Centamin plc (CELTF) Q4 2022 Earnings Call Transcript

Centamin plc (OTCPK:CELTF) Q4 2022 Earnings Conference Call March 16, 2023 4:30 AM ET

Company Participants

Martin Horgan - Chief Executive Officer

Ross Jerrard - Chief Financial Officer

Alexandra Barter-Carse - Head of Investor Relations & Head of Corporate Communications

Conference Call Participants

Jason Fairclough - Bank of America

Daniel Major - UBS

Li Low - Liberum

Operator

Good morning. I would like to welcome you all to the Centamin Full Year 2022 Results Announcement. My name is Brika and I will be your event specialist running today's call. And after the speakers' prepared remarks, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to Martin Horgan, Chief Executive Officer. So Martin, please go ahead.

Martin Horgan

Thank you, Brika. Good morning, everybody. As mentioned, Martin Horgan, CEO of Centamin. I'm delighted to be here this morning and two of my colleagues, Ross Jerrard, CFO; and Alex Barter-Carse, Corporate Comps.

As mentioned, it's our 2022 full year results and the usual format will be followed and no surprise to everybody. I'll give a quick introduction and an overview of the year. Ross will then take us through a bit of a deeper dive into some of the financial metrics and the balance sheet management and then we'll finish off. We're looking at future prospects for 2023 in terms of growth and opportunities. We'll then open up to Q&A. Delighted to answer any questions you might have and then we'll wrap up from there as well.

And so if we move on to the next slide, please, Alex, our usual disclaimer which I'll refrain from making usual job about you reading it, I'm sure. And then they move on to the next slide around sustainability highlights. I think this really frames the year for us when I look back and I think it was a fantastic year for us in terms of our ESG and sustainability highlights. I honestly believe that sort of the safety metrics of any operation of any company, I think there's a really good proxy for management capacity and capability. And I'm delighted that last year saw a fantastic result, both in terms of our lost time injury frequency rate and our total recordable injury frequency rate as well. And I think this really is a real indication of the quality of the management we have now down at Sukari and their ability to hit these records.

That's LTIFR of 0.08%, an 83% improvement in 2021. And that was really driven and underpinned by the site setting a new record for lost time injury frequency manhours worked. Previously, we've managed 5 million hours. And by the end of last year, we've actually gone through 8 million hours. And as of today, I can tell you that, that record continues to be set. We're now north of 9 million hours worked or lost-time injury. And I think that really attests to the quality of our team, the focus of the work around safety and the real sort of dedication to ensure that we have a safe working place for all of there. Internal total female workforce -- sorry, a 160% increase on 2021. The 174 females employed across the group now and that itself is fantastic. But I think what sits behind that which I think is even more impressive, is at Sukari itself. Well, actually, we went from 0 female employment to having 34 professional females employed across the organization within Scale. And I think that's a fantastic result.

We saw a change in the Egyptian law that allowed us to basically now really commit to bringing female as sort of agenda recognition to the workforce. And we pushed that through with full buy and support from the operational team down at Sukari. And I think that's been a huge success. So delighted that, that change of 34 professional female employees in Egypt now as well. I think that's a super bit of work. We've also seen that trend across our EDX portfolio also taking place in Egypt as well. So I think that's a fantastic result and one that we hope to build on and continue into 2023 as we really look to try and push our targets around this area.

And speaking of workforce in Egypt, I've long term that I've been super impressed with the policy of the team that I found down in Egypt. It's my first time working there for the last 3 years and really been surprised to the upside about the real ability and the hunter learn of the workforce down there. We've added 52 improvement over 2021 in terms of workforce development hours, up to 44.3 hours now, up from 27 hours in 2021. And the real focus is we look to really develop that talent that we have. And in doing so, of course, that linked into our workforce where we've been able to go from 94% to 96% workforce of nationals within Egypt as well. And that's something we're going to continue to focus on in this year and beyond as really look to digitize that workforce.

And finally, in terms of security decarbonization. Obviously, it's been well flagged but our 36-megawatt solar farm was commissioned late last year. That's now fully operational and already contributing to both cost savings but also carbon debate as well. The thing I'm delighted about there, of course, is that lots of people are talking about road map for decarbonization setting times for 2030 and 2050.

What I'm delighted about at Sukari is the fact we're doing it. This is real. It's not talk. It's not a plan. It's on the future aspiration. This is something we delivered and having a material impact already. But we're not stopping there. We think there's more to do. I think solar expansion could be looked at which we'll do this year but also importantly, the ability to connect to the grid within Egypt recently expanded and upgraded grid network and has great opportunities there for further cost savings and of course, that carbon abated.

So I think it's a really great year. And I think it really sets the tone for the rest of the year for 2022. So moving on to the next slide. In terms of operational highlights, we I think one thing to say about last year was that the mine reached an amazing milestone. It produces 5 million ounces. Very few operations get to produce 5 million ounces in their totality. And at Sukari, we poured that in around about the third quarter last year. And it was even more surprising, of course, is that we've still got 6 million ounces currently in reserves. So we are not even at the halfway point at Sukari. And that really gives you an indication of the quality of the ore body and the operation of Sukari. And of course, that 6 million ounces we believe there's further upside to come in terms of reserve growth. Away from that milestone again, a year of delivery a year of working to plan. Production came in midrange, delighted with that. continue to build back that confidence and that operational stability that we're looking for. And I think in terms of the cost, again, within guidance, albeit at the top end of the guidance but I think it's important to understand why.

This time last year, we announced our cost guidance I think it took a few people by surprise at the time that we seem to be guiding higher. I think, of course, state we've been prudently budgeted for the year. And I think we're one of the few which didn't have to reguide during 2022. And I think that's a testament to the work that Ross and the team have done around forecasting. I think importantly as well is given those inflationary pressures that we all saw globally across 2022, also by the team's operations to basically try and offset those headwinds of inflation but to bring that guidance and to set a prudent and sensible budget to then deliver into it despite the headwinds of inflation. I think that was a great result by the team, both in terms of the accounting and the budgeting team but also operationally.

And moving on to the actual sort of physical operations. Another big year in the open pit, a record year in terms of terms moved in the open pit, combination, of course, of our contractor as they continue to move through what is now this year with the final year of full contractor moving but also our own team moved record number of tonnes as well with our own fleet. And that's all part of that reset plan to have that flexibility and that consistency into the open pit.

In terms of the underground ore mine, again, a step-up in terms of tonnes at brought to surface with the underground high grade, underground ore, a 12% improvement on 2021. And that's fantastic because it's a high-grade underground ore that really helps to drive that grade and hence so down. But what's more important about that, of course, is that it is part of the reset year. When we -- our contractor left side in the first quarter, we bedded down over mining in Q2 and then we delivered those tonnes another improvement over the second half of the year. So that's a great improvement in [indiscernible], especially against the complex of that contract or swap out.

And of course, the feed grade, 6% improvement year-on-year on 2021. I think that reflects a couple of things. One is that sort of improvement of operational flexibility in the open pit which is linked back to the stripping which has given us more operational flexibility but also access to high-grade areas. And of course, that contribution of the high-grade underground or and that gave us that 6% on feed grade as well. So I think a really good year for us last year in terms of operational performance, stability, consistency and confidence and moving that into 2023 now. Next slide, please, Alex.

