is robust with capacity to fund our capital needs, shareholder returns and growth with discipline in allocating capital with a clear dividend policy and leverage targets.
I'll finish where I started closing the value gap. An important part of the strategy to achieve that aim is to regain cost competitiveness when we started this journey in 2021, our cost inflation was right at the top end of the peer group as our various interventions have gained traction. We move first to the midpoint.
And then to the lower end of the range, you can see our guidance for 2024 and '25, the costs will be within $100 of the all-in sustaining cost of the guidance of the main sort of competitors. I just want to highlight that will be about a third of the gap that existed three years ago, but we are far from finished.
I know we've not been perfect, and I know there's more work needed to ultimately to bend our own cost curve forward. We face challenges and overcome many of them. We have learned lessons that we will apply for a stronger, more competitive and better place than we were this time last year. We are proud of our team. We are proud of our people and what we have accomplished this year.
We eagerly look forward to what is yet to come. Thank you.
Question and Answer Session
Operator
(Operator Instructions)
Raj Ray of BMO Capital Markets. Please go ahead.
Raj Ray
Thank you, operator, and good morning, Alberto and Gillian. My first question is on the full asset potential going into the implementation phase at various operations. Can you give us some visibility as to what remains to be done? And are you happy with the way things have gone across the various assets?
Second is on the cost impact -- the cost is flat year to year. You did say that. But against your initial guidance at the beginning of 2023, 1395 to 1455. It's a substantial increase. So if you can comment on that.
And then lastly, with respect to Nevada, can you talk to what do you see as the potential permitting time line with respect to North Bullfrog? And when do you expect to get into construction? And secondly, when can we expect some visibility on the expanded silicon economy?
Alberto Calderon
Thank you. Okay. Let me lots of questions, but good ones. Back to full asset potential of look, we how we track. You saw two slides and one of them are the hard metrics, and that is really what we track are we structurally and permanently improving the tons were moving on the recovery we're having or the metallurgical recovery or whatever hard metric. And that is what is tracked what the operators with the CDO with the COO and all of their teams.
Now that slide you saw on finance was actually done by the finance team and they just made a reconciliation and said, okay, what can we see from this full asset potential in the bottom line. And this is an export spec. And you can see that they can find $200 million, clearly of improvements of increasing the EBITDA because of what we have done and in full asset potential for 2023.
So I thought we would share this for the market. What is yet to come? I can't put out we haven't put out targets, but we will continue. We think that there is still yet a lot to improve. So I haven't done it in the past, and I won't do it now, but I believe that with a little bit of not bad luck. Again, we did have very significant events, Siguiri and in Cuiaba.
And so if we hadn't had full asset potential, we would have been in real trouble. I hope that this year we don't have maybe we have only one, I don't know in mining, you already have something. And then probably we can see that more clearly is not offsetting, but in the bottom line, but we are still we believe there's still a lot of value to be uncovered by full asset potential let me put it best.
In terms of costs as we said, we met the guidance in cash cost and we're quite happy about that $1,108, you're right in Bowling sustaining we're above 6% higher. It is two areas that we wouldn't expect of Obausi and on tailings stamps in Brazil really sucked up that additional that additional 6%. The good thing is if you see we finished at $1,538.
Our guidance for 2024 is $1,521 which is slightly lower in nominal terms, but significantly lower in real terms. And then we have another guidance of $1,525 for 2025. So we were stabilizing the all-in sustaining costs. If you look at the guidance and absorbs and briefly our guidance of about three or four of our peers, they're all their all-in sustaining is going up.
So I think we're happy that we're able to contain this for '24 and '25. If we look into Nevada, we're expecting we have said probably last year, we were expecting a production at the end of 2025. That will move to first quarter of 2026.
We have designated them, let's say the good news is that we got very clear feedback from the Bureau of Land Management and the organizations that are of which are going to give the license. So we have even more sort of understanding of when they will give us the permission and then how long it takes.
And so I think that now we're sort of comfortable that saying right now that production would be, and that's a 2026, which is still quite good, we believe and then expanded silicon we told you about six months ago. Look, we have an objective.
We want to finish the concept study for silicon at the end of the year, and we want to finish the feasibility study we did both now. Now we are entering the phase of the pre-feasibility study that may take between 18 and 24 months.
Things can change significantly. We don't know right now, but nobody knows how to tackle in an optimized way this magnificent borderline. Is it going to be actually huge pit? Is it going to be a smaller pit? Is it going to be underground? We just don't know.
And so the way we end up optimizing the project will determine a lot of things that we don't know right now. I can't tell you right now is we right now have a target of 18 months, we will be telling you how things are progressing.
And then when we finish the pre-feasibility study, as we are doing without a doubt, we will be able to tell you much more about silicon. It is, however, you can see already it is and we said like one of the probably the best discovery in more than a decade in the US, and it's a massive, massive ore body. So we're very excited.
Raj Ray
I want to thank some of them very clear. One last follow-up question, if I may. On Obuasi is good to see that last four months, the tonnage have stabilized. The growth rates have picked up in 2024. How comfortable are you with your development rates and how much flexibility you have in the operations. The reason I ask is there any risk you see with respect to volatility and similar to we saw in Q3 towards here?
Alberto Calderon
So look last four and now five months, because we're in the third week of February, we're averaging these 90,000 tonnes, which would give you about a 250,000 ounces of gold for the year. And we've said that we believe we can ramp up a bit from about 95 to 110, that would then put us into the 270 to 300.
So at this stage, everything is looking good and we stand by our guidance honestly, right now, we are already at the lower end of that guide. So if we can improve a bit more of which we believe we can, then we should get into the midpoint of that guidance. The important thing of more than that number, if it's 270 or 260 is the KMS shaft is a huge thing and it will give us so much more flexibility.
The other important thing that I want to underscore is the trial on the underground cut-and-fill has worked beautifully. So and it has we have proven that it will reduce the cost per ounce. And so then we have the VY. reamer very well. And we also have another hand that is working well and reducing significantly dilution.
And so I think we have good instruments now as we move forward to give us comfort on the guidance that we put forward to date on that ratio, '24 with the KMS shaft on the increase now for between 325 and 425. And then eventually when by then by '26, we will be very comfortable with both methods. And hence, we have the confidence of above 400,000 in '26 and beyond.
Raj Ray
Perfect.
Alberto Calderon
Thanks, Raj.
Raj Ray
Thank you.
Operator
Josh Wolfson of RBC.
Josh Wolfson
Thanks very much on. So I just wanted to recap a comment that I think Gillian had made earlier on the capital front, what was the item that was not included in that in the guidance, was that both fronts?
Gillian Doran
And for 2025, yes. Capital for Nevada.
Josh Wolfson
Okay. So the project capital guidance I think was yes. So the project capital was something like 400 to 450. What would be that spending is directed towards?
Gillian Doran
So there is this study tested studies in there and for Nevada and also our kind of usual growth program as well. So of expansion of tailings facility and some other growth projects that we have and some of our assets at sort of like the normal envelope of growth capital that we spend annually.
Josh Wolfson
Okay. So it looks so assuming the project work to be advanced in let's say, mid '25, first half of '25, assuming the permits come in, what sort of what balance of the CapEx would be we added to that figure in 2025.
Gillian Doran
It's for now based on where we are with this study. We don't know the level of confidence in this study. We haven't we don't want to opine on what that range would be because the team are still, of course, assessing a number of options in the region.
Alberto Calderon
It is not the construction phase rollout with its pre-feasibility study. And so it's not like going to be something it would be very, very material would be, but we just don't know. So we'll be telling you where the pre-feasibility ends.
Josh Wolfson
Okay. We'll stay tuned for those numbers.
Alberto Calderon
And I think over time, it should be 30, it would be 50, it could be 60, it's not 100, I think. So that's sort of what I'm trying to say.
Operator
Thank you very much.
Alberto Calderon
Okay. Go ahead, Josh. Anything more?
Operator
Leroy Mnguni, HSBC.
Leroy Mnguni
Hi, good afternoon. Thanks for the opportunity, and it's quite pleasing to see that the underhand cut-and-fill at Obuasi is progressing really well. I was just wondering if you have a sense yet of how the costs of that method compared to the sort of previous long all open stoping mining method? And if you could also please provide some guidance on what you expect Obuasi all-in sustaining costs to be when it reaches steady-state production.
And then the decline in all-in sustaining costs into 2025 compared to 2024 is also quite pleasing and was just wondering, I know you mentioned that it's asset optimization and improved efficiencies. I was just curious as to is that just generally across the group or are there specific assets within the group that are driving those improvements?
Stewart Bailey
Leroy, you broke up a little in that last question. Could you just repeat for us, please.
Leroy Mnguni
Yeah, sure. I was saying that the guidance all-in sustaining cost guidance for 2025, the fact that it's declining is quite impressive. And I know you said it's asset optimization and improved efficiencies. I was just wondering, is that just broadly across the group or are there specific assets that are driving those improved efficiencies? And then maybe if I could just add and what are you currently seeing as underlying mining inflation across the group?
Alberto Calderon
Okay. That's clear. Thank you. So the first question, underhand cut-and-fill subgroup in the trial that we already did and completed. What we found is that the cost per ounce was around $800, so $750, I'm sorry. And the equivalent cost with the existing method would be $800. And the reason for that is because within the underhand cut-and-fill, as Richard explained very well, last time, there's no dilution and there's no pillars.
So you take all the gold. So when you are in high grade areas, this method just reduces the cost per ounce of extraction. So that's what is going quite exciting that this now this number of $50 an ounce. Lower cost per ounce is now a proven one in this trial that we have been doing for the past weeks.
Regarding our all-in sustaining cost for Obuasi, it would be in the $980 an ounce for Obuasi. So Tier 1 in costs plus the potential that I think that there's two things why also the all-in sustaining cost for '25 in the numbers that we have for '23, there's still a lot of tailings dams from Brazil. And if you look at the numbers of Brazil.
And this difference between all-in sustaining costs and cash cost is the highest in the group, it's about $700. So we expect that that number should start coming down. And so that's part of the reason. But of course, we are currently have on full asset potential. I would not highlight any particular one. This is an initiative that is done across all the group and all assets.
So we now have a rebuild budget, it's fake for '25. And so this is some I want to say is clearly when we put out these numbers, we there's a lot of thought through them and we aim to achieve them, if I may say. So we put in February of 2023, in March the numbers for '24.
If you go back to that, and you will see that our current guidance for '24 is exactly in the range of what we said a year ago. And so I go back for '25. We were putting a lot of attention and we really believe that this is achievable so that's the third question.
And then mining inflation, it's still that 5% unbelievable, but that is still pervasive. We've seen commodities go down slightly, oil goes down and we are trying to do everything the renegotiating with our procurement people on the other ones on re-agents and in ammonia, ammonium nitrate, this process that should come down.
But wage inflation, I would say it's 5% on average across the group, and that's still the 50% and very pervased.
Leroy Mnguni
Clearly religiously follow not come cover exactly. I can still say thank you very much.
Operator
Adrian Hammond of SBG Securities.
Adrian Hammond
Yes, good afternoon, everyone, and thanks for the detailed presentation and appreciate the transparency increase here for the 2025 outlook on costs included and as you know, transparency drives ratings so well done on that. I would just like to know if you intend on increasing that further with the three outlook in the future and perhaps on a mine by mine basis? That's the first question.
Secondly, the prospectivity around the water looks obviously very attractive. I was wondering whether you've had the expressions of interest for JVs and would you entertain that? That's the second question. I'm also firm bit more color. If you may a much seem much deeper on the asset potential program for within the business itself ex Nevada.
In terms of reserve replenishment, you declined 0.7 million ounces year on year. I wonder if that worries you if the industry is any sort of color you can give us on the progress of the asset potential program within the rest of the business.
And then just a comment for Gillian. I notice that the cash conversion has improved tremendously with the progress you've made on the VAT lockups in DRC, Tanzania and the duties in Argentina. So just congratulations on that. It's a lot more than your predecessors ever did and in such a short time.
Alberto Calderon
Thanks very much. What is the third question?
Stewart Bailey
Adrian, I think the third question, could you just repeat the one on the full asset potential and reserves if we kind of lost you off where the sorry.
Adrian Hammond
Sorry, here. Replenishment is concerned, you were down 0.7 million ounces year on year. So perhaps you can but yes, I could not look at it as a risk.
Alberto Calderon
Okay. Well, thank you. We've heard you and believe me, we are working towards increasing. We know we need to increase probably two or three year eventually, but we will only do it when we're comfortable that we are not putting out like sort of Globe's. And with all due respect, I have seen others that said, I'm going to go down by $100 and you just don't know how to.
So we will do it. I can't promise you when, but we will do. We are working a lot in mine planning right now across the whole company. And when we have a better understanding of all of that of the long term, we will so Gillian has is on her to-do list, but it's really not Gillian, we just need to have the operators have better understanding, but we've heard you and we're working on it and we'll come one moment when we will be providing that and mine by mine also.
Prospectivity JVs it's actually not in though in the to-do list right now. There are some other companies that have assets in the region and we are not against probably creating a bigger one or something like that. But it is nothing that is actively in discussions right now.
It is such a massive resource as you see that in itself, it's just going to take a lot of effort getting to that 0.5 million ounces longer replenishment. If you look at our track record of 25% per year on six years. Sometimes it's a bit higher. Sometimes it's a bit lower. I really am not concerned about that. We actually, if you look at the resource. Actually we did increase now, but by 5% resource.
More importantly, you see where our data is. I think it's at seven years. All the big ones are between [70] and 10 years in Tier 1. So I'm I know we went down by 0.7 million ounces, but it's a lumpy thing. We have very interesting targets for this year.
I am pretty comfortable that if you take a three year average, we're basically replenishing our I'm pretty sure we will be replenishing our depletion.
Adrian Hammond
So half a million-ounces can you give the rough guide as to when you think you could get there from Nevada?
Alberto Calderon
That goes with appreciate we know that the resource sustain something like that, but looking specifically at the it's a the pre-feasibility study will take 18 months and we will be informing you when we have more right now. But at this stage, I would just it would be very speculative.
What we do know from the concept level study yeah that it's going to be very profitable, that it is massive that it is multi decade and it will we own also know that it would be in the all-in sustaining in the high nine hundreds, let's say, at a high end, but we believe we can optimize that.
Adrian Hammond
Thank you.
Alberto Calderon
Thanks, Adrian.
Operator
Thank you very much. So if we have no further questions in the queue, would you like to make some closing remarks.
Alberto Calderon
Okay. And when I look at our. Thank you again very much for your time for your questions. As always, I always think when I'm reading the presentation, it's a bit too long and I hope we didn't bore you too much, but we are proud of what we have done.
We are proud of that in what was a difficult year that started put things beyond our control with a concentrator collapse and with the change in the regulatory environment in Brazil, we were able to overcome you probably I would add that you see and we have heard you and all that all the analysts, we are much more focus also and our new CFO, much more not so new, but a focus on cash conversion, working capital, you can see it's much better in the second half, and that will be a continuing.
So it's not only cash cost all-in sustaining, but we're also very, very heavily focused on free cash flow and working capital and it's showing. So look, things are coming to play in terms of how it finished. Again, my last introductory comments, we have a great team at all levels. We are very committed people and we're doing what we said we're going to do, and that's the most important thing.
In the end, what we have is our credibility and you guys are the ones that judges are we delivering what we said we were going to do. I believe in the last few years we have done so. But again, many thanks for your questions and for your attendance.
Operator
Thank you very much. Ladies and gentlemen, that concludes today's event and you may now disconnect your lines.
