Sibanye Stillwater - H1 2023

Transcript

Neal Froneman (CEO)

Good afternoon and good morning, ladies and gentlemen. Welcome to our H1 2023 results presentation. Just a few comments up front. This has been another period of our results being impacted negatively by once-off events, some of them self-inflicted, and some, such as the extreme weather event in Australia, an act of God, or for those of you who believe in climate change, also self-inflicted by humanity. The economy and hence the running of mining operations is in a particularly tough place globally at the moment. There could well be a downturn, as we see it, for some time. Remember, we refer to these more as pandemics. This is where our anti-fragility culture or differentiator stands us in good stead.

As you will see from the title of the presentation, our anti-fragility differentiator is creating significant advantage to our peers for reasons that I'm going to outline in the first section. Anti-fragility, for those of you who are wondering what it means, and I took this definition out of Wikipedia, is something that does not merely withstand a shock, but actually improves. Anti-fragility is beyond robustness, and that is the culture we drive within our company. Please take note of our safe harbor statement. I'd like to now discuss the agenda. I will continue with the introduction and cover the changing environment, or what I call the anti-fragility section. The chief regional officers will present the operating review for each region separately.

Charles will continue with the financial review, and I'll complete the formal delivery with a brief conclusion. As you know, a company is all about the people. We've had some changes in the C-suite and some new executive management appointments. Dawie Mostert left us. Themba Nkosi has stepped in as the Chief Organizational Growth Officer. In other words, driving the strategic aspects of HR, and we are looking to fill the sustainability position, hopefully with a woman. Robert van Niekerk, in addition to his technical and innovation responsibilities, has taken responsibility for the Australian region. And then, with the resignation of Wayne Robinson in the US, Kevin Robertson has been promoted to Executive Vice President for the US PGM operations, and Charles will cover that in more detail.

And, very pleased that we have deep bench strength, that we can make these changes, relatively quickly. And, really what you don't see is the structures and the number of really good people we've got in our organization below these, levels. If we could go on to the next slide. This is our strategy. It's built on a strategic foundation. The essentials are our primary focus. 80%-90% of our focus is on our operating business. And then, of course, the differentiators and the area where I'm going to really focus today is highlighted in the red ring, and that's about building pandemic resilient ecosystems. And, we've shared this strategy with you before, so I'm not going to go into the details. But pandemics, we define as... certainly COVID-19 was a pandemic.

That's a vanilla pandemic in the sense of it's a, it's a viral pandemic. The Ukraine invasion, we've referred to as a pandemic, and I think the current global economic crisis is the next pandemic we're dealing with. And if you deal with pandemics and you prepare for them well ahead, you become anti-fragile, which is really the theme we want to talk about today. But of course, this is our results, and let me just move on to the salient features. And very pleasing, significant operational recovery at our gold business contributed to H1 earnings, cushioning the impact of softer PGM prices.

You are now starting to see in practical terms the counter-cyclical characteristics of gold having been confirmed, and something we've alluded to previously, and this is enhancing our portfolio. The South African PGM operations, another consistent and really solid performance, load curtailment and the strategy around that, Richard will cover that. Very well-managed, industry-leading cost control with a 9% increase. I wan say only a 9% increase, a lot lower than our peers. And you will see from some of the graphs I'm going to show you, we're very well positioned for the anticipated price weakness. In terms of the U.S. PGM operations, unfortunately impacted by the shaft incident at Stillwater West Mine, which you won't see the progress being made in our results. I do, because I go to site often.

But we were proactive in repositioning this business in 2022 already for this changing environment and creating sustainable value. Ongoing skill shortages are still impacting productivity, and I'm going to show you again a practical map of the number of jobs and the number of positions available across states. In terms of the European region, we started our lithium refinery. I'm going to talk more about that. Received the permit for the concentrator and the second mine. Our rights issue, the equity component of funding the project capital is now concluded. Our partners, the Finnish Minerals Group, has increased their stake to 20%, contributing to that number, and the balance of that funding will come from debt. So effectively, it is now fully funded. We continue to have challenges at Sandouville. They're being addressed.

Mika will talk more about that. Our feasibility studies on PGM autocat recycling in Europe, battery recycling and conversion of that plant to a nickel sulfate plant will be completed in the second half of this year. In terms of our financial position, strong balance sheet. Our net debt is only ZAR 262 million, which translate to 0.01 net debt to adjusted EBITDA. We did declare an interim dividend. We are very mindful that the dividend yield is low. You have my commitment to review this at year end. Depending on market conditions, we will look to again reestablish a leading dividend yield from our dividend policy, but that's a final dividend decision at year end. All right, embedding ESG, this is not just greenwashing.

Our tailings storage facilities conformed with the GISTM audits. We have advanced our renewable energy program with a commitment to adding nine megawatts of the Castle wind farm, first step in our carbon neutrality journey. And then, very pleasingly, when we start looking at our safety strategy and how it is improving our poor performance relative to our global peers, I'm going to cover that, in fact, in the very next slide. So all in all, a reasonable H1 impacted, as I said, right at the beginning, by one-off, one-off events. So let's have a quick look at safety. As you can see, this is the ICMM peer group. The 2021 peer ranking is the top graph, and you could see we were not in a good place.

In 2022, you can see how we have, despite our deep level, high risk, mines, we've moved into a much better position on this, on this ranking. Certainly, being in the midst of Barrick and Newcrest, and better than, the ones, on the left, is very pleasing, considering all the hard work and our relative risk exposure, that has been so well managed. This is a very pleasing outcome. So I wanted to talk about this anti-fragility and, the current and changing environment that we are, finding ourselves in. So let's have a look, at, let's call it the global context and the gray elephants. We believe this is a compelling framework to understand the external context. A gray elephant has been presented to you before.