And when we look at '23, it's another step-up again. We've got that production guidance increase on last year, now $450 million to $480 million. When in fact, we moved the upper end of that lift guidance up from 4 75 to 4 80 given our confidence of where we can go with that. In terms of cash costs, again, looking at the improvement, looking at those inflationary headwinds, we're being sensible around things like diesel pricing. Ross will touch on consumables and diesel pricing later and the impact of inflation. I don't think we're seeing inflation roll off yet but we're not seeing the accelerated rate of change that we saw over 2022, I believe, at this stage. In terms of CapEx, it's not big last year of CapEx when we think about our key growth projects and that full year of stripping from remaining to go with the contractor and hope and expect that to roll off next year.

And in terms of exploration spend, we're committed to the drill bit. The drill bit really creates value. We believe in that. We've added 2 million ounces of reserve to Sukari. We've got our EDX program underway. We've got the ROCO as well. So we believe in the drill bit to really create value for all of us. And we're committed to that, as you say, were $10 million spend. The majority of which is around the ROCO to finish off the DFS but also across that Egyptian test as well. And in terms of the dividend, Ross will take you through our revised and strengthened dividend policy later on how that works. We're maintaining that, I think, is key here as we seek to balance both growth and returns for our shareholders and sterols. Next slide, please, Alex.

And we've put this in now this slide is really just a bit of a sort of a real highlight real over the last couple of years. Those key projects on the right-hand side. We've done a huge amount of work. It's when you sort of stop and pause and look back, you realize about how much ground we've covered in what I think is a relatively short space of time. I'm delighted with the outcome of that work, the way that's moving forward for us.

And I think on the graph on the left-hand side, you can see the results of that gold production stepping up year-on-year as we take that 500,000 ounces. The quality management we put in, the systems that they're working to, seeing those injury frequency rates reducing to come to be lower and where we want them to be going forward. And so that underground material mind, seeing that step up from where we were to where we want to be and where we're going to take the mine in terms of the -- back to steady state at this stage and then underpinning that expansion case.

And in terms of open pit material mine, having that flexibility and that confidence back into the open pit as well. So I think it's been a great couple of years for us. And I think it really sets the term for 2023. I think it really sets the platform of what Centamin can be. And the question is where do we take Centamin from here. And I think we've created a platform now at Sukari.

We've got a clear direction into our West African portfolio. And we've got some exciting plans as we move forward to 2023 and beyond.

So with that, maybe I'd like to just pause there. I'll hand over to Ross, who will now take you through some of the financial aspects of the business. And I'll come back a little bit later to talk a little bit more about the future prospects. So, thank you. Ross?

Ross Jerrard

Thank you, Martin and good morning, everyone. I'm delighted to talk you through our 2022 full year results where Centamin, what I would term, delivered a resilient financial performance. Importantly, it was in line with our expectations and guidance metrics that we had outlined for the year. And this, I feel was a great achievement is the group's results were significantly affected by movements in gold price and various input costs particularly in consumables and diesel fuel prices.

So delivering on guidance published at the beginning of last year in what was actually a very volatile market where everyone was a credit to the team. And I'll go into a bit more on how we delivered this in a moment. But let me talk you through some of the highlights.

Revenue for the year was $788 million, up from $733 million the previous year, generated from sales of 438,000 ounces at an average realized gold price of just under $1,800 per ounce. And the increase was driven by those increased sales ounces. Importantly, EBITDA margin was maintained at 40% despite these global inflationary pressures and gold prices remaining relatively constant year-on-year. During our second year of investing for sustainable production at Sukari, we delivered on several key CapEx projects, both on time and on budget and in line with expectations at $224 million. And importantly, this year, we have guided another $225 million as our peak year before we start to see that profile come down from 2022 -- 2024, excuse me.

It was really pleasing to close 2022 with $43 million worth of gross cost savings generated during the year. This gives us a cumulative $116 million total savings delivered to date on the project, well on track to meet our $150 million cost saving target. The Board has proposed a final dividend of US$0.25 per share, equating to $29 million to be distributed subject to shareholder approval but this brings the total distribution to shareholders for the 2022 financial year to $58 million. Again, in line with our guidance and commitment for 2022.

We closed the year with a strong balance sheet with cash and liquid assets of $157 million, excluding the $150 million sustainability-linked revolving credit facility [Technical Difficulty] 2 years so that the period from July 1 through 2020 through to June 2022 and that's what you're seeing in the income statement in terms of that movement and the reconciliation process. The movement allocated to the NCI represents a reconciled position. So while it does look high on a standalone period-to-period basis, over time, it's fully reconciled and importantly, going forward, now that we've normalized the sign-off of these periods and basically quarter those outstanding periods, we don't have a lag and we're well positioned going forward and you're not likely to see the movements that we've seen during this last period. So despite the persisting global supply side issues and inflation, our plan is always to focus on what we could control. And this meant that we have to ensure a disciplined compliance to plan and then still a driving culture of continuous improvements across the business. And as you know, we launched the program targeting $150 million worth of sustainable cost savings to achieve by 2024.

I'm glad to report that this program has really matured and we are now at $116 million of that $150 million cumulative target. And specifically, as mentioned, for 2022, it resulted in $43 million worth of savings being extracted from our cost base that went a long way in offsetting the inflationary pressures we experienced. Some of those initiatives are shown on the right-hand side here, high-performance truck trays, switch owner mining in the underground and solar power are all significant contributors in addition to the rafter smaller initiatives.

We really need to stay focused and continue with this culture of improvement. And as you can see, we have numerous initiatives either under review or in progress that we continue to drive connection to the grid power and the gravity circuit are 2 examples of projects that will have meaningful impacts on the cost base going forward. Importantly, I'm confident we will meet our $150 million target by the end of this year. So what does that all mean? And how does it reflect on our results across the business?

You can see the impact on these slides across the 4 main areas of operation. Starting with the open pits on the top left, you can see the costs trended broadly flat. This is in spite of the significant 74% increase in fuel prices experienced during 2022 being mitigated by better truck productivity, cycle times and other operational initiatives which include those lightweight truck trades and tie a projects, for example. That fuel price increase also had a significant impact on the processing costs, where over 30% of our costs come from our diesel-powered station compounded by a further 30% increase in consumables. Again, being able to keep these costs in check as a credit to the team. On the right-hand side, you can see the decrease in the cost profile of the underground as the transition from contractor to owner mining was embedded during 2022, resulting in a 15% decrease in contractor costs but also an increase in the material move during the year.

And the overall G&A costs were also well managed under this challenging global inflationary environment which saw labor costs increasing 4% in dollar terms as well as significant increases in transport and logistics.

Talking a bit more about foreign currency and how that affects our business. This is an area that we've received several questions about over the last several months with regards to the change in Egypt. And as you can see from the graph that we are largely a U.S. dollar exposed business in U.S. dollar-denominated business. We have seen an increase in the EGP component as we continue to increase our domestic supply chain and also those higher fuel prices, we have experienced which are paid in EGP. But labor is not a significant portion of our EGP exposure but an important one. The man on the street in Egypt is feeling the pinch with this hyperinflationary environment. And we have given 2 lots of pay increases and continue to monitor the cost of living changes in Egypt.

The Australian dollar component has reduced significantly which reflects the move to owner operating in the underground as our previous contractor was paid in Australian dollars. And so whilst we have seen an almost halving of the Egyptian pound over the last 12 months, we're equally conscious of the high local inflationary environment that we're seeing in the domestic market. For us as a business operating largely in U.S. dollars, this has not made a material impact yet but we do remain vigilant with both monitoring and managing the cost base.

