Sibanye Stillwater Limited Q3 FY2021 earnings call

Management Statement and Operational Highlights

• Safety: Suffered 20 fatalities in 2021, took actions like suspending operations and closing mines. Conducted an independent review confirming safety strategy alignment. Working on a faecal elimination plan to reduce fatalities.
• ESG and Carbon Neutrality: Made progress on carbon neutrality by 2040, reduced water demand/intensity. Implemented a green metals strategy with 4 acquisitions in 2021 (Keliber Sandouville, Rhyolite-Ridge Project, etc.).
• Strategic Refresh: Addressed gray elephants (pandemic, aging, inequality), revised strategy to focus on ESG excellence, building green metals portfolio, inclusivity, and pandemic-resilient ecosystems.
• Financial Performance: Record adjusted EBITDA $68.6 billion, adjusted free cash flow R37.4 billion. Declared a dividend of just under R14 billion ($866 million) and conducted share buybacks of R8.5 billion, with a net cash position of R11.5 billion.

Segment Performance

• South African PGM Operations: In the second half of 2021, total production was just over 940,000 ounces, 5% higher than the comparative period. Unit costs were nominally 1% lower year-on-year. Sold just under 960,000 ounces of PGMs at an average basket price of just over R40,000 per 4E ounce. Free cash flow from these operations for the second half was just over 8.2 billion, with a 54% adjusted EBITDA margin.
• US PGM Operations: Had a tough second half with production of approximately 270,000 ounces, 11% lower than the comparative period. Unit costs increased 18% year-on-year to just over $1,000 per ounce due to constraints like a fatal accident and skill shortages.
• South African Gold Operations: Produced just over 550,000 ounces in the second half, 4% lower than the prior year. Unit costs increased 16% due to inflationary pressures, resulting in EBITDA of R2.8 billion with an 18% adjusted EBITDA margin.
• Recycling: Fed just over 350,000 ounces of PGMs in the second half, unlocked $380 million in working capital, with recycling inventory normalizing to around 200 tonnes.

Guidance

• US PGM Operations: Forecast production for 2022 between 550,000 and 580,000 ounces, all-in sustaining costs around $1,000 per ounce, capital ~$300 million.
• South African PGM Operations: Forecast flat production between 1.75 and 1.85 million ounces, costs between R18.5 and R19,000 per ounce, capital ~R4.7 billion.
• South African Gold Operations: Lowered guidance to between 25 and 27 tons of gold, with unit costs forecast between R875,000 and R925,000 per kilogram, capital ~R5.2 billion.

Risks

• Safety: Fatalities due to various factors including COVID-19, need for continuous safety improvements to reach zero harm.
• Supply Chain and Commodity: Eskom's unreliable supply and tariff increases, microchip shortages affecting PGM business, geopolitical risks like Russia-Ukraine impacting palladium supply.
• Regulatory: Uncertainties in regulations and approvals for renewable projects and mine closures, potential issues with tailings facility rehabilitation.

Question and Answer

Q: With the current lithium price at its all-time high, is Sibanye likely to exercise its option to increase its current investment in Keliber? And if so when?

A: Yes, we will progress our route to control of Keliber, with feasibility studies expected to be complete within 6 to 9 months.

Q: Can you provide some color on what's happened with the Appian transaction and why you decided to not complete it?

A: A material adverse geotechnical event led to exiting the transaction. This doesn't affect future M&A, and excess cash will be used strategically.