A gray elephant is a highly probable, high impact, yet often ignored trends that are shaping the 2020s. You can see those are pandemics, aging workforces, angry planet, inequality, big squeezes, angry people, multipolarity, and intelligent advances. On the next slide, you will see a few that I just want to highlight that, there's been clarity in that these are real issues. I think on climate change, climate records are being broken literally every day, every week, and if anyone ever doubted, global warming, I think, you really need to look at, some of these trends. Global carbon emissions being covered by active carbon pricing initiatives, are increasing exponentially. And of course, this is the, the fundamental driver of the metals business that we are busy building.

So we've gained confirmation that we're in the right place, unfortunately, due to climate change. In terms of big squeezes, again, becoming very apparent, increasing scarcity of raw materials is putting a huge premium on these materials. I'm going to show you our entry points and what the pricing looks like today. But more importantly, the stewardship related to the responsibility of producing these metals is increasing on miners, and being involved in recycling and recovery of these metals from waste is becoming a global imperative. And again, I want to say we've been early adopters of that. In terms of angry people, well, we've just experienced a very disruptive period in France with strikes and riots that impacted on Sandouville, was not the only issue, and Mika will cover that in more detail.

We fully are aware and sensitive to the social tensions in South Africa, but well-positioned to manage that, and I will share a bit more on the South African landscape in the next few slides. In terms of multipolarity, very interesting. We are very pleased with having established ourselves in North American and European ecosystems. We are starting to see the geostrategic importance of Africa with its mineral wealth intensifying. Again, early adopters of being in the right places at the right time. Just on the South African political landscape, it's evolving rapidly. I want to say, first of all, all credit to the Center for Risk Analysis, and I would urge you to...

If you're not familiar with this scenario planning in terms of the changing South Africa, I'd urge you to make contact with John Endres, the CEO. Of course, this is not predicting an outcome. It's actually understanding the possible outcomes that are in front of us with the 2024 election looming next year. The buffalo is the ANC, and you can see there were phases where the buffalo was charging. We've moved from a developmental phase or first age to a second age, being detrimental under the leadership of Zuma. And we're now in the third age, which is an emasculated stage, which is why I am, let's say, motivated as business, that we can make a difference. And there are various outcomes.

We can go back to a detrimental phase, we can stay in an emasculated phase, or we could move into a very constructive lean phase. You'll see references to hyenas, you'll see references to wild dogs, and clearly, it's about being prepared for these changes that are coming. Thanks. If we can go to the next slide, which really just encapsulates what I said about in an emasculated phase, business does have the ability to influence outcomes and should be influencing outcomes. And what you see here, and I'm not going to go through the detail, are the structures that have been put in place together with government to address energy, transport, crime, and corruption. And these structures emulate what was put in place for the vaccine challenges around COVID-19.

And as you know, we had a very successful outcome in business and government working together to deliver vaccines to the nation. This is in the national interest, and I do believe all these work streams are making and are going to make a very significant difference, which makes me a lot more positive about South Africa and our future. As I said, I would just include a slide showing the skill shortage and the challenges in the U.S. You can see all the shaded states have more jobs than people. For instance, in Montana, there are 46 people available for 100 jobs. And that's our challenge in our U.S. PGM segment. It is changing. We've got some smart initiatives in place.

But if you want to summarize, there are currently 9.8 million open jobs in the U.S. and only 5.9 million unemployed workers. I really wish South Africa was in this situation, but it's got its own challenges. But I think this represents, it's not a unique Sibanye-Stillwater issue in Montana. It's a national U.S. challenge. It's only Washington, California, and New York that has sufficient people to fill openings. So what I want to do is just work through each one of these in terms of the operating context that we find ourselves in, high mining inflation, the potential for impairments across the industry, and of course, restructuring. We are preparing for a prolonged and possible PGM downcycle.

Load shedding and curtailment is affecting South Africa, being very well managed by my team. I will cover that. The global call for a lower carbon footprint and better TSF management, we've delivered on that. The critical metals or the green rush with regional incentives driving multipolarity. And then, of course, this becomes an opportunity for those companies that are well-positioned to drive value-accretive and well-structured M&A. And I'm going to refer to some of the M&A we've done and being early adopters and having an anti-fragility culture has put us in a really good space. Thank you. Let's just move on to the first one. So high mining inflation and potential impairments, what have we done about it?

Well, we have timeously restructured and closed end-of-life shafts at Kroondal, Rustenburg, and Marikana in 2016 and 2019. Then some of you would remember, we closed Beatrix 4 shaft in 2022. That is just the nature of owning mature assets and being proactive in terms of avoiding cross-subsidization. We've executed integration across our new acquisitions, realized synergies, and we've moved our assets down the cost curve. I'm going to show you that as well. We've proactively repositioned our US PGM operations in 2022. You would remember, in anticipation of PGM price weakness, in addition to some technical challenges that we had. So let's just look at some of those things. There's the cost curve. You can see where most of these assets were sitting on the right.

Four of them are really in a good place. There are some areas at Marikana that need attention. I'll show you that. And then, of course, Stillwater was impacted in this period by the shaft incident, and of course, that is not a true reflection of its potential, and I would hope in the next year to 18 months, you will see it in a very different place on this cost curve. So let's look at the next slide in terms of, this is a South African PGM business, and you can see there's a very small part of it that needs, let's say, to be optimized for sustainability. We are busy with those processes.

Richard will talk a lot more about some of the long-term life of mine planning we've done, and I think you will find it particularly pleasing. But we are proactively looking at these things and have been prior to spot prices moving down to these sort of levels. On the next slide, you will see the same approach for our gold business. You know, the market generalizes about our gold business being high cost, unprofitable, but you can see there's a very large portion of it that sits below the spot price line. Clearly, those areas that are sitting above are being addressed, and we are considering a number of scenarios, and we will look to provide more guidance in the next few weeks.