Turning to the balance sheet. Centamin closed the 2022 financial year with cash and liquid assets of $157 million. As announced on December 22, we secured the first piece of the corporate debt. And on March 13, 2023, all conditions precedent were met regarding this $150 billion facility. This significantly increases the financial flexibility to fund growth projects across the portfolio. Initially, the focus will be Sukari is under our terms of the concession agreement, growth capital at vested has recovered over 3 years. making these investments ideally suited to the structure of the RCF. We envisage using the RCF to bridge those growth investments to match with repayments in line with the subsequent cost recovery, effectively so not to penalize shareholders and cash flow distributions in that particular period.

The RCF is a facility across 4 major banks with an accordion provision that provides the total potential $200 million facility across the 4-year term. Importantly, it has sustainability linked targets across carbon emissions, workforce deployment and gender diversity. This is a big work stream not only because it was inaugural debt facility. But having now completed the process and effectively having been due diligence by 4 prominent international banks, who obviously take a prudent approach, means that we have confidence in our mine plan, our business models, the financing structure and our approach for the future.

Having the RCF in place was the key step needed before finalizing our capital allocation review. And let me address that with you now. Whilst capital allocation continues to be disciplined and closely qualified against value creation, the key challenge presented was being able to exercise a balanced approach to maximizing cash flow generation investing for future growth and prioritizing sustainable shareholder returns. The company is now strong liquidity and strength of balance sheet across both treasury and debt creates that platform to provide both growth and returns. Centamin has now strengthened its dividend policy which is to continue to use the group free cash flow generated and applying a 30% minimum priority payment of dividends from those cash flows but now calculated before gross project CapEx which will be funded by debt and any surplus cash flows.

Thereafter, any surplus cash flows should be assessed against both the balance sheet requirements and the application of further shareholder returns, maybe special dividends or share buybacks. The intent is that the growth project CapEx will be funded by balance sheet treasury or debt which is the RCF facility. This would fit the SGM concession terms where these projects of costs recovered, as I mentioned. And therefore, the RCF facility would provide a bridge that would result in shareholders not being penalized from cash flow in a particular year. Importantly, the rules of treasury management now include no uncovered dividends, debt is to be used exclusively for these growth projects and the balance sheet will be assessed against the minimum liquidity requirement of $100 million as well as the standard evaluation metrics that you would normally expect in assessing the growth projects, they will continue to be assessed against ESG criteria and we believe this is now a balanced and sustainable platform. Let's talk a little bit more about that CapEx profile in a bit more detail.

In 2020, we set our gold capital investment plan which were required to sustain our business and drive higher production and improve margins over the longer term. And for the last 2 years, we have delivered on those plans. You can see on these charts, both the sustaining and on sustaining profiles. A major part of that elevated profiles during the periods are the waste stripping costs, where we are in the last full year now and expect these will decrease by mid-2024.

The main growth projects include the construction of hybrids, the hybrid solar plant, the ongoing construction of the underground [indiscernible] north dump leach and construction of the TSF 2 lift. Impressive progress was made across all those project deliveries, meeting some important milestones and also creating large business improvements. It is specifically these growth projects that will be funded by RCF facility and would be added back into the dividend calculation we have just discussed. So for example, it could be that $37 million currently flagged on the right-hand side of the chart that would be added back in the free cash flow calculation. This would obviously -- we would obviously update you if there are other projects added and this would be highlighted when the RCF is drawn.

In summary, I think it's been another year of delivery against our stated plan. and we continue to build on that track record and deliver the results. We remain fully focused on managing the bottom line of the business to drive margins. As we look to maximize the value of Sukari, deliver both growth and diversification that combined with sustainable stakeholder returns. Our strong balance sheet now across both cash and RCF underpinned by a resilient business for the long term gives us the flexibility and strength to deliver objectives of growth and shareholder returns.

And with that, I'll hand back to Martin.

Martin Horgan

Thanks very much, Ross. I think fairly modest there given the work the team did over the last year. I think it was fantastic in terms of being able to navigate those headwinds and continue to move forward around delivering guidance. So, thanks very much. But look at Sukari value maximization now and we'll start with the open pit of the operation. I really think about the open pit really as being the engine we move Sukari. I know the underground grabs a lot of headlines given grades and production and so on but that open pit really is the bedrock of the operation here.

It's 4.6 million ounces of our reserve base. It's a significant contributor at Sukari. Delighted to say we replace reserves at the depletion last year which I think was a fantastic result. Obviously, we see much reserve growth in the underground but delighted to see that the geological work and the mine planning allowed us to basically hold a flat total proven probable reserves for the open pit last year which is a fantastic work. And I think we've seen, of course, the benefits of that accelerated stripping program, a big year last year in terms of tonnes moved that allowed us into -- back into those high-grade zones and also gave us a significantly increased operational flexibility.

I think as you can see from the graphic there, back in December 2020, we were pretty much constrained to working at the Stage 4 and 5 north end of the pit which was a medium-grade sort of area. But over the course of '21 and then '22, by pushing back that eastern wall, by getting an operational flexibility back into the pit there, we've now got 4 working areas available to us as well. And I think it's that ability to give us a more operational flexibility which allows us to give us more confidence in guidance in terms of being able to deliver into it and, of course, allow it to those high-grade ventures as well as we go forward as well. So I think that's a great bit of work. It is our -- 2023 is our final year of the full accelerated stripping program. We expect in '24 to see the stripping to start to roll off in the recession of the contracted period with capital at this stage and looking forward to continue to push that forward in terms of the open pit performance as well.

And I think one of the things there that we talked about, of course, as Ross talked about there, was the ability to hold those open pit costs relatively flat despite that significant uptick in diesel price. Diesel accounts for about 30% of our sort of the open pit mining costs given the use in the mobile equipment. And I guess the question is how the team has been able to basically sort of maintain those open pit rates as well? And as we step on to the next slide, we'll have a little look at that how we've been able to do that while adding that flexibility back into the pit. So really talk around sort of those marginal gains and those sort of focus on operational delivery. And this slide really neatly encapsulates how we've been able to navigate some of those headwinds around the open pit operating costs as well.

We talked about the high-performance truck trades. I think they're well flagged now. I think they're a great initiative in terms of being able to improve the productivity of the open pit fleet, more tonnes to be moved by the same truck of the same distance; that gives us some carbon abatement benefits as well. We've got a lighter load on the backhaul when we're returning back to their working area, less tire-wear for example, as well. So delighted to see those now fully installed and coming through last year as well. we're focused on things like just some things like allow maintenance, making sure that the roads are properly well graded allows us better running speeds, better cycle times, better tire life as well in terms of the operational performance of that pit.

And then just that cycle time is that scheduling of how and where we work, just sharpening up how we operate in pits and move that. And when we look at that, that takes us from the monthly moving average back in August 2020, we're about 300 tonnes an hour on our own fleet. This doesn't include the contract fleet. This is just duly the SGM fleet. So we're about 300 tonnes an hour. As of December last year, that had gone up to 30 -- sorry, 354 tonnes per hour. That's about an 18% increase in terms of their productivity. And great but what does that mean in real terms? It's an abstract numbers held on the slide. You think what does 18% be. The way I think about that, of course, is that as we've talked about last year and this year, it was 130 million tonnes of total material moved from the open pit using just round simple numbers on a simple man at $2 a tonne moved. That's about $260 million of expenditure in the open pit. And what we're saying there is that we've been able to drive an 18% productivity gain in that open pit.

And when you apply that to $260 million of annualized costs at this peak stripping period, you can start to see that those changes are material and they have a direct impact on flowing to the bottom line as well. So those sort of initiatives have that investment in the truck trade and investment in operating people and then the investment in effectively optimization of the operations, starting to see some real benefit and starting to a help to navigate those headwinds that we saw there as well. Maybe just moving on to the next slide. Underground. I've said the open pit is the engine, the bedrock of the operation. Absolutely. But the underground really is where I think there's been a lot of excitement over the last 2 or 3 years. And I think it's been 1 of the real notable successes of the last couple of years and certainly in 2022.

