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Good morning, all. I think we're ready to get going. So welcome to you all to the results presentation for our H1 2020 financial year results. I'm Richard Duffy, CEO; and with me is Jacques Breytenbach, our CFO, and we'll take you through a presentation of the results, after which we'll take questions both from the audience here and also telephonically and from the webcast, if we have any questions. So I'm going to go straight in. Thanks very much. Starting with safety, which remains our most important value. I'm pleased to say that we have continued to deliver safety results that reflect an improving trend which has continued over the last several years. We did have a small increase in our all injury -- in our lost time injury frequency rate. We went from 0.21x to 0.22x, but still a very good safety performance.On the operational results, as we mentioned in our trading update, we had very good operational results ahead of production plans across all of our mines. And that translated into production of just over 2 million, just under 2.1 million carats for the half year. Our revenue was, however, negatively impacted by a weaker market and our market impact was about 10%. We had an adverse product mix impacting us by 3%, mainly from Finsch and Williamson, and that was offset -- partially offset by the 20-carat blue that we recovered from Cullinan that we sold for just under $15 million.On the CapEx side, as indicated, our CapEx is lower on the back of us completing our significant capital expansion phase, and so that's tracking as guided. Project 2022 has kicked in and support the delivery of our outperformance in terms of operational results. And what you see there is really just a graphic of that progression, resulting in our record H1 production results.Talking to our EBITDA and operational free cash flow. Jacques will take you through a graphic in his section that provides a little more detail on the operating free cash flow and our net debt. But what you can see here is that our EBITDA at $67.2 million is down around 11% on the back of the weaker market, but importantly, our EBITDA margin remains robust at 35%. On the operational free cash flow, we generated $13.7 million, and as I said, Jacques will take you through that in a little more detail under the financial section.And then just touching on some of the things we do at Petra in terms of responsible mining and our impact and participation in our communities. This slide just shows a number of events that we participated in or contributed to across the group, including the work we do at Cullinan with the local school, the mining initiative at Koffiefontein with the artisanal mining and a number of other initiatives, including Women in Leadership and activism against violence against women, amongst other things.So talking to the diamond market. As we had indicated in the trading update, we are in a world where there are limited new mines coming on stream. And in fact, we only have 30 significant kimberlite mines globally. If you look at the outlook in terms of the fundamentals for the diamond market over the longer term, as we've said, and this is a graphic we've put up a number of times, we are seeing a contraction in global supply from around 150 million carats currently down to around 115 million carats over the next 3 or 4 years. So the fundamentals for the market remain robust.However, as we have seen, we have been through a difficult market. We saw some stability towards the end of last calendar year, and you see that in the Bloomberg rough diamond index, where there was a modest uptick as we went into the end of last year and early this year. We did indicate that in H1, our prices, on a like-for-like basis, were down around 4%. But we also said that at our first tender this year, we saw a marginal improvement in pricing.I think the thing that has created a little bit of uncertainty in the short term is the outbreak of the coronavirus, which was really inopportune in terms of timing, right in the middle of the Chinese New Year. And what we think that will do is it will push out the recovery in terms of pricing. It is still too early to really determine the impact, but it is going to have a short-term impact in our view. The important thing, too, though is the majors have continued to exercise discipline in terms of their supply into the midstream. And that certainly has helped to stabilize that sector of the market and we expect that to continue going forward.I'm going to hand over to Jacques, who will just take you through the financial results summary. Thanks, Jacques.