But again, just because of a high gold price environment, we're not sitting on our hands. So preparing for a possible downcycle, what have we done? Well, you've just heard me talking about optimizing operations for profitability. We've had a disciplined, transparent capital allocation framework, which we've stuck to for a good number of years now. We have financial flexibility, a strong balance sheet. We have restructured our debt recently, low coupon bonds, and the dollar RCF was increased to $1 billion in April 2023, and both our rand and dollar RCFs are undrawn. Our multi-commodity portfolio diversifies our risk exposure as well. So let's look at a couple of slides setting that out. There's our net cash or net debt to adjusted EBITDA.

You can see we've been in a net cash position for some time, but we're still in a very strong balance sheet position with our net debt just at 0.01 net debt to Adjusted EBITDA. Next slide, please. In terms of our capital profile, even with Keliber, Rhyolite Ridge is not in this graph, but with Keliber, as I mentioned right at the beginning, the equity portion of the funding has been raised and the balance will be in debt, and that's very manageable. I just want to point out, if you think you're going to add a capital hump on for Rhyolite Ridge, I want to point out that the purchase price is meant to cover the capital. Of course, we don't know exactly what the capital cost is going to be.

That feasibility study is being completed, but certainly, the acquisition price is designed to cover the capital. So please keep that in mind, when you model our company. Next slide, please. I'm not going to go into the details on the left, but suffice to say, PGM basket prices, whether you look at them in four E or two E, in four E, they're down 41% to date. In two E, which is our North American basket price, it's down 27% year to date. That is very, very significant reductions in our revenue line. Next slide, please. Obviously, the demand side needs to be well understood. Again, the bullets on the left-hand side underpin what we see is effectively a balanced market now in 2023.

So we don't see a lot of demand drivers despite light vehicle production having increased or forecast to increase from 80.6 million units to just under 84 million units. Nevertheless, we have taken a prudent view and believe at best, the market will be in balance. Let's move on to load shedding and curtailment affecting South Africa. Our South African operations, as I said, were well managed. There were no stockpiles at or major buildups in inventory at the end of the period. We now have a renewable projects plan of over 600 megawatts with the first 89 megawatts wind farm project having now reached financial close.

Very pleasingly, our first concrete step in investing in assets to ameliorate load curtailment and of course, address our carbon footprint. Next slide, please. So this is just a picture of the earthworks taking place for the Newcastle Wind Energy Project, which achieved financial close in May 2023, and of course, there's more to come. Thank you. Next slide, please. In terms of a global call for low carbon footprints and better TSF management, well, of course, our PGMs and battery metals contribute to a greener future, so that's fundamental and is a foundation of our business.

We're on track to meet our carbon neutral target by 2040, and we had a very successful outcome, as I've mentioned, to the global tailings standard, with all very high and extreme consequences, TSFs in our South African and U.S. regions conforming to the standard. So very pleasing. This is a slide you should be familiar with. It shows our planned decarbonization pathway, aiming to achieve carbon neutrality by 2040. What is new on this slide, however, is that we've increased our renewable energy plan to over 600 megawatts of solar and wind projects. You can see it set out on the right-hand side of the slide. Again, I'm not going to go through it in detail, but this is a slide you're familiar with and has really just been enhanced with additional commitments.

All right, the critical metals or the green rush, as we're calling it, with regional incentives driving multipolarity, or you could say multipolarity is driving regional incentives. Either way, we're well positioned. We acquired and consolidated our Keliber stake, well ahead of the lithium price surge. Lithium is going to be in short supply over an extended period. We're absolutely convinced of that. In fact, there is not going to be enough lithium to meet the projected demand for battery electric vehicles, so we're in a good space. We commenced the construction of the refinery in Finland. We also entered into a JV agreement for Rhyolite Ridge, well ahead of the lithium price increases.

The Inflation Reduction Act, and again, very pleased that we targeted the North American system, ecosystem, I should say, is benefiting our U.S. PGM operations already. From the end of this year, we'll be getting a credit, of 10% of, qualifying production costs, and that's going to be in place for 10 years. We've taken the initial estimate in these, financials, but I think we've been very prudent. And then, of course, the IRA advantages for Rhyolite Ridge, we've also seen through a $700 million conditional funding, from the, Department of Energy in the U.S. So let's just look at a couple of, slides on this. They're the two ecosystems, North America and Europe.

If you start on the right-hand side of the slide, when we made our first entry into Keliber, the lithium price today, even after having come off a bit, is 447% higher than our initial entry. If you go to the left-hand side of the page and you look at the Rhyolite Ridge investment, you can see it's still 83% higher for lithium carbonate than when we made those entries. I'm very optimistic about the Rhyolite Ridge project as well, and I'll cover that in some detail. So the Keliber project is being built.

James has indicated to me that many analysts do not include the value of Keliber, but they include the capital. That just doesn't make sense. Yes, it's a new project. Processing might be tricky, but there's very little risk to this project. So I would ask the analysts to really start giving us credit for something that is already happening. In terms of the Rhyolite Ridge Lithium project, myself and some of the technical team, together with the US team, spent time on site. This project has advanced. The permitting risk has decreased significantly with the revision to the mine plan, with the South Basin now not impinging at all on the buckwheat.

There's very significant upside potential as well, not only in the North Basin, where we've agreed with Ioneer to continue with some exploration, which we will fund. In addition, in the South Basin, there's additional potential, which we hope to explore shortly. I think that's all on the basis of, as I've said earlier, the commitment from the Department of Energy for a conditional loan of $700 million. So, both lithium projects in a really good space. Of course, remember, Rhyolite Ridge should be a low-cost producer, even though the grade is low because of the boron credits. I just wanted to make a comment.