We have some ambitious targets to grow the resource and reserve base there. I think you said those back I'm delighted that they've come through. That real focus on the geology that we started back in 2020 has really paid significantly for us as well. We've seen a tripling of the reserves from 2021. We're now up to 1.2 million ounces of proven and probable reserves on the underground. And that reserve base as well, of course, creating value, it unlocked a couple of other opportunities for us as well. As we know, it's supported that transitional way that confidence it gave us to move away from the contractor mining and go owner mining.

And as per Ross' slides earlier, you've seen the benefits that we're able to drive down unit costs on the underground. Would we have made that decision to move to owner mining if we didn't have that reserve base, I think that would have been a struggle to justify. But with that reserve base, it certainly has been able to do that. But of course, flowing on from that then is our confidence in the expansion, is that we've already grown those reserves, tripled them. We do think there's more growth to come. And with that additional growth and that extended life as well. And as we announced last year, the ability to move that underground from an oral mining rate of about 1 million tonnes a year to about 1.5 million tonnes a year as well. And we'll look to do that work this year and announced after there.

And that really is one of the key we're taking is back towards that 500,000 ounces of production. In terms of that, though, I don't think that, that is the end of the underground. It's not a case that we can sit back now. And we think there's more to come. We still think that the ore body is open to depth and potential strike expense as well. And we've got about 90,000 to 100,000 meter program in the underground this year of drilling. And we sort of see that split sort of into thirds. About 1/3 of those meters go into grade control, so preproduction sort of drilling to give us additional confidence. About 1/3 of those meters will go into resource conversion, taking things from inferred is measured and indicated, so we can then convert them to reserves potentially and about 1/3 of those meters going to grow to continue to extend the ore body limit to continue to generate those targets that we can chase down to ultimately bring into resources and ultimately reserves as well.

So, I think reserve is -- I think the underground has been a great success. I think we've really sort of kicked on I think that underground expansion at a conversion to owner mining has been a big brilliant for us but we still think there's more to come. And this year, looking forward to delivering that to fully engineered underground expansion case and potentially further resource reserve growth as well as we go forward. Moving on to the next slide, the broader Sukari mining concession. We've talked about this over the last sort of 12, 18 months. We've been pretty busy in 2022. Obviously, there's a full reinterpretation of existing drilling data on geological data we have.

We added significantly more data through the soils and mapping program. And of course, then we go on with the business with a drill rig and put the number of holes across a number of these targets as well. I'm delighted that those are now set to come through. we've got some priority areas that we're looking at cartridge and be, for example, 2 of the focuses at this stage. And the strategy there, of course, is to get these drilled off, get them into the mineral resource management team on site get resources evaluated, hand that across to the mining team and then have the potential to bring those into the mine plan going forward.

That MRM work is ongoing, as we speak. Resources that are being generated internally for a number of these targets. Before we hand them over to the mine planning team as well. And I think what that leads us to then is the potential for some of these resources to be included in this year's resource reserve statement will be published in Q4 this year and then of course, pull into the mine plan as well.

I think just to stress, these are going to be smaller targets likely in the order of tens of thousands of ounces but they're likely to be good grade, they shallow. They've got a relatively low strip ratio. And I think they're going to give us some really good operational flexibility in and around the main pit as well. So delighted that work's moved on. And of course, the highlight of the whole work this year was the airborne survey that will be completed over that concession back in the early part of the year. It gave us great information around the Sukari concession itself. But of course, importantly, it gives us that real sort of advantage of having sort of an airborne geophysical data set which we can understand about Sukari and then apply to our broader EDX portfolio as well.

And on the EDX portfolio, we'll move on to sort of quoting diversification. I get familiar with the slide here. around our landholding in Egyptian Arabian new bean Shield. I think I've stolen before about our 2 strategies through a strategy to find satellite feed for the Sukari operation and around the Lugos block, the standalone opportunities in the conversion matched.

I think in 2022, we saw the Nogra block handed over to us in May, when we received the final terms to start operating there from the government. We've formed a dedicated EDX or [indiscernible] exploration team in Matalan separate from SGM. And that staff predominantly with Egyptian team members and a good proportion of those female representation as well. So we'll continue to live and breathe our strategy around that. We've got busy. We've obviously done a lot of preparatory work around the blocks and we're able to get moving pretty quickly into Migros initially and on to Omeros and then started our field programs in earliest boots on the ground. We're yet to move up to NASH. I think the plan is to do that this year. But of course, initiative focus given that proximity to Sukari and Lupus.

And maybe we step on to the next slide, now we'll have a little for bit of a deeper dive on Migros. So a lot of work done. -- move through the gears relatively quickly on this priority area. Our first pass of work was a black survey, really looking to sort of do that recommit scale regional work that was completed. Full analysis of those results. It's sort of obviously a chain of process there to take those samples, to prep them, to get them out of country into international lab results back. So that kind of proof of concept of how we work in Eastern Desert work very well.

That allowed us to then focusing on priority areas. And that led to a detailed soil and mapping campaign across a number of priority areas which was completed. And that, of course, then distilled itself down into the identification of 5 priority areas. So as we sit here today, we have those 5 priority drill targets identified. We've mobilized the rig out to the Nobres area and the plan is to start drilling in earnest on these 5 targets post around that. That really takes at the end of April, early May, by the time we wholly month finishes and the associated facilities are wrapped up.

We intend to be in the field and start to drill test these targets across starting in May. I can imagine that over sort of Q3 to continue to drill and take these samples, get them offshore, get them into the lab to come back. It sort of says to me that we can start to see results coming through end of Q3 and into Q4 in the dual campaign as well. So I was really excited and delighted to be getting moving on the strategy. Obviously, it's potentially accretive to the Sukari infrastructure. We did a little bit of work internally just to understand and help the geologist to understand what type of targets we should be looking at. We do some desktop exercises around sort of capital assumptions for establishing a satellite deposits.

We looked at all resistances. We looked at our cost base at Sukari, understanding how what it costs. And a bit of analysis as we move further away from Sukari mill, what sort of minimum ante and grades do we need to see in order to make them value accretive to the Sukari mine plan. And of course, having that infrastructure in place means that actually, the barrier to success or the hurdle for success for us in this area is significantly lower. We think something in the order of 300,000 ounces at 1.3, 1.4 grams starts becoming value accretive to Sukari and we'll start to trip those ounces in.

So it just tells us that certainly we're clearly looking for big deposits and sort of large incremental sort of increases but actually smaller deposits of I would consider the moderate grade become very value accretive to SCA as well. So armed with that mapping and screening tool, on top of the geological data, we're going to get those rigs moving. We're going to get into [indiscernible] and look to report back second half of this year as hopefully, we start to build on that momentum and success across Migros. If we pivot across now to West Africa.

Doropo, we did delay things last year. We pushed the PFS out by a few months but I think for a very good reason. And I think that project really kicked off. I'm delighted with the progress that's been made versus the PEA outcome. We obviously announced the resources at back end of last year. 2.5 million ounces in the resource category after the infill program constrained in proper resource pit now So we're happy with that. And I think the key there, of course, 1 was the confirmation of the ounces, the ore body didn't break up or the ore body didn't break up when drilled. And what we're really delighted with, of course, is the increasing rate of to about 1.5 grams on a resource average grade as well.