Good morning, all. Just going to take you through some of the numbers here, not all the line items. Revenue line, income decreased by some 6%. Richard covered it, it was largely driven through market weakness in this period observed. Adjusted mining and operating cost really turning around expectations, assisted by a weaker rand during the period, some 4% contributed by the rand, resulting in the slight improvement year-on-year.Corporate overhead at $3.2 million shows our focus on cost and decreased quite significantly year-on-year as well. It's an area, as mentioned, a part of Project '22, we are looking at all costs throughout the business, not only at the operational side. EBITDA came in at some $67 million compared to $75 million the previous year. As Richard mentioned, EBITDA margin of around 35%, so strong operational results on that front still.Jumping to net finance expenses of some $34 million. Just to point out, the previous year, we've capitalized some $3.5 million or $3.7 million of interest in 2019. That largely explains the movement in our net finance expenses year-on-year. All borrowing costs are now expensed and no further capitalization since the completion of our expansion programs. All of this resulted in a loss from continuing operations of around $10 million for the 6-month period compared to $18 million from continuing ops in the preceding period or the comparative period, rather.Our balance sheet snapshot. Most of these numbers have been already published throughout in -- at time of our trading update, end of January. Just to take you through some of the key numbers here. You would have seen a strong-ish rand end of December, ZAR 13.99. It has already weakened again to levels closer to ZAR 15. I think we're trading at ZAR 14.90 this morning. So most of the gains that we've seen during December on the rand side already given up, obviously assisting our position with a weaker rand.Diamond inventories increased in the 6-month period from $57 million end of June to $85 million carrying value end of December. As expected, we did only 3 tenders in our first half, and the bulk of the inventory buildup is expected to be released again during our H2 period.Diamond debtors, $12.8 million. Although we have closed our December tender early in December, there's, as per usual, some off-cycle or off-tender sales happening throughout the sales cycles. We are compelled to offer certain parcels to our local diamond beneficiations companies in SA as well as to the State Diamond Trader. Those parcels are thus not part of our normal tender and sales were concluded right at the end of December relative to those parcels. These funds have been since received in full shortly after the period end.Our net debt came in at $596 million, already a number disclosed in our trading update, and I'll take you through a bridge shortly just to explain the movement there. Bank facilities remain fully undrawn at reporting period. We do utilize these facilities on a temporary basis within periods purely for working capital and operational reasons. But again, fully available and undrawn. Subsequent to period end, we have received waivers from our banking lender group in SA. As our net debt to EBITDA, the ratio is not stated here, but we effectively came in at 4.4x, slightly above our 4.25x covenant measurement requirement. We have received a waiver from our banks. There won't be any measurement for the December measurement period, and the facilities therefore remain fully available to the group.Just to take a bit of time on our net debt. I think it's an important movement and obviously a key focus for us and for most of our investors and bondholders. Operationally, we've generated some $13.7 million of operational free cash flow over the 6-month period. Basically consists of a couple of items, i.e., operating cash flows before working capital movements of some $67 million, positive for the period. This was then impacted by our diamonds -- or total inventory buildup of some $23 million. The bulk of that is expected to be released, as I said, in our H2 and clearly a seasonal lockup of inventory.Receivables and payables increased some $3 million and largely driven by some $5 million associated with VAT at Williamson in Tanzania during the 6-month period. And our CapEx number, $26.8 million. The sum total of these bars is the operational cash flow whenever we report on that number. Outside of this, we obviously also had to fund our cash interest expenses of some $24 million. The bulk of that is associated with our bond, $23.6 million in the period; and the balance, either commitment fees to our SA banking facilities as well as some interest, although minimal, for utilization of facilities during this period.Our BEE partners, we've advanced some $11 million to them over the period. The bulk of that, over $9 million was associated with their debt obligations, capital and interest payments on the SA lending requirements or obligations. And some, as we call, trickle dividends of some $2 million over and above the debt repayment. Realized FX losses over the period, closing out of hedges, in line with our approach, not to try and be clever on the hedging strategy but closed out as and when these sales happened, was some $3 million realized. We do carry some $2.7 million of unrealized profit at end of December, which, depending