We have been involved in a number of assessments in Africa, and it is very clear to us that Africa is emerging as a key player in the energy transition. And certainly I want to make it clear, we're a western-facing company, and we look forward to bringing some of these resources to account for the West. This will be an interesting landscape that is going to evolve. So I wanted to conclude this section just talking about value-accretive and well-structured M&A.

Of course, you know, I'm very proud about what we have achieved as a team in terms of our PGM acquisitions, and I will remind you of that again in the next few slides. In fact, these acquisitions have paid for themselves multiple times over. I think there are many, many examples of assets that never pay for themselves, which is why some companies don't embark on M&A. I think it's a strong point of ours, and of course, we will continue to look for value-accretive opportunities. Approaching value-driven growth with smart structures and innovative financing is something that I need to bring to your attention. We do not really like competitive processes because you end up being sucked into the hype.

You end up being sucked into overpaying, or you lose out because of your positioning around what is fair value. The sort of structures that have worked very well for us, and are the sort of structures you will see us implementing, and there's many good examples is where we invest in the asset rather than buying assets from shareholders. I've just spoken about Rhyolite Ridge. Keliber was a similar investment, predominantly investing in the pre-fees and the feasibility studies, exploration, and rather investing in the ground. There was some shareholder takeouts, but investments in Africa, for instance, in Mopani, are not going to be paying shareholders upfront, as an example. Probably the best example of smart structures is Rustenburg Platinum, where there was an earn-in.

Both Anglo and ourselves did extremely well out of that structure. Those are the type of structures we think of and implement. Obviously, partnerships are important, and that enables optimum value creation. So let's look at a couple of the underlying slides in this. You all know the sigmoid curves that have taken us to where we are. I want to point out, and I really want you to focus on the red areas there. We initially leveraged our operating skills for commodity diversification. In other words, we did well in turning around the original Gold Fields assets.

That gave us the credibility to move into PGMs, utilizing our core skills... Once we had done that and established a bit of a base in PGMs, we were able to leverage those exact same operating skills in a new commodity to move into the U.S. and start our geographical diversification. And you can be critical of Stillwater, but it's paid for itself. And please remember that with probably still another 30 or 40 years of life. What we learned in moving into the PGMs was doing things somewhat different to our peers in this industry. We realized there was a lot of benefit in terms of understanding the value chain and moving down further to the end user.

Hence we leveraged our market and value chain knowledge to diversify into green metals, tailings and expand recycling. I'm going to come to that stewardship of those three elements now. But moving downstream is a very, very important part in terms of the business we are entering into. So as I said, when you understand there's a big squeeze, when you understand the importance of decarbonizing the planet and that the metals are critical constraint, the intention is not to abuse that, but to embrace resource stewardship, and it's not just through primary mining. In our view, you can't be in this sector if you only are conducting primary mining. So as you know, over a period of time, we've built our secondary mining business that now has two legs, DRDGOLD and New Century Resources.

Of course, we are in the recycling business in Montana with auto catalysts, one of the biggest recyclers in the U.S. But we are actively exploring opportunities for further recycling of precious metals and of course, ultimately electric vehicle batteries. So that's a very important concept, and it does move us downstream in a responsible way. We are not going to build gigafactories. We may invest in gigafactories in a small way, but this does move us downstream. Next slide, please. So if you look at our timing in terms of our entry into the PGM business, it couldn't have been better. And that's really the only point I'm going to make.

And when you couple that with our early entry into the lithium market, again, I think you can see a track record of doing things at the right time. Next slide, please. This is an interesting slide with two key messages. We fully understand our current multiple and what causes that, but you can see when you look down the multiple column, you can see diversified companies do attract a better multiple because they are less risky, less exposure to market cyclicality. And then, of course, as you move downstream, you also see an increase in market multiples. So that bodes well for us.

The one aspect on this slide, in case you didn't think payback of all our assets was enough, if you compare our return on invested capital to some of our peers, you can see that in really good company, we have also provided a better return to our shareholders in terms of invested capital. So the strategy, the concept of moving slightly further downstream, bodes well for us. Our returns to our shareholders, through doing things at the right time in the commodity markets, has provided very significant benefits. Doesn't matter how you measure it. Next slide, please. This is an interesting slide, and the critical minerals that we are focused on are a very small part of the metals market.

So if you interpret my comments as we are trying to emulate, a Rio Tinto, an Anglo American or a BHP, we are not. If you follow this, these bars, you can see iron ore, all other metals translates into, the orange stacks bar or, you know, with aluminum, manganese. Copper, of course, is a significant block. But when you move into the little green block at the bottom, and, and, and I probably should highlight nickel at 2.8 million tons. If you move into technology and precious metals, it's that little green block expanded into the bigger green block. You can see the type of metals that we are looking at, and if you expand the precious metals into, into gold and PGMs, you can see it's a tiny portion.

My point is this, that, this is a very small market. Even including lithium in the bottom middle of the, the green block, and copper, which we see as a critical metal, we are still, operating in a very small segment of the market. It's a niche part of the market, and, and although we're going to be diversified, we're not trying to diversify, like your traditional diversified mining, company. So hopefully that's also useful in understanding our strategy and, and where we're focused. Thank you. So at this stage, I'm going to hand over to the chief regional officers, to go through their regions in, in detail, and the first one up is Richard Stewart. Thank you, Richard.

Richard Stewart (Chief Regional Officer: Southern Africa)

Good afternoon, ladies and gentlemen, and thank you very much, Neil. I think, as is always the case at Sibanye, we'll commence this part of the presentation with safety. I think, as Neil has highlighted, the year-on-year progress in terms of our safety from 2021 to 2022 has been very pleasing. Clearly, however, we are still on a journey where our ultimate destination is about zero harm, and the first step in terms of, and the first milestone in that journey, is around eliminating fatalities sustainably from our operation. I think it's pleasing that a lot of the momentum from 2022 carried through into the first quarter of this year, but very disappointing that on the 31st of March and into April, we experienced three fatal incidents across our operations.

