Sibanye Stillwater Limited Q2 FY2023 earnings call

Management Statement and Operational Highlights

• Antifragility Strategy: Focus on building pandemic-resilient ecosystems, leveraging the antifragility culture. Mentioned changes in the C-suite and executive appointments.
• Regional Operations: Richard Stewart discussed safety progress, load curtailment management, and the performance of PGM and gold operations. Charles Carter talked about challenges and recovery in U.S. PGM operations. Grant Stuart covered headwinds in the recycling segment. Mika Seitovirta outlined progress in European operations. Robert Van Niekerk spoke about Australian zinc operations.
• Financial Review: Charl Keyter discussed capital allocation, financial results, and the strength of the balance sheet.

Segment Performance

• PGM Operations: South African PGM operations had solid performance with a 9% increase in costs but remained competitive. U.S. PGM operations were impacted by the Stillwater shaft incident and ongoing skill shortages. The recycling segment faced headwinds with lower volumes and prices.
• Gold Business: Gold operations showed operational recovery with a 22% increase in the gold price, but faced challenges such as a shaft fire and seismicity.
• Lithium Business: The Keliber lithium hydroxide project in Finland is on track with construction started. The Rhyolite Ridge lithium project in the U.S. has advanced with reduced permitting risk.
• Other Regions: European operations faced challenges at the Sandouville refinery but made progress in the Keliber project. Australian New Century zinc tailings retreatment operations had production impacted by flooding.
• Financials: Revenue decreased by 14% to ZAR60 billion, profit was ZAR7.8 billion, and a dividend of ZAR1.5 billion was declared. The balance sheet remained strong with low gearing.

Guidance

• Revised guidance in U.S. recycling, South African gold operations, and EU battery metals output due to market conditions and operational impacts.
• Expectations for the second half recovery in U.S. PGM operations and progress in lithium projects.

Risks

• Operational risks such as load curtailment in South Africa, skill shortages in the U.S., and challenges in European operations like the Sandouville refinery.
• Market risks including PGM price volatility, the cyclical nature of PGM demand, and potential impairments across the industry.

Question and Answer

Q: Which shafts at the SA PGM are currently producing at costs above spot and what optimization work will be implemented?

A: Rich Stewart mentioned focusing on rightsizing shafts to improve margins rather than simply opening or closing them, with the major project K4 at Marikana being a long-term investment.

Q: What palladium long-term price do we use and how should we think about potential impairments at the U.S.?

A: Charles Carter discussed using current spot prices around 1,200-1,300, with plans to get back on track to 700,000 ounces by 2027 and evaluating levers to adjust costs.

Q: Do we see the downturn in PGMs is cyclical or structural?

A: Richard Stewart and Neal Froneman agreed it is cyclical with long-term fundamentals for PGMs remaining good.

Q: How long will OEMs destocking take place before we see prices stabilizing and improving?

A: Richard Stewart said it's difficult to give an exact time but expects a couple of quarters towards the end of the year.

Q: What's our view on the global PGM recycling business and status of Appian transaction?

A: Grant Stuart remains excited about recycling with flexibility, and the Appian transaction is ongoing with legal processes preparing witness statements.