Sibanye Stillwater Limited Q2 FY2024 earnings call

Management Statement and Operational Highlights

• Balance Sheet: Increased balance sheet strength and liquidity by over ZAR25 billion. This was achieved through actions like uplifting debt covenants, implementing currency hedging, refinancing debt, and advancing Keliber financing. The net debt to adjusted EBITDA stood at 1.43 times.
• ESG and Diversity: The company is committed to ESG and views diversity, inclusion, equity, and belonging as strategic differentiators.
• Operational Restructuring: Substantial restructuring has been carried out in South Africa, the US, and other regions to optimize operations for the lower price environment. Cost savings have been realized from this restructuring.
• Regional Updates: South African PGM operations had a solid performance despite challenges. The US PGM operations initiated a new restructuring phase. The Keliber project is progressing well. The Century operations are showing improvement.

Segment Performance

• PGMs: South African PGM operations had production up, but revenue down due to lower prices. Adjusted EBITDA for SA PGM was approximately ZAR5 billion. US PGM operations saw a 16% increase in mine PGM production but faced losses because of low palladium prices. Recycling operations generated positive earnings and cash flow.
• Lithium: The Keliber Lithium project is moving forward with commissioning expected in the second half of 2025.
• Gold: South African gold operations had disappointing output due to closures and seismicity. US gold operations had a 16% increase in mine PGM production but underwent restructuring.
• Zinc: The Century zinc retreatment operation is on track to be profitable in 2024 with improved production and cost control.

Guidance

• Balance Sheet: The company expects to continue strengthening the balance sheet with non-debt initiatives.
• Operations: South African gold operations are expected to have improved performance in the second half. The US PGM operations are entering a new restructuring phase. The Keliber project is on track with commissioning scheduled for the second half of 2025.
• Cost Optimization: There is an aim to drive the all-in sustaining costs for US PGM operations to $1,000 an ounce over a period of 2-3 years.

Risks

• Commodity Price Volatility: Uncertainty in PGM and lithium prices poses a risk to revenue and profitability.
• Operational Disruptions: Seismicity in gold operations, legal industrial action, and cyber-attacks present risks to operations.
• Restructuring Challenges: Implementing restructuring may face challenges in fully optimizing operations and achieving the expected cost savings.

Question and Answer

Q: Regarding the company's outlook on increasing allocation of gold assets.

A: Neal Froneman stated that the company likes gold but is not currently focused on external growth, instead focusing on the balance sheet and operational results.

Q: How much time the balance sheet shoring up has provided.

A: Neal Froneman and Charl Keyter mentioned that it buys time to get through a three-year hump and operate well below covenants.

Q: Risk of paying too much of future upside with alternative funding structures.

A: Neal Froneman said the company is aware of the cost of capital and makes careful decisions regarding streams.

Q: On the US PGM restructuring, how long can the current production run rate be maintained.

A: Charles Carter said that choices have been made to defer capital and there is flexibility to increase production when prices allow.

Q: About selling assets or cutting costs to fund the offshore strategy.

A: Neal Froneman said the company is not averse to selling assets and will be prudent with cost cutting.

Q: Chrome contribution to revenue at SA PGM operations and Keliber valuation.

A: Richard Stewart said Chrome contributed approximately 7-8% of SA PGM revenue. Mika Seitovirta said Keliber's valuation is based on moderate and flat lithium price assumptions.

Q: Why restructuring instead of full closure for Stillwater.

A: Charles Carter said restructuring is to protect optionality and preserve a world-class asset, and care and maintenance is a lower cost option than full closure.

Q: Fixed costs in the US PGM business.

A: Charles Carter said fixed costs have been addressed through simplifying the organizational structure and adjusting the operational profile.