One at Burnstone, where we tragically lost 4 contracting colleagues, and 2 at our Driefontein operations. The way we are addressing eliminating fatalities from our operations is through our fatal elimination strategy. This strategy is a fundamental risk approach that really revolves around identifying the highest risks that can result in fatal incidents, and mitigating these risks through critical controls, critical life-saving behaviors, and management routines. I think what does give us a level of comfort is that when we look at the incidents we've experienced, both fatal incidents as well as high potential incidents that we analyze, we have noted that all of those could have been avoided, with the exception of Burnstone, had our critical controls, behaviors, and management routines been effectively implemented all of the time. This does give us a level of comfort that we have developed the right toolbox to eliminate these fatalities.

I think when I sit back and reflect on it, I see how our safety journey in the company over the last few years has developed from being safety as an operational focus to safety as a strategic essential across all aspects of our business, to now having the toolbox in place to mitigate risks. Clearly, our immediate focus is on ensuring that that gets embedded throughout the organization and truly delivers on our safety-first strategy. I think what gives me comfort that we are making progress on that journey is looking at things like self-stoppages, where for the first time, we have now seen the number of self-stoppages, in other words, our crew, frontline crews, frontline supervisors, making more safety-related stoppages than what is made by safety departments or management.

This, to me, is an indication that our teams are truly becoming empowered, enabled, and engaged to exercise their right not to undertake any risky work, and through that, we will block the path to fatal incidents occurring on our operations. I think another pleasing trend is the continued decline in our serious injury frequency rate, which often the incidents that result in serious injuries are the same incidents that could be more serious, resulting in fatals. Seeing this constant decline in many of our operations today, delivering the lowest serious injury frequency rate we've ever seen, does tell us that we are on the right journey, that our commitment to eliminating fatalities across our operations remains our absolute number one agenda.

Many of you will recall that I sat here in February of this year and indicated that if we saw a continued increase in the level of load curtailment that we saw during the second half of 2022, and we did not respond to it in any way, that the impact of load curtailment could be as high as 15% on our business. Well, I'm very relieved today to say that that has not transpired, and it's not transpired for 2 reasons. Firstly, our forecasts of what load curtailment could have been based on the end of last year, the actual curtailment levels have been lower, albeit we have still experienced more load curtailment this year than the whole of last year, but it is lower than what we forecast. That is largely down to 3 things.

Firstly, Eskom's energy availability factor, or EAF, has increased from 50%-57%, and they've also expended a lot more in terms of diesel to keep the lights on. Both of those remain high risks, and we continue to monitor them carefully. I think a more pleasing and sustainable impact has been the response from the private sector and private individuals, where we have seen solar capacity more than double over the course of this year, and currently sits at about 4.4 gigawatts of power across the grid, relieving energy curtailment, at least during certain times of the day. Taking that lower curtailment forecast, combined with what we've done internally, which has really been around the developments of a digital model that has allowed us to simulate and predict the optimal load curtailment response actions.

Really what that means is we can still deliver Eskom's requirement for curtailing our load, but doing it in a way that ensures the best possible financial outcome from our business perspective. Utilizing this tool, together with some of our competitive advantages, such as having spare processing capacity, particularly at our PGM operations, has allowed us to minimize the impact of load curtailment quite significantly. During the first half of the year, we saw a 2% impact as a result of load curtailment, which was significantly lower than it could have been, and very pleasingly, did not have any stockpile ore at the end of the half, where we managed to treat all of that. At our gold operations, due to additional redundancy, a load curtailment doesn't impact on production output, but does impact costs.

And again, pleasingly, those costs are significantly less with the implementation of our new load curtailment model. I think this model is a true testament, not only to our key value of innovation in the company, but also as testament to the resilience of our operating teams, in the face of some real challenges. As we move on to our PGM operations, I think fair to say that our PGM operations are steady and had a very solid performance again during the first half of the year. Compared to the same period last year, we were marginally down, 3% down on production, and came out just under 800,000 ounces, excluding third-party, material. And that decline was largely planned as a result of the closure of the Siphumelele shaft at our Kroondal operations.

I think also pleasing has been our response to copper cable theft. Last year, you would recall, I indicated that cable theft, in fact, had the same impact on production output as what load curtailment did. But very pleasingly, during the second quarter of this year, we saw, for the first time in several quarters, a decrease in terms of the impact of cable theft through the commitment of our protection services teams and operating teams coming up with innovative ways of working against the scourge that we are facing across the country. In terms of cost management, PGM operations sustained an exemplary cost management, coming in at just under ZAR 20,000 per 4E ounce on an all-in sustaining cost basis. And although that is 9% higher than the corresponding period last year, that does, of course, come with slightly lower production.

But considering that mining PPI over the same period was well above 15%, that performance saw us continue to move down the industry cost curve, with these operations truly becoming highly competitive, in terms of costs and margins that are produced. Adjusted EBITDA was down 44%, largely as a result of a 22% lower price, basket price, that was received, and that came in at just under ZAR 12 billion. What will provide some relief this year is that we made our final payment to Anglo American in terms of the Rustenburg earn-out, at the first half of this year, with any free cash coming from Rustenburg now being for the benefit of those shareholders, including our minority shareholders at Rustenburg. And finally, we are looking to conclude our Kroondal wage negotiations.

That agreement expired in June of this year, and we are well progressed towards having that concluded in the coming weeks. I think what has been particularly pleasing over the last couple of months is the work that we've done on developing what a long life PGM life of mine profile could look like. I think many of you will recall when we acquired these operations, in particular, Marikana, and to a lesser extent, Rustenburg, in order to maintain a production profile with the plans that we acquired them with, required significant capital investment. At Marikana, it was about ZAR 12 billion over 4 or 5 years. And this was clearly something that, given the market conditions at the time, we did not want to, tolerate. That meant we developed our own plans that required significantly less capital investment.