on how the remaining period goes, could offset some of the losses incurred in H1.The lease payments relates largely to the mining fleet at Williamson, where, through IFRS 16, we have to now recognize the contract fleet as assets on our balance sheet, leased assets, and the associated lease payments amounted to some $2.8 million. Minimal tax payments during the period and a minor recoupment from the KEM, which receivable we've written off in full last year during our payment reviews. So this basically explains the movement from opening EBIT of around $565 million ending at $596 million. So positive operational cash flow have really eaten up, if I can use those words, by net finance expenses and BEE advances during the period.Moving on to our costs. Our costs remained largely in line with expectations. You could see our cost in H1 compared to the prior H1 basically remaining flat. It has to be considered in line with increased run-of-mine production, quite significant movement on that front. We've still managed to maintain our cost on an absolute flat curve, obviously assisted by a slightly weaker rand, some 4% in this period observed.The other item, just to reemphasize the diamond inventory movement. If you look at H1 -- or the full year 2019, you could clearly see an inventory release in our second half with a $27 million buildup in H1 and the full year ending up at a $2.9 million buildup. So a circa $25 million release in H1 the prior year, and we would expect that trend to continue into this year.Group technical and support costs, also just further to our focus on cost, decreased significantly more than purely the FX movement and a decent result over on the cost performance. There's obviously some focus and -- it remains a key focus for us to ensure our cost is well controlled.Impact of rand movements. Just to point out, the sudden and unforeseen strengthening of the rand right at the end of our reporting period, down to ZAR 13.99 end of December, basically immediately clawed back over the extent of the month in January to reach levels closer to ZAR 15 where we are trading today as well. As per usual, the -- our bulk of our costs and CapEx across the SA operations are rand denominated. And the movement in U.S. dollar -- a weaker rand effectively assist us quite a bit but so does a strengthening rand obviously as well, with 18 -- as much as $18 million impact on EBITDA for every ZAR 1 move, and circa $25 million impact on free cash flow for that same ZAR 1 move over a period of a full year.I'm handing it back to Richard to cover the operations in a bit more detail.
Thanks, Jacques. So if we turn to the operations, just to remind ourselves that we are at the end of a 10-year capital investment period, and that's summarized on the slide in front of you. And as we had indicated, over the next 3 years, starting with this year, we have relatively low capital, as indicated, increasing to a little over $60 million by 2022.In terms of the contribution from the different mines, what we've seen is Cullinan stepped up its contribution over the last year both in terms of the carats produced but also in terms of its contribution to revenue and EBITDA.Turning to Cullinan now. We've discussed this at the trading update, but we're now at a point at Cullinan where we are pretty much complete in terms of the C-Cut development, and I'll show you on the next slide what that looks like. But importantly, we have seen a progression across the footprint of the C-Cut and an increase in our underground run-of-mine tonnes, where we now have an operation at Cullinan that is producing above target in terms of run-of-mine -- underground run-of-mine tonnes. And a number of analysts were at a recent site visit and hopefully would have seen firsthand how we have progressed at Cullinan.In terms of the C-Cut, what you see in this graphic is the development of the C-Cut across the ore body starting in 2016 and where we are currently pretty much complete. There are 3 draw-bells that were slotted in December last year that are all but complete. And as a result, we are seeing a representative extraction across the full footprint of the ore body.On Finsch, we have now seen or have reached steady-state production, and will do in the second half of this year from our Block 5. The sub-level cave has been in ramp-up since 2017, and we've seen that progression through to the first half of this year with 1.5 million tonnes, and we remain on track to complete that through the balance of this financial year. The schematic you see here at the different levels is the progression of the sub-level cave. And again, similar to Cullinan but this time looking at a sub-level rather than a block cave. You can see we are extracting ore now at 75 level and starting at 78 level, which again should give us a better mix across the ore body itself.We did, at Finsch, indicate that we had seen some product mix issues. We have taken remedial steps in the final recovery plant, where we did recalibrate some of the equipment, and we put some new technology in -- both in the final recovery around the x-ray machines, and we also put a new x-ray machine into our bulk sampling plant which will help us to audit the tailings and ensure that we are recovering the stones that we expect. And we have seen an improvement in terms of the size, frequency, distribution at Finsch as a