Sibanye Stillwater Limited Q2 FY2021 earnings call

Management Statement and Operational Highlights

• People and Safety: Reenergized safety strategies after a regression, vaccinated over 40,000 employees against COVID-19.
• ESG and Sustainability: Developed a comprehensive sustainability strategy with focus on climate change resilient business, economic stability, human rights, and data-driven decision making. Aim to achieve net carbon zero by 2040.
• Financial Performance: Record adjusted EBITDA of ZAR40.5 billion, record adjusted free cash flow of ZAR17.3 billion. Declared interim dividend of ZAR292 cents per share, implemented 5% share buyback.
• Strategic Acquisitions: Acquired Keliber lithium hydroxide project and Sandouville nickel facility to position in European battery electric vehicle sector.

Segment Performance

• South African PGM Segment: Produced just under 900,000 ounces, a 42% increase year-on-year. All-in sustaining costs reduced by 10% to below ZAR17,000 per ounce. Generated ZAR14 billion in free cash flow with a 66% adjusted EBITDA margin.
• Stillwater Operations: On track for record performance but faced a 21-day safety shutdown at Stillwater West, leading to flat year-on-year output. All-in sustaining costs increased by 12% to $973 per ounce.
• South African Gold Operations: Produced just over 0.5 million ounces, a 29% increase year-on-year. All-in sustaining cost just below ZAR800,000 per kilogram. EBITDA increased by 40% to just under ZAR2.5 billion.
• Recycling Business: Produced just over 400,000 ounces, generating $50 million adjusted EBITDA with a 5% margin.

Guidance

• US PGM Operations: Forecast slight downturn of about 40,000 ounces (6%) due to safety shutdown impact, all-in sustaining costs expected between $910-$940 per ounce.
• South African PGM Operations: No change to production or cost guidance, but forecast ZAR350 million reduction in capital.
• South African Gold Operations: Production flat, but forecast 5% increase in all-in sustaining costs to between ZAR815,000-ZAR840,000 per kilogram due to inflationary costs.

Risks

• Safety Incidents: Continued safety regression and incidents impacting operations, such as the 21-day shutdown at Stillwater West.
• Commodity Volatility: Short-term volatility in precious metals markets due to factors like chip shortages.
• South African Economic and Political Risks: Uncertainty in the business environment affecting operations and stability.

Question and Answer

Q: Have auto manufacturers continued to buy PGMs despite semiconductor shortages?

A: Neal Froneman - They have continued to buy, but with a reduction in purchases, not stockpiling.

Q: On SA gold cost provisions, how much is electricity driven and other costs?

A: Richard Stewart - ~25% due to electricity, balance from other inflation factors like steel and industrial chemicals.

Q: How long to get full flexibility back at Stillwater?

A: Richard Stewart - About 18-24 months.

Q: Thoughts on stock valuation and dividend/buyback strategy?

A: Neal Froneman - Dividends and buybacks will continue, need consistent delivery for valuation improvement.