Kroondal, likewise, had a short life of mine up until 2026 at the time. This did, however, lead to, I dare say, a perception that these were short, short-lived assets, and actually nothing could be further from the truth. These assets still have significant resources. We have, over the last few years, been working through several projects, completing feasibility studies, and what we are showing in this profile is just some of those projects that have been completed, in most of which are brownfields projects, and therefore requiring relatively low capital intensity to develop. But what this profile shows, and we'd certainly share more information with the market in the coming months, but is that we can comfortably sustain a business of well above 1.5 million ounces for well in excess of 10 years. Then finally, moving on to our gold operations.

Clearly, compared to the comparative period of last year, a significant turnaround, where the first half of last year was impacted by the industrial action. At our gold operations, we produced about just over 416,000 ounces of gold during the first half of this year. And as Neil mentioned, counter-cyclical, where we saw a 22% decrease in our PGM basket, at gold, we saw a 22% increase in the gold price. Gold was produced at an all-in sustaining cost of just over ZAR 1 million per kilogram during the half. Our gold has been a bit of a story of two tales. I think post the BH1 closure, we have suffered two significant events. The first one was our fire; it was a fire at our Driefontein 5 shaft that occurred on the twelfth of July.

This also impacted Driefontein One shaft for a couple of weeks, but I'm very pleased to say that we have started ramping up production again at Five shaft, with crews going underground and that production ramping up again. We do forecast, however, that this could have an impact of about 900 kilograms relative to the original guidance given for the full year. In addition to the fire, we have suffered significant levels of seismicity across several of our operations, most notably Driefontein Four shaft and Driefontein Eight shaft, but also at Kloof Four shaft. At Kloof Four shaft, in particular, the increase in seismicity has impacted our flexibility and essentially increased the footprint that we've needed to mine in order to sustain output, and that, in turn, has compounded cooling and ventilation constraints.

We also announced that on the thirtieth of July, we had a very unfortunate incident at Clovelly Shaft, where the counterweight to our conveyor system got caught in the shaft. Unknown on what it was caught, however, that fell down the shaft, creating damage below 39 level to 46 level, and as a result, that has ceased production at that operation. We are currently still assessing the impact of this incident, combined with the seismicity and cooling and ventilation constraints, and for that reason, have included no further production from Clovelly for the balance of this year. So our gold operations are really a story of having a few shafts, which have had some real challenges regarding seismicity and the fire. However, the rest of our operations pleasingly are producing as expected in that plan and generating good profits at current prices.

Thanks very much, and I'll now hand over to Charles.

Charl Keyter (CFO)

Thank you, Richard. Our first half results in the U.S. were unfortunately negatively impacted by the Stillwater shaft incident, which we fully communicated to the market at the time. In addition, as Neal has noted in his earlier comments, we are experiencing an ongoing skills shortage among miners and mechanics in particular. This is due to an exceptionally tight labor market in Montana, with unemployment at around 2.4%, and those with technical skills being spoiled for choice on new mining opportunities elsewhere in the U.S., as well as non-mining employment opportunities in Montana, such as construction and infrastructure build. We are starting to get some success with new recruitment and retention strategies, and we are also focusing on longer-term initiatives, such as in-house training of mechanics and miners, to build a skills pipeline for the longer term.

At the same time, as you're well aware, we've experienced sharply lower 2E PGM prices, which has reduced cash flows, while we still have been set on maintaining development spend, so as to create greater flexibility in our ore bodies at both Stillwater and East Boulder over the medium term. As we lift volumes through the remainder of the year, we will see lower unit prices, while we are also reviewing all aspects of our spend, so as to better position the business for potential lower prices going forward. As Grant will cover shortly, 3E recycling volumes have also been sharply reduced through the past six months, in keeping with an industry-wide recycling slowdown in North America. The six months saw mined 2E production of 205,513 ounces.

This 11% lower production was attributable to the Stillwater shaft incident, which saw an 8-week stoppage, which largely impacted the West Mine, while East Boulder continued to experience skill shortages and some continuing difficult ground conditions that reduced production as against plan. An all-in sustaining cost of $1,737 per 2E oz, which was 27% higher due to lower production and higher development costs, is now being turned around through the remainder of the year. In July and through August, we have seen higher volumes at Stillwater in particular, and we are working hard to get East Boulder back on plan. So we are expecting a second half that tracks back to plan with a better production and cost profile at both operations.

You will also see that these results have started to estimate a production cost credit that flows from the Inflation Reduction Act that has been legislated. Although we are still awaiting detailed codification from the IRS, among other regulators, on its specific treatment for our business, so we have been conservative in its application until such time as we have firm guidance from the regulators. Before handing over to Grant Stuart to talk to recycling, let me just acknowledge Wayne Robinson's retirement, and note that I'm excited by the addition of Kevin Robertson to our Americas team. Neal has reflected on the leadership changes, but let me add that Kevin brings a wealth of geological and mining experience to his new role, and he has hit the ground running as we work hard to return these operations to plan through the remainder of the year. Thank you.

Grant Stuart (SVP: Recycling)

Thanks, Charles. The recycling segment continues to face headwinds. The global collections network's contraction, exacerbated by the declining 3E PGM basket price, increasing interest rates, and lingering recession worries, threatens to impact recycled volumes even into the first half of 2024. Amidst these challenges, however, there is some optimism driven by positive sentiment in the automotive market. The top 15 automotive sales countries have experienced a 12% year-on-year increase to June 2023, a promising leading indicator for recycled volumes, suggesting that the market may have bottomed out. Reflecting on these headwinds, average volumes of spent auto catalysts fed at our US PGM recycling operations were down 55% when compared to the first half of 2022. Adjusted EBITDA decreased by 49% year-on-year to $20 million, or ZAR 371 million, a margin of 5%.