result of that.Koffiefontein, we did reach a steady-state production from the sub-level cave at Koffiefontein. Really, the focus on Koffie is to make sure we get to the run rate in terms of tonnes and that we manage the costs and the CapEx to ensure that we're able to deliver cash contribution from the operation itself. And we continue to focus on that, particularly around managing grade and draw control to ensure we are able to deliver the targeted grades.At Williamson, we did report at the trading update that we had seen a pit slump at the mine. It was around 1.3 million tonnes of largely waste material. We are currently finalizing the plan to remove that material. Most of that will happen towards the end of this year but particularly in the next year or 2. It isn't expected to have a significant impact on this year's production. Fortunately, we have been well ahead of the run rate, and so we continue to project the targeted levels of production from Williamson. And we will publish an updated or provide information on an updated plan by the end of our quarter 3. We are continuing discussions with the government of Tanzania. We are in constructive discussions with them, and we hope to be able to provide some feedback on that in the near future.Project 2022. I think it's important to emphasize that this project has been implemented across the group. We are seeing some very good traction, and we're seeing better-than-anticipated results earlier than we thought we would, which has supported some of the outperformance in terms of the operations in H1. We are indicating here though that on the back of an ongoing weaker market, we are looking to defer the targeted benefit of $150 million to $200 million, with the result that, over the 3-year period to our financial year-end 2022, the cash generation number is likely to be $100 million to $150 million rather than the $150 million to $200 million.We still anticipate hitting the targeted annual run rate of $50 million to $80 million annually by financial year 2022. But given the ongoing market weakness, we don't see us getting to that target in the time frame we had initially hoped to. We've indicated previously that throughput is the bulk of the benefit that we've identified, around 75%, with cost efficiencies at 10%, sourcing at around 5% and then a bucket of other, which includes things like the blocked parcel in Tanzania and the sale of redundant and scrap equipment, amongst other things, in that bracket.What we've done on this next slide is we've provided a breakdown of -- and buildup of Project 2022 and the contribution -- the cash contribution we see from that. So what I've highlighted here is we've indicated the 4 work streams or buckets being throughput, cost efficiency, sourcing and other, and we've shown over the 3-year period both the Project 2022 target and the stretch. And so what you can see is if -- at target over the 3 years, we deliver $100 million; and at stretch over the same 3-year period, that is the $150 million referred to. And as you can see from this, it is back-weighted, as we have always said. Obviously, it takes time to establish and see the benefits flow through, so we're expecting a relatively modest contribution from Project 2022 in this financial year. But that steps up significantly in 2021 and particularly in 2022. And at that stage, you can see we're at our annualized run rate of between $50 million and $80 million on an annualized basis.So the message with Project 2022 is that it is doing exactly what we had hoped, and in fact, slightly better than we had hoped, but we are negatively impacted by the ongoing weaker market in terms of delivery of those benefits.Just to talk you through how this all works and those of you who were at the Cullinan site visit would have seen some of this. But the process of Project 2022 is for the support team, which is a corporate Project 2022 team with the site team supported by [ PEP ] going to site to review all of the mining processes and the processes through the plant and identify opportunities to debottleneck and improve throughput at the operation. So this schematic just shows that there are really 6 sub-processes in mining, which start withdrawing the ore from the block cave, and this is specifically Cullinan, through loading, crushing at the shaft and hoisting through the mill and then producing the diamonds from that.And at Cullinan, what we identified was really 3 main areas of improvement in sub-processes: around the loading, in particular, the hoisting and then how we process and liberate the stones in the processing plant itself. And within each of those sub-processes, we've got a number of ideas that then get transformed into projects and get implemented as such and this really shows what some of those are. So around the loading, we've looked at reducing the time that it takes around shift changes or, as we've called it, shrinking the shift change. We've looked at weekend loading, which means we're able to better utilize the capital invested by getting contractors in over the weekend to provide additional loading. That's also helped us on the hoisting side to improve or increase the hoisting capacity from a previous 4 million tonne a year to north of 4.4 million tonne a year in terms of better utilization of our asset base.And then also on the loading side, we have reduced the