So a really nice pickup in grade that you saw there. We've done some mining work. I think the key of the mining work really has been focused on making sure that we are environmentally and socially sensitive in terms of sequencing of these multiple pits and we've done a lot of work to make sure that we're able to effectively sort of operate these pits in a socially responsible way. such that we're able to sort of dovetail our assumption engagement plans around the mining sequence to make sure that we've actually something that's realistic and can be implemented not a sort of spreadsheet NPV maximization exercise which sometimes happens. So that's moved true, again, seeing results consistent, slightly better than the PEA numbers.

I think processing was the big upside that we saw and hence, the reason for the delay. We have considered a float and a fine grind circuit as part of the PEA I think test work that we did during the PFS stage identified the ability to drop that and we've been chasing that down. And obviously, given the fact we're on the remote power generation in this part of the world, moving away from a fine grind and go to a whole or reach has got significant both capital but importantly, OpEx savings as well.

I'm delighted that, that work has continued over the last quarter. and coming together. So we see a number of opportunities for both technical and economic enhancements compared to the PEA. There will, of course, be some inflation baked will have to be baked into those numbers from the PEA but we're pretty comfortable and confident and actually excited around what we've been able to achieve to basically offset potentially those headwinds that we're seeing around inflation, around that as well.

So putting all that together, we're going to finish off the work. We're going to get that out and we're planning for a June release for that I think importantly though, given our confidence in the project, we actually have started the DFS field work program in terms of the infill drilling in terms of geotech and water in terms of the environmental and social impact of setting baseline. So although we'll finish the PFS around the middle of the year, I would suggest that sort of around about the same time, we will have substantively finished the DFS feasibility. So the feasibility field work will have been completed at that time as well. So it's not a case that we have to finish the PFS, think about it and then start the field work for the DFS. We'll have that mostly in the bank by the time we start that and then we can move quickly on to the DFS evaluation.

So I'm hopeful and confident that the DFS delivery will move along at a pace given the heavy lifting in the PFS stage as well. And with our license renewed last year, we've got until the middle of 2024 to make that mine license application submission. So I think we're well on track to be inside that and take that form as well. So really looking forward to updating everybody towards the end of the second quarter. I think there's some good news to come there. I'm looking forward to taking that onto the DFS space as well.

Just moving on to the summary. We've got our growth in action slide which is the ground title. I quite like that. But really, I think that 2022, we delivered a huge amount of new slow. Obviously, in the background, we got on with delivering guidance. But on top of that, it was almost -- it seems the second half of the year, there was an announcement per month on some aspects of optimization or improvements around the operations that we have as well. And really carrying that momentum into 2023, we see the same.

We're going to look at our solar plants. Can we upsize that? I think the first flush of 36 megawatts has been a huge success for us. And the question now is that how do we take that forward? And can we expand that? What's the potential to further increase that and potentially doing the hours completely displace diesel consumption or thermal power generation on that basis as well?

So we're moving forward on that studies are underway as we speak and we'll look at that going forward as well. Jumping around those boxes slightly lead to that, of course, as I mentioned before, is our ability to connect to the Egyptian National Power Grid. The tenure has been launched in Egypt and we've got a date from April for submissions of tender bids and looking to move that initiative forward fairly quickly and significantly.

Huge opportunity there, again, for further cost savings given the fact that we're still on a combination of solar and diesel the opportunity there, of course, is to completely remove these or from the film energy mix and move to a combination of solar and grid. And part of that sort of expansion study, of course, is linked back to the crude connection study and also the ability to harmonize those 2 systems. And I think that even the sort of proven that we're doing now still says that solar makes a huge amount of sense for us even with good connection. It's just a slightly longer payback time as well. So we'll continue to move those 2 opportunities along, recognizing the sort of opportunity for significant further operating cost reduction and also carbon abatement opportunities as well.

Underground expansion; we're busy now engineering that out. Looking forward to bringing that engineered case back to everybody having a look at a little trade-off study with the open pit underground interaction as well and looking to optimize that, putting together an next iteration of our sort of ongoing and improved mine planning as well. And I think that, combined with the gravity circuit work, the gravity service work that we're doing and that normally don't reach extension that we've got underway at this stage as well.

I think the combination of those initiatives are really that takes us on that next leg back towards that sort of 500,000 ounce level from there. I mentioned these in the exploration, getting those hold into those priority targets. Obviously, it's speculative at this stage. Exploration is by its nature risky. But those results would start flowing through the second half of the year. I'm looking forward to seeing those myself, of course and then potentially communicating actually communicating to the market as well.

And finally, that Doropo PFS, getting that finally put down and put away and then moving quickly keeping momentum going there as we seek to get that into a mining application phase as well. So I think a lot more to come in 2023, really building on our momentum and success in '22 and a number of catalysts to come through there as well.

So on to our final slide, we'll probably hold this as our holding slide for Q&A. Our strategy has been the same. It's been clear and consistent. We're going to look to maximize Sukari value. We're looking at that growth and diversification we can add into EDX and Doropo. And of course, after Ross outlined in terms of our financial flexibility, our balance sheet strength, our enhanced and strengthened dividend policy looking to maintain that commitment to later returns as well. So look, thank you very much, everybody, for listening. Ross and I have sort of banged on there at about 45 minutes. We'll pull back there. And what I'd like to do now is open the floor to questions. Ross and I are happy to take those before we're in a quick wrap-up as well.

So with that, I'll hand back to Brika and open the floor to questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first question we have from the phone lines comes from Jason Fairclough of Bank of America.

Jason Fairclough

Super interesting as ever. I have 2 questions, please, 1 on Doropo and 1 on Nugrus. So first on Doropo, I'm just wondering could you talk a little bit about the timeline beyond the PFS? So is it the sort of thing where the PFS is being done to a degree that you can actually do a feasibility study quite quickly and then take this thing through to Board approval? And then just on Nugrus. So you're going to start drilling in the second half of this year, how quickly could we see ore from Negros ending up in the Sukari mill? Is this 2 to 3 years away still?

Martin Horgan

Jason, thank you. Let's take it in reverse order. So no risk Yes, look, I think from a technical perspective, the furthest extent of Nugrus is about sort of 30, 35 kilometers away from the mill. So reasonable distance but not fully distances.

Yes. Look, we've done a little bit of work. What would it take to establish on the assumption we had geological success. Look, we found something that was significant in scale and size, then clearly, you're going to have to do a lot of drilling, a lot of valuation work to work out how to how to best tackle a large or a significant resource find as well. So it was something that was pretty exciting in Texas probably going to take a little bit longer to fully drill it off, do the met test work and then do the mine planning around it. On the assumption, it was, say, a 300,000 to 500,000 ounce type satellite target. Yes, you could drill it off pretty quickly. So I think that getting the rigs turning relatively quickly, you could bring that into a resource category pretty sharpish in terms of sort of the mine planning relatively straightforward.

We've clearly got a significant sort of cost base understanding but also the technical execution capacity. So it's pretty easy for us to move on opportunities there in saves an open pit sort of target as well. Obviously, the harmonization of terms between bringing a sort of a target in the -- under the current new sort of the mining regime into the concession agreement, although we have broken that with the Minister in prior to the previous meeting and he's quite comfortable that relative to easily done in Egypt. They've got present in the oil and gas sector. So look, I would say that a small to medium target, absolutely 2 to 3 years with a following wind, we could get around that. If it was a bigger target that required more drilling and evaluation than possibly longer but that would be a lucky headache to have, Jason.

So yes, I think that would not be beyond the realms of possibility given the infrastructure we've got in place. In terms of Doropo, yes, look, it's that kind of philosophical approach to sort of study work is that the pre-feasibility should be about assessing all the various options, doing lots of work to evaluate lots of different configurations and so on, finalizing a sort of preferred configuration. And then the DFS is about the engineering and cost accuracy to DFS stage at the preferred option. And we very much followed people can think that PFS to BFS means you just get more accurate. That's not the approach we've taken.

So we've done a lot of the heavy lifting during the PFS stage where we looked at lots of different options and opportunities. And that means, of course, that when you get to DFS is that you've got a high level of confidence that you're then engineering the optimal or the preferred outcome. So we've very much taken that approach. Hence, that delay in the PFS while we chase down this processing opportunity. So there's two ways to think about it. One is that we have to have a license application in by the end of June 2024. That's a hard stop for us. So that's the backstop to it. But I think the reality is that given that sort of heavy lifting during the PFS stage I would hope that sort of given the fact we've done a significant portion of the technical film work for the DFS now, we're using the current dry season to do that. I would hope by sort of year-end, in the early part of Q1 next year, that the FS is done. So that's a sort of a 6- to 8-month window post the finalization of PFS to get the DFS where we need it to be as well.

So I think that heavy lifting we've done now will pay dividends down the track towards in terms of timeline. And then in terms of moving through the gears. Look, we've got a regular technical committee that meets alongside of Cisco as well. We have really been updates with that. We keep them informed on a step-by-step basis. So by the time it came to a decision point, we're not going into our Board calls, hey, this is how we'd like to do it. They're pretty much up the curve on what the opportunity is, what the risks are associated with that, how we look to fund that as well. So we've worked very much hand in glove with the Board to take them along for the journey.

So when it came to final presentation of the recommendation to move forward is that they're doing that from a fully informed basis in move forward as well. So I can see we can expedite the sort of the technical work program time line quite quickly. And by the time we get to present that to the board, yes, I don't think it will be a large deliberation around whether we go forward or not. I think we're sort of reaching that sort of decision point pretty much with the decision to positive or negative as it may be but that's how we kind of work with our Board and the various committees as well.

Jason Fairclough

So just to make sure I get that, Martin. So Doropo, assuming things are favorable, go, no-go mid-'24 or end of '24?

Martin Horgan

No, I would say, go, no go, would be sort of first half of '24 from a Board perspective in terms of taking the project forward. From a regulatory perspective, we have to have the application in terms of mining licenses by the middle of the year. So, I think that sort of first half of next year as a management team and a Board, we'll have a very clear idea of whether it's going forward or not. And then I think then it's -- and obviously, with the regulatory process. If the Board are confident and the board are supportive and the Board back the decision management give inception it's positive. And we believe that we're going to get sort of the permit. And of course, if you're sort of first half of '24 that you conflict move forward, we can actually start to do things like really push on with the front and engineering design. You can even start putting deposits down on long lead items. You can start doing a little bit of preparatory work on site in terms of preparation of construction camps, access roads, small water dams as well. So that's the approach we've taken in West Africa before, is that it's those types of things that add to project construction timeline, the absolute -- the time to build a mine or process at the right time around it.

If you've got your camp in place and all the infrastructure services in place, it's about 12 to 14 months. It's the kind of 6 months of putting an accommodation camp, putting in a large account having light vehicle workshops to support a larger fleet of vehicles, all those types of things have taken time. But if you're confident that the Board support you only prepared to put the risk capital in there and you're confident you're going to get your you could start to it as well. So we look to sort of for shorten that time line. So I would say first half of next year, management and Board will be able to sort of understand that we want to take this forward. Regulatory, you're sort of expecting midyear to get the government approval to take it forward. But then depending on your risk appetite, you could put a few single-digit million at risk to basically at risk inverted commerce just to get some of those softer early things moving. So you really hit the ground running when you get the final green light to move forward with all permits in hand.

Operator

We now have Marina Calero of RBC Capital Markets. Unfortunately, we have got no audio from Marina's line. The next question -- we now have Daniel Major of UBS.

Daniel Major

A few questions for Ross around the minority interest in the P&L dividends and then the CapEx guidance. Firstly, on the just the EMRA profit share and I'm just being clear on some of these elements, can you just quickly walk us through the difference between $98 million P&L charge and the $35 million cash outlay in 2023, what the outstanding balance is on the cost recovery and therefore, what we should be expecting for those 2 line items in 2023, 2024. That's the first question.

Ross Jerrard

Okay. Yes, so I'd refer you to that both 2.4 in the financial statements. But basically, the -- in summary, the outstanding cost recovery as we sit at the end of December '22 is that number that sits within that note of $22.5 million. So that's a pure cost recovery. That is due and payable as of the end of December. There's a further tail of $80 million that is in the cost recovery model but that will be recovered over future periods over the following tail periods. So in aligning or truing up these 2-year periods from July 1, 2020 through to June '22, that charge that went through effectively in the income statement was to align those numbers going forward. So in summary, you've got your $22.5 billion that's due and payable immediately and you've got a further dip feed of that $80 million which will unwind roughly $24 million to $25 million every 6 months on a way going forward. I say roughly because there's further investment as we contribute further cash calls or contributions that obviously tops up that profile as you're going forward. So -- and then with regards to your profit share, if you look at the cash flow statement, there's $35 million of profit share that's paid. That's profit share that's been paid to both partners but you're only picking up on the RAC side, that's profit share that goes forward.

We've basically modeled circa $24 million, $25 million a year that would come through in terms of normal profit share in the absence of outperformance and things. So that's the type of number that you could reasonably expect on a go-forward basis at conservative prices, if operations and cash flows obviously generate more, we would we distributed a bit more than that. And that's the -- I guess that's the balancing position in terms of because if you refer to the note, you'll see that we continue to pay a profit share, notwithstanding that there's cost recovery due and maintaining our relationship and position with our partners but also ensuring that we've recovered the costs that are due to us. And we've done really well in terms of recovering those historic balances over those periods.

Daniel Major

Yes. So just to kind of circle back on that. The cash flow item, the $35 million this year. Am I correct in saying you've got EUR 22 million that's due in Q1. And then you have like a residual requirement to still pay. I think it's about EUR 7 million per quarter on the MR profit share whilst you're drawing down that residual balance. So what should we assume because that balance should be large enough to last year through 2023. So what actually contributes to your cash flow should be $7 million a quarter plus $22 million. Is that correct?

Martin Horgan

That's correct.

Daniel Major

Okay, perfect. And the P&L charge, just to be clear on that. Again, is that -- would that be comparable to the cash charge? Or would that be 50% of reported pretax profit?

Ross Jerrard

All things being equal and without any time lag on signed off accounts and if it all worked perfectly, it would basically be a 50%. So it would be aligned to a 50-50 type split. So if you added those over time, that would all equalize but it's out of sync in particular period because of the catch-up of historical periods. But over a period of time or over life of mine in your model, you would reasonably expect those to [indiscernible] out and basically be equal.

Daniel Major

Right. So in 2023, we should just take 50% of reported pretax profit effectively goes to Emera and goes to your EPS and we should take a run rate of about $35 million to $40 million in the cash flow statement?

Ross Jerrard

That's right. That's right. And if there's any absence of that, it's for us to update everybody in terms of the timing of those in offshore -- the hope is that we keep everything current were current up until June 22 with our partners. But if that starts to lag, that obviously opens up now, I guess, our exposure and try and keep it current and that's the plan going forward. some variability but it won't be the significant peaks and drops that we've seen recently for volatility.

Daniel Major

Okay. And then just on the CapEx side. Just want to clarify the difference between kind of what you guide and what your real CapEx is because your real CapEx was $275 million last year, not $225 million, the difference being the sustaining element of waste stripping capitalized. I guess the first point, what is the explicit guidance on your actual CapEx, not this adjusted CapEx? And do you not think it might be prudent to guide on this to the market because, obviously, that's what actually feeds into your financial statements.

Ross Jerrard

Yes, you're absolutely right. The adjustment between the $225 million and $275 million or $280 million is the basically the transfer of waste stripping that comes out of OpEx and goes into CapEx. We've always viewed the CapEx of those discrete the true traditional CapEx numbers. This reallocation or accounting adjustment is really a reclassification in terms of the various requirements of the accounting interpretation or IRC. But so I believe those numbers are true but your point taken in terms of guiding and giving you line of sight in terms of both those at model.

Daniel Major

Right. So what is the guidance on the full CapEx number, the 2025 plus what?

Ross Jerrard

It will be a similar number. So that will be a similar number in your models if you're adding back and putting in the $55 million or $60 million to that number, you'll end up with a similar number, similar profile. And that -- and again, we'll guide you on that in terms of where the fleet are operating.

Daniel Major

Okay. So 275 to 280 is the guidance. Come reduction in OpEx as well, Ross. That's right?

Ross Jerrard

Yes, right. That portion then. It's just a reallocation from OpEx to CapEx.

Daniel Major

No, I understand that. But obviously, you're showing the total cash cost, excluding the recapitalization of stripping. But you're guiding on CapEx reducing -- stripping that out, it kind of feels slightly inconsistent but that's clear. So $275 million, $280 million is the CapEx number we should be thinking about. Yes, okay. And just a final 1 on that for your adjusted free cash flow to calculate the dividend. You've indicated that $37 million is the kind of adjusted add back. Is that versus $275 million versus EUR 225 million to calculate this kind of adjusted free cash flow number for your dividend?

Ross Jerrard

Yes. So that's why it's against that $225 million. So we're looking at discrete projects. So this waste stripping and the operation of our fleet. We -- for us, we view it as cash and OpEx. And it's those discrete growth CapEx projects that are excluded and funded by the RCF that we would add back. So certainly, waste stripping wouldn't be included in the da. It would be those positions that we -- or those projects that we're financing out of ICF.

Daniel Major

Right. So $275 million, $280 million less $37 million is the CapEx number to calculate your kind of adjusted free cash flow for the dividend?

Ross Jerrard

Yes. Yes, I would add it back the other way and say free cash flow plus those discrete projects is the easier almost an add back rather than stripping it off.

Operator

We now have Li Low of Liberum. You may proceed.

Li Low

Congratulations on being in line in your financials. First few questions. And I think I'm going to take them one by one. The first is can you speak to recovery rate? Because in the last life of asset review, you were targeting 89.5%. And my understanding was that it was going to come from existing plant optimizations. So before gravity recovery. But the recoveries have generally been in the 88% range. And I wonder whether -- how much bus material you're putting to? I know there was some investments in Q3.

Martin Horgan

Yes, we did a little bit of back through late last year in Q4 and that did have a minor detrimental impact on recoveries, while that material is working its way through the plant, given the nature of the of the ore feed. And look, in terms of the plant optimization they're ongoing. They're nearly finalized now. We've been looking at some floatation reagent changes to help the flotation circuit, looking at some sort of reagent mixing and dosing control systems as well as put through there and looking to put optimize as well. So still targeting to be up to that sort of number. We have been a little bit down on that but strategies in hand to take that forward and we're hoping to bring that back up. And of course, as we all know, recoveries are a function of head grade. It's a big tail relationship. So as we see sort of grade improving as well, we're hoping and non-Bats material with that grade improving, hopefully, between the improvement in grade and also those operating initiatives, we can get that back towards the 89, 89.5 type number.

In terms of the gravity, that will come through, we think. Well, the test work plan to be paced by the middle of the year, a little bit of engineering and procurement. We can start construction sort of Q4 this year and have the gravity circuit online as sort of the first half and we think that's going to have some pretty good operating benefits for us in terms of making sure we capture full value of high-grade legacy ore body but then also in terms of improving overall recoveries as well.

Li Low

Okay, that's great. On a related note, the Bonanza structure [indiscernible] there's been no mention of that since they were brought up in the life often review. Sorry, aside from the -- that you put a bit of bus material through the plant. So how much but material has been delineated. And how much of it have you actually set through really? So how much is left?

Martin Horgan

Right. Okay. So in terms of as material, that continues to be drilled up and added to the both resource and the reserve statements. So there will be a further base material added into last year's December resource reserves. In terms of what we've mined, very limited amount. It was a bit of a trial mining exercise last fourth quarter. So the substantial part of the Bast material remains in inventory for mining. And of course, we want to do 2 things. One is that we believe, given the sort of the very high-grade nature of the Bast material is that we believe that there's a risk that if we try to push that through the processing plant as it's currently configured that we sort of risk that coming out the tail at the back end or just the heavier gold sort of sinking and getting stuck in the effectively sing to the bottom of the system is larger now that they get flattened out by the combination process and they sort of effectively settling to a on the process plant. So then not lost but you can't really recover them.

So we believe that the gravity circuit will have a significant impact on being able to effectively scale out that high-grade nuggety gold before the balance of the material goes into the back end of the processing plant. So in terms of accessing the Bast material as we go forward, first consideration is that we want that -- we want the gravity circuit in place before we do that.

Second consideration is that we're working through now on the underground life of mine plan. Expansion cases that we're looking at a number of scenarios but 2 of the trade-offs we're looking at. And I think I mentioned this before, is that -- the first one is we could as we build up our tonnage capacity from the underground, as we move from 1 million to 1.5 million tonnes per annum of ore brought to surface, one could continue to effectively mine to the pot average grade of the underground plus/minus. And you would see the ounces increase in time as the oil tons increase as well. Another strategy we could look at is to preferentially take some of the higher-grade material sooner. So while you units moving from 1 to 1.1 million, 1.2 million, 1.3 million tonnes per annum, you could mine that the sort of the high-grade material earlier, that gives you a bit of a bump on ounces.

And then as you then basically come through the -- and getting up to the steady state revert back to the mean average grade of the ore body. So it's a way to effectively try and flatten out the ounce profile increase from the underground expansion case as well. So we're currently looking at the gravity test which we believe is I'd say, essential but would be a significant value enhancement for Bass material and then looking at how we schedule a fast material within the connection of the underground expansion case as well. So it fits in inventory. We've mined very little amount of it. it's basically required the gravity so that we believe to fully get it maximize value out of it.

And then, we're thinking about how we feed that material into the year expanded case schedule. So that will all come together when we do the life of mine plan update probably H2 this year around that optimization work.

Li Low

Is that -- how big a mine is likely to be early or late this year?

Martin Horgan

Well, look, we've got some internal deadlines that I'm working with the team, depending on the results of those and then whether we want some external review and validation of those Look, let's say, Q4, we released the market. And if it's sooner than that, we're all happy.

Li Low

Okay. Now moving on to a different topic. On the subject of debt, is there still an intention to get any project debt for Doropo? Or is it just going to be the half year? And if Sukari -- are Sukari cash flows still going to be ringfenced?

Martin Horgan

So I think that when we think about the order of magnitude of the Doropo CapEx, now we guided $275 million in the PEA. Let's use $300 million as a number and I'm just putting it out there. No, I don't think the RCF would be sufficient scale to fully cover the Doropo construction. I also don't believe that sort of Sukari cash flows our balance sheet would also fund the $300 million CapEx, if we wanted to continue to pay dividends. And to be clear, we want to keep paying dividends. So with that, the construct that we're looking at and we'll start a discovery process once the PFS is finished is that we would look at having an asset level project finance facility, ring-fenced against the repo and then the sort of effectively owners contribution, the balance of that, we say that was 2/3 or 70% of the project -- of the CapEx but could be project finance against Doropo.

The balance of that then would come from sentiment treasury and that sentiments, it could be a combination of the RCF, cash on hand and also carry cash flows. So -- and one of the specific terms of the RCF facility is that it has been set up and documented such that it can be harmonized with a project finance at the Doropo level. So we would imagine that Doropo would have an element of ring-fenced finance. I'm saying project finance. It could be PF. It could be a stream. It could be some of that. But there would be, let's say, an asset level piece of funding required.

And then, the Centamin contribution to top up the construction funding would come from our enhanced balance sheet between cash on hand and debt facility and cash flows from Sukari. But importantly, we would enable us to carry cash flows to remain available for dividend payment as well. And that was the whole point of balancing growth and returns.

Li Low

Sorry, I had a little bit of interference in my line. Did you say that Sukari is available for dividends but it's no longer ring-fenced for dividends?

Martin Horgan

No, no. No, I said that there would be an asset-level ring-fenced funding for Doropo, so that we would see either a project finance refer similar and the equity, if you like, or the owners' contribution to the Doropo funding requirement away from that asset level funding could come from a combination of our RCF facility, our balance sheet cash on hand and Sukari cash flows. But the point being is that by having that debt facility at the RCF at the corporate level, having our balance sheet strength is that we believe that we can use those to and we can make a decision on the cash flow in order to then basically continue to fund Doropo development but also leave cash flow available for dividend payment. And to be clear, the 30% of corporate free cash flow ring-fence the dividend, that policy doesn't change. So at the very least, you're going to get that but we believe with the financial flexibility we have now is that we can continue to develop the op and pay dividends as we move forward.

So there's no change to the policy, 30% of free cash, minimum will still be applied to Dizy and that would be before Doropo financing but we've got additional flexibility we have now. We believe that we can secure a full funding package with Doropo without the need to basically go and tap equity markets without the need to cut the dividend to 0 while we've gone through that growth rate.

Li Low

All right. And just going back to Sukari, I think you mentioned that the ore body was open alongside you mean just underground? Or do you mean that you think that the open can actually extend alongside?

Martin Horgan

Well, I would say that from an underground perspective, the team are seeing sort of a strike extent to the -- towards the Northeast. And of course, historically, we know we have some drilling into what's referred to as the clear patron which is again to the North and Northeast of the open pit. Now, there is historically limited drilling available in that area, mainly because of the topography when the initial drilling was done, it was on top of the Sukari Hill. I mean it was quite difficult to get rigs out there. So we know the mineralization does continue through the clear patron zone. That is striking towards the Northeast. We know that's where the regional structure heads off to the Northeast at the host. We do have some drilling indicating that our resources in that zone. But now that we've basically got the top of Stage 7 flattened out, now that the pit is opening, we can now both from an underground open pit perspective, do some drilling in these areas to understand where does the mineralization go to the Northeast, is it there in sufficient volume that would drive the compete underground economics but we don't know. But certainly, I would say that we are aware of mineralization. We are aware of the general sort of geological striking to the Northeast. And we now -- because we've got -- we've basically taken the top of the hill, we now have an ability to get rigs in there and start testing that as we go forward.

So it's not an immediate priority for us. as we continue to sort of push down to the deeper levels of Sukari. But it certainly remains, to my mind, open in that direction and it hasn't yet definitively been closed off either geologically or economically say doesn't work.

Li Low

Okay. And finally, just going back to the Bonanza structures again. There was mention previously of visible gold in the -- I think it was the hanging if I get reached now. Have you been followed up?

Martin Horgan

Is VG all over the place unit. It's an amazing underground deposit. As you go various parts of the ore body, we see it in Pata, we've seen it in a month. We see it occasionally in Horus as well. So look, it is a high-grade novate ore body. We do get the zones where we have super high-grade areas where we see VG as well. So I would say that we don't we don't chase visible goal in what we [indiscernible] the mineralized structure and then we take those high grades [ph].

Li Low

Sorry, I meant in the open pit.

Martin Horgan

Yes, in the open pit. Look, absolutely. Obviously, the open pit was not really selective. So yes, from time to time, we do have high-grade structures these normally sort of court pains sort of steeply dipping sort of fairly narrow in structures but they sit within an overall panel within the open pit as well. But if you're designing a 50,000 to 100,000 tonne tunnel, they just basically get taken with the overall sort of panel as well. So we just talk during open pit mapping in and around the production areas, we're still seeing the structures that sort of sit there within the overall, the overall mineralized package. We do occasionally see these higher rate structures sitting down. It just gives us that -- I mean, you'd expect that to be the case given what we've seen in the underground. But they're not selectively mined in the open pit. They're just taking part of the panel and taking on patents and then processed.

Operator

I'd like to hand it back to Alex for any of the webcast questions.

Alexandra Barter-Carse

Thank you very much. Only 2, actually. First one, Martin, for you. Is there any possibility of Group Connection or solar power at Doropo?

Martin Horgan

I would say, grid, less likely; solar, yes in short term. Very quick answer, just conscious of time for people. Look too far north, I think, the grid, solar, yes.

Alexandra Barter-Carse

Wonderful. And then the other one is with your revised dividend policy, how should we look at the 2023 dividend?

Martin Horgan

I'll pass it over to my world-leading CFO, to Ross Jerrard. Pressure on you now.

Ross Jerrard

Yes. So I guess in terms of the construct that we've described and modeling. If we're looking at those projects, as we've shown and looking at gold price, so I think the gold price depends on your inputs but the gold price of $1,700 and the projects that we've described, you could reasonably expect a $0.03 dividend or something in that type of range. If gold price is going to go up to $1,900, it would be more akin to a $0.05 dividend for the previous year. But that's the type of range. I think we would be looking at sort of minimum or general percentage being $0.03 per share up to $0.05 but very much performance based.

Alexandra Barter-Carse

Also, that's all for me. Thank you.

Martin Horgan

Well, thank you very much, Alex. Well, look, maybe to wrap up fairly quickly then. Look, I think 2022 is a great year. Delivery across Sukari, delivery into our projects and growth opportunities. Some great strides made across our ESG front. A big step forward around our -- in terms of our balance sheet and the application of the debt and the fact that we've been through that external validation process by the bankers to enable them to lender sort of point in the background there we have been diligent and lenders are prepared to lend the game as well. So I think a really good year of delivery. Another year into the reinvestment program and went through that kind of down and tailing off into that now to get back towards steady state at Sukari. And lots of opportunities still to come, lots more to deliver this year to keep that momentum and a real sense of examining the business.

We've really created a platform now. We tend to think of this as not the finish line but actually the start line. And we've built this foundation and the question is, where do we go from here? And I think that's the excitement for 2023. So I think lots of -- lots more good news flow to come, lots of focus on delivery against plans that step to plan, again, we get back to those ounces [ph]. I'm really looking forward to engaging with everybody over the balance of the year as we continue to drop the news flow around the various Sukari solar expansion, the grid connection underground expansion, the OCO PFS and so on and so forth. And there, of course, that potentially exciting news should we get positive news there as well.

So, I'd like to thank everybody for their time this morning. Thank you for the questions and I look forward to catching up with you individually. As ever, we remain open to people who want to catch up offline, usual channels by myself, Ross or Alex, to get in touch and we'd be happy to call from there as well. So thank you, everybody. I wish you all the very best. Have a good day and talk soon. Thank you.

Ross Jerrard

Thank you.