The decrease was due to a 6% decrease in the 3E PGM basket price to $2,735 per 3E ounce, and 3E PGM ounces sold declining by 58% for the same period to 153,446 3E ounces. Despite the headwinds, we continue to view the recycle space as critical to augment the increasing demand for green metals in support of the energy transition and the world's net zero ambition. Over to you, Mika.

Mika Seitovirta (Chief Regional Officer: Europe)

Thanks, Grant. Hi, everyone, and greetings from the region Europe and from Helsinki. I'm going to go briefly through the key milestones and the key messages from H1, 2023 with you. The strategy, as we call it, battery metals or green metal strategy for Europe, was approved last year in May. Since then, we have started to deliver on this strategy, and now I can tell you that our European leadership team is almost complete, and we can 100% concentrate on the delivery of this strategy. If we start from Keliber, which is the lithium hydroxide project in Finland, in Kokkola and in Kaustinen. So the key milestone, obviously, is that we started the construction of the refinery this year in March. We can say that we are very much on track with our timetable and with our budget in building up that refinery.

We also think that we can, in the very near future, start building, and we target for that still this year, also the concentrator, meaning that everything actually for the ramp-up of the refinery is ready for 2025, this year, and, for the concentrator, a bit more than a year after. We start with the external feed and then later on with our own ore as the concentrator is ready built. We can also conclude that we are very much in plan when increasing our headcount. We get good manpower here. We are about 60 right now, with the target that by the end of the year we are going to be closer to 100 person.

It means also that we are attractive employer, and I think not only Sibanye-Stillwater, but also the industry we are representing here with battery metals, is something which is very attractive for most of the skilled people in the region. We have also fully funded the project in the sense that EUR 250 million of equity is secured, and we are currently organizing the debt facilities for the rest of the total CapEx being EUR 588 million. Is it fully permitted, means also that despite of the appeals, we have the opportunity to build and move forward and to operate. Let's move from Keliber to France, Sandouville. Sandouville is our nickel refinery, which was acquired, 2022, a little bit more than a year ago. The H1 for Sandouville refinery has been very challenging.

We have lost a lot of production days, equivalent equally in actually to 50 days during the H1. That is partly a legacy from last year, where we lost, due to technical problems, a lot of saleable capacity. We have been able to build up that saleable capacity, so we are almost fully having those capacities in use, after H1. However, it was not only the technical problems with the capacities, it was also inflation that impacted the production a lot and cost, and it was also the situation in Europe where we got big challenges with raw material supplies because of the war. We also had general strikes in France impacting the production levels. That's why we actually ended up to a level which was 23% lower than last year.

I need to comment also that we could see at the end of H1, we could see a declining nickel price, and that meant also that the market softens towards the summer, which means that we didn't get as high premiums for the products as we used to do earlier. The good news are that recoveries were good. As I said, cell capacity in use, production much more stable than before, and we have completely new management in Sandouville and also in France. So we have done some senior appointments, and this new management, together with the European team, is working very hard now with a plan to optimize the performance of the site, but also to turn all the stones, how we can radically and fast improve the performance, both production-wise, but also financially in Sandouville. We are also building future in France.

As we have said in our strategy, we look very seriously two ecosystems in Europe, the one in France and the other one in Finland. In France, we look actually two projects on top of this, which are on a level of feasibility studies for the time being. It's about Autocat PG and recycling, where we are going to finalize the pre-feasibility study still this year. Then it's about nickel sulfate and battery recycling, which we are actually looking in the same feasibility study. We are going to get scoping study ready still during this year.

Just a reminder, we are already in many parts of the ecosystem there, because when we look at the strategic opportunities, so we have already earlier invested in Verkor, which we believe is going to be one of the gigafactories that are going to be very successful, not only as a project, but also as a business. And there we see clear links, how we can cooperate in that ecosystem, and this is one of the initiatives that we have taken in order to secure our positions in France. Thank you very much for this, and over to you, Robert.

Robert van Niekerk (Chief Technical and Innovation Officer)

Thank you very much, Mika. And good afternoon, everybody, and good morning, everybody. My name is Robert van Niekerk, and I'm responsible for the New Century Zinc Tailings Treatment operations in Australia. Sibanye-Stillwater acquired 100% of the Century operations, effective 1 March 2023. Now, New Century is an Australian tailings management and economic rehabilitation operation, which essentially handles 8.5 million tonnes of zinc tailings on an annual basis, and then pumps approximately 250,000 tonnes of concentrate for a distance of 300 km to the Karumba port. The acquisition of the New Century Resources complements very well our investment in DRDGOLD. Since acquiring the organization, we've reorganized it significantly. We've delisted the entity, we've reconfigured the board of directors, and we've put a more appropriate management structure in place as well.

I'm sure you all know by now that we've had a challenging first half of 2023 because of regional flooding, coupled with low zinc prices. To put the flooding event in perspective, in the first nine days of March, the mine experienced heavier rainfall than what the region has ever experienced for an entire year before. The operations were brought to a close on the third of March. The team did exceptionally well and restarted the operations up by the twenty-seventh of March, and the operations resumed steady state production again by the twentieth of April. Sad to say, though, during that period, we sacrificed more than 11,000 tonnes of zinc production.

Since we've owned the operations or since we've acquired the operations, we have sold 27,000 tonnes of zinc, and we produced this zinc at an all-in sustaining cost of $2,418 tonne. Together with the tailings operation, we also got an option to purchase or to acquire Mount Lyell mine, which is a copper gold mine on care and maintenance in Tasmania, for which our technical team are busy completing a feasibility study now to re-explore the opening of those operations. I think now I'll hand over to Charles. Thank you very much.