LHD cycle time through a number of initiatives, which we just captured under the start your engines heading. Hoisting, as I mentioned, we're now able to hoist over more hours. But what we're focusing on is really maximizing the hoist time, obviously within the limits of proper planned maintenance and ensuring that we do all of those things. But within that, looking to maximize hoisting.In the plant, we're looking at reducing our recycled materials so that we're able to reduce the recirculating load and improve our productivity as a result. And we've also looked at optimizing the milling side, in particular as well as prioritizing the relatively limited material we have left in terms of the higher-grade red tailings. So there's a very systematic process around Project 2022 around identifying opportunities, converting them from ideas into project plans and implementing them. And we track them, as I think I mentioned in the trading update, very closely. I have weekly meetings with my general managers around Project 2022 and the delivery against these areas.And then this just summarizes what you would see on a typical Petra mine site, this is Cullinan, where we clearly set out what we've delivered, what our best delivery over the period has been and really what we consider to be the target or stretch in terms of great delivery in those different areas around the mining.And so then if I summarize all of this in terms of the outlook going forward, I think it really is captured around the fact that, operationally, the mines are doing very well. We're doing what we can in terms of operating efficiently, focusing on cost, managing capital. And from an operational point of view, I think that is demonstrated in the results delivered. However, as we've indicated, the market does remain challenging, and that notwithstanding the upside that we see in terms of the fundamentals around supply and demand down the line. But in the short term, we continue to see a choppy market, which does make it a little more difficult.As I've just explained, Project 2022 is firmly on track. It's delivering what we intended it to deliver, albeit impacted, as I said, by a weaker market. And then obviously, in terms of cash management in light of this market, we are focusing on our liquidity. We're managing very tight control around overhead and capital, as I've said to you previously. We're also in ongoing discussions with our SA lender group. They continue to remain supportive and we enjoy their support through a very constructive relationship with them. And in the context of our bond, we -- as I say in the last point is we continue to assess our strategic options around the bond ahead of its maturity in May 2022.And with that, that concludes the presentation, and we would be very happy to take questions. I suggest we start with questions in the room, and then we'll take any telephonic questions. And if there are any webcast questions, we'll read them out and address those as well. Thank you very much.
Edward Sterck, BMO. Just a couple of questions. Firstly, on your commentary around the impact of coronavirus or COVID-19 on the diamond market. Is this manifesting itself in terms of just pricing or is it lower volumes that are being looked for as well? And how is this coming about? Is it just less restocking after the holiday season sales?
It's a little difficult to really understand the impact just yet. I think from a Petra perspective, what we saw in our first sales earlier, last week in fact, is we saw a modest improvement in prices. It was probably a little behind what we had hoped for. And so I think the uncertainty around the impact of coronavirus, as I said, has probably shifted the recovery out a little.I don't think it's had -- again, early to say, I don't think it's had a significant impact in terms of the midstream and them taking material but it probably will see the potential price recovery shift. We'd probably need a little more time to properly assess it there. But it has had an impact, and the fact that it's right in the middle of the Chinese New Year, the timing is lousy.
Understood. And then just one follow-up question on Cullinan, if I may. The -- clearly obviously, the initiatives are showing some success in terms of cost and throughput and so on. Just on the hoisting, adding an extra 2 days a week of hoisting over the weekend. Is it possible to go beyond the 4.4 million and get closer to 5 million tonnes just with the -- all of that extra time available?
On the hoisting, we're mostly doing an extra day. We're not doing the full weekend. We -- 4.4 million tonnes is certainly achievable and probably beyond, I think, to -- not yet sure whether we can quite get to 5 million tonnes, but certainly, there is the potential to improve probably beyond the 4.4 million tonnes. And that's really part of the focus around optimizing your infrastructure and better utilization of that.
Richard Hatch from Berenberg. First question. Appreciate you're going to generate more free cash flow in the second half of the year. Can you -- and then more into 2021 as well. With the bonds trading at 61, is that -- at some point in time over the next 18 months, do you kind of think it's a wise thing to step into market to buy some bonds at a cheaper price? Is that a consideration at this point? Or is it too early at this juncture to talk about it?
Thanks, Richard. Look, the issue around the bond, obviously at current prices, it's attractive for us to look at that as an option and it's one of the options we're considering. There are a number of options besides that, that we're actively considering and we do have some time before May 2022. Obviously, what the market does is important and where we sit right now, it's a difficult market but that, as we look out 12 months, could change quite significantly.And also, don't forget that in Cullinan, we have a mine that does throw out exceptional stones from time to time. I've said repeatedly before, we don't plan our business on exceptional stones, we can't, but we similarly can't ignore the fact that the mine does produce those from time to time. One roundabout now would be really nice. But obviously, that's not entirely within our control.
Look forward to the announcement on that. Can I also just ask, on KEM, I think I had in my numbers, I was expecting some cash this half from KEM, but it -- I don't think it came in, what's the latest on that? And how should we be thinking about the consideration on it?
Yes. I mean, Richard, the -- you would have seen on the waterfall around our net debt position, there was some inflow, only $0.1 million in the 6-month period. They're obviously also being impacted by the diamond market, and we have discussed some [ realization ] around the proceeds. We have taken prudent steps last year to write off the receivable or make a provision for a write-off, but funds should still come in. I think for now, assume a fairly modest inflow for those amounts. That's still [ outlooking ] given the diamond market.
Okay. And last one was just on costs. Cullinan costs came in pretty well and perhaps tracking slightly below guidance as did Williamson. Are you still comfortable with the guidance you're putting on the table for the full year? Or do you think there might be some opportunities to come in a bit below?
Look, it's -- we're certainly focusing on holding the costs that there's always pressure on that front. So I think we're targeting delivery against guidance. Any upside on that would be great. But again, a lot of those measures related to Project 2022 only really ramp up from '21. So holding cost is the focus, improvement probably more an FY 2021 conversation.Any other questions from the room? Here we go.
It's Thomas Streater from Streater Investment Research. Just a quick question, very quick question to Jacques. Are you guys considering to sign up to the Task Force on Climate-related Financial Disclosures, TCFD?
I'll have to confirm. We are -- obviously, our -- all our disclosures is in line with the Carbon Disclosure Program (sic) [ Carbon Disclosure Project ]. Apologies I -- but Cathy, maybe on the -- if you could assist?
Yes. Well, we're already -- we've been disclosing to the CDP for about 5 or 6 years, and we've got up to a B level of disclosure, which is pretty good for a company of our size. With the TCFD, we're doing a lot of the requirements of it already within our sustainability reporting, things around scenario planning and our various carbon-sequestering programs. So I think it's just a matter of further expanding on that. We will be looking at doing something along those lines in due course.
Charles Vaughan from Tamesis. Can you tell me a bit about what you think the effect of the withholding of diamonds from, I think, Alrosa? And how many diamonds are being withheld from the market? And what are you hearing about that continuation?
I'm not going to pretend to speak on behalf of either Alrosa or De Beers, but what we see in the market is they've really exercised some discipline and restraint around supplier of rough to the midstream. And just to step back, towards the middle of last calendar year, what we saw was a combination of factors in the midstream that really created a fair amount of distress and saw an imbalance in that pipeline.The factors included the supply of rough in -- at the front end. It included over -- excess inventory on the polished side. And then there was some financial distress around the financing of the midstream that resulted from a number of banks or a few banks withdrew funding on the back of some fraud in that midstream sector. Since then, a lot of that has cleaned up, and there's been a lot of tiding up of the midstream. And the majors, through continuing to manage the supply of rough, has meant that an element of balance has been restored in the pipeline.Jewelry demand has been pretty consistent so that hasn't been the issue. But because of the excess inventory of polished, it wasn't pulling through. Towards the end of this year, what you've seen is greater balance. And that demand is starting to pull through from the midstream. So what's important for us, and we still -- we're seeing it with the majors is they are continuing to exercise discipline. They have supplied increased volumes to the market in their last sales as we had expected, but still maintaining that discipline. So it's important that, that midstream and that broader inventory pipeline remains in balance for that market to be healthy and for our goods to continue to be demanded at reasonable prices. The issue is how long it will take for that to really rebalance and show real pull-through, which will translate into higher pricing. Any other questions here? Otherwise, my -- we've got another one.
Sorry, just one last one. Can I just get into the weight on tax? Not very much tax paid in the first half, which is pretty standard. Have you got a steer on how much we should book into the cash flow statement for the second half for tax?
Richard, that's obviously dependent on prices and result in taxable income. Our tax rate is, roughly across the group, 28%. So it's really driven by profit estimates going forward.
Okay. And your own kind of model, are you able to give kind of a range?
Difficult. Let's consider. And if so, we'll then distribute to all. I don't know that number at hand.
All right. So we've got another question from Ian, I think.
Ian Rossouw from Barclays. Just I guess, following up from what Richard was asking around the cost base. At Finsch, it looked like your costs for the first half was quite a bit above what you were guiding. Could you maybe just talk a bit about that? Was those sort of one-off costs? Do you -- should we expect that to come down for next year?
I think at Finsch, there were a number of factors that are impacting costs. We do have a once-off charge from the Sedibeng Water Board around the capital charge on a pipeline that all of the users have to contribute to, and that's going to have an impact of around ZAR 40 million over the year. We're looking at hard to offset that cost, but that is a one-off that did come through. And as I said, at all operations, but Finsch, too, is -- at Finsch, we're looking at how we get back to the guided number, and there are a number of things we're doing to address that. But that is a one-off cost that, I think, in fairness, was unanticipated and we just need to look to offset that.
Was all of that ZAR 40 million in the first half already?
I don't think so. A portion...
Yes. That's roughly -- half of that has already been incurred with the other half estimated in H2. There was some other, I'd say, costs incurred through the really good run rate on the production side. So pushing up some of the variable costs. But all in all, it's really driven by this water levy that was unforeseen and unexpected when we did the budget and guidance for this year.
To confirm, there's no questions from the webcast.
I don't know if there are any questions on the lines. Have we got any questions from anybody participating via telephone?
[Operator Instructions] We have one question from Rahul Bhat.
This is Rahul Bhat from JPMorgan. I just had a couple of questions. First, probably on the strategic option on the bond. Can you elaborate like buying back the bonds is one option, what are the other options you're looking at?
Rahul, it's Richard. At this stage, really, we can't elaborate much on that at all. As I said, we have some time ahead of the bond maturing. We're looking at a range of strategic options, and they would be the options that you would expect us to consider as we approach the maturity, but not much more I can say at this stage, unfortunately.
Can I ask if you've appointed any advisers on that?
Look, as a company and a Board, we make use of advisers as and when required, and you can assume we'll continue to do that.
Okay. Understood. And can I ask, on the debt level, clearly $650 million seems a bit high. Is there -- could you give an estimate on where do you think should be the ideal debt level for the company?
Rahul, Jacques here. I think we have indicated that -- well, we're in agreement that the debt is too high. We have indicated that we will consider all options how to reduce. And I think it's fair to assume that a level well below 2x EBITDA is a longer-term target. How we get there is obviously part and parcel of the next steps that we are considering and we'll be considering in the run-up to the bond.
Understood. And then, Jacques, one last one for you. On the cash balance, so the unrestricted cash balance is now down to only $40 million. What is the minimum level of cash that you'd probably need to run the business without dipping into the facilities?
The current cash levels is really at the minimum level without going into facilities. And we would not -- ideally with the medium term, obviously around the $40 million accessible cash is an absolute minimum that we are aiming to -- aiming for. We do have the facilities in place to make sure that we have adequate headroom however. And if we need to, for operational reasons, we will be utilizing those facilities.
Any further questions?
We have no further questions on the line.
Thank you very much. Without there being any other questions, then thank you very much for your attendance and time, and we'll talk to you in a few months. Thank you.