Charl Keyter (CFO)

Thank you, Robert. Good morning and good afternoon to all participants. Turning to the financial results and starting off with the now familiar capital allocation framework, we continued to deliver on capital allocation using the framework as our North Star. On project capital expenditure, spending on both Burnstone and K4 were in line with plan. The Keliber Lithium project was approved in November 2022, and spending for the half year was EUR 65 million, against a fully funded plan for 2023 of EUR 230 million. Our cash position at ZAR 22 billion is still in a very healthy position. We continue with our dividend policy of returning between 25% and 35% of normalized earnings, and returned ZAR 1.5 billion in dividends for H1 2023.

As reported by Neil, gearing at 0.01 times is extremely low, despite our ongoing investments in battery metals, and strategically, we will continue to optimize throughout the cycle. During this period, we further bolstered our liquidity by refinancing and upsizing our US dollar revolving credit facility from $600 million to $1 billion, with a three-year maturity plus two optional one-year extensions, or effectively a five-year facility. Taking into account our cash position and our committed and uncommitted credit facilities, available liquidity is approximately ZAR 48 billion, or roughly half a year of operational expenditure.

If we now move to the financial results for H1 2023, revenue was down 14% to ZAR 60 billion, and this was driven by lower production from the PGM operations, and a 15% and 22% drop in the 2E and 4E basket price at the US PGM and SA PGM operations, respectively. Recycling receipts remain under pressure, and volumes were down 58% for this period. The good news was that gold output, following the strike in 2022, improved by 109%, and the rand gold price was up 22%. Cost of sales at ZAR 45 billion was down 4% year-on-year. This was due to lower volumes, but also due to very good variable cost control.

Royalties and taxes for the six months was ZAR 3.4 billion, approximately half for the same period in 2022, due to lower overall profitability. Profit for the period was ZAR 7.8 billion, and as reported, resulted in a dividend of ZAR 1.5 billion for H1 2023. If we investigate the balance sheet, it is clear that we remain in a very robust position with very low gearing. This is not only evident in absolute terms, but also by analyzing standard balance sheet ratios. The foundation of our strong balance sheet remains our diligent and disciplined capital allocation. Additionally, timeliest debt repositioning and an upsized US dollar revolving credit facility provides us with significant financial flexibility. As a final message, the financial health of the business is very good.

Gearing remains very low, and shared value creation continues through a 35% dividend payout ratio. I will now hand you back to Neal to conclude. Thank you, Neal.

Neal Froneman (CEO)

Thank you, Charles, and I will conclude, and I'm going to be very brief, starting with some adjustments to guidance. So next slide, please. There are three areas where we've had to revise guidance. In terms of US recycling, the market continues to remain depressed, and it would be inappropriate to assume it's going to change. The South African gold operations have been impacted quite severely by the shaft incident at Kloof Four, and there have been adjustments made to take account of that. We've also had to adjust the EU battery metals output at Sandouville. So you can compare that to previous, let's say, guidance, and you will see the differences.

In terms of concluding in a little bit more detail, I want to make the following points: I think we've clearly showed the ongoing benefits from commodity and geographical diversion, diversification, I should say, since 2016. We are positioning ourselves, and have been for some time, for a lower price environment. We've got a resilient financial position and ZAR 22 billion or $1.12 billion cash buffer, should we ever need it. We are assessing all our operations to optimize for longer term sustainability and constantly optimizing to improve performance. We are driving and being a catalyst for change in the challenging South African environment, and I think the trends are improving. Still some way to go.

Critical metals, as I explained, towards the end of my section, is a niche market, and we're well positioned in it. It's niche for us as a player, and that will enable medium to long-term value creation. We are definitely in the right metals, and we are in the right global ecosystems. As I've pointed out, we've made these entries at the right time. We will continue to look for value accretive opportunities to increase our global portfolio, but in a downturn like this, we will be very prudent, but certainly there will be very significant opportunities. With that, I'd like to just advertise our battery metals day on the 27th of September, 2023. Please save the date.

These have been particularly successful, using SFA and alluding to what our thinking is from a company point of view. I think provides a lot of good strategic direction... insight. And then finally, just to say, let me conclude this formal presentation by asking if there are any questions. So James, over to you.

James Wellsted (EVP: Investor Relations and Corporate Affairs)

Thanks, Neil. Yes, we do have some questions. I think we'll start on the website first, ask a few questions, and then we'll go to the phone line. So first of all, there are some questions around which shafts at the SA PGM are currently producing at costs above spot, and what optimization work will be implemented. And then also, if the PGM prices drop further, would we consider cutting production or canceling projects? If so, which would go first? And is closure cost a significant impediment to closing mines or shafts?

Neal Froneman (CEO)

Thanks, James. I think, I'm going to ask, Rich to deal with the details. But just to say that it's been my experience over many years, that, you've got to take a long-term view. You've got to look through cycles. It's important not to make, knee-jerk, reactions. For instance, projects are committed to in the longer term, they've got their own, capital base and, economic, returns. So you don't go and start- you don't really start and stop, projects. Of course, you can, if you really get into a very tight, situation. So we're mindful of all those things. But we, we don't see it as a, as a major, constraint in terms of the phase we're entering into.

I would also say that mine closure costs are not prohibitive. If necessary, we will do it. But Rich, your specific view on the South African PGM aspect to that question.

Richard Stewart (Chief Regional Officer: Southern Africa)

Yeah. So thanks very much, Neal. I think. And maybe just to pick up, I guess, specifically on the project side, obviously, the major project we're currently developing is K4 at Marikana. Worth remembering that that's a project that's got a 50-year life, and certainly one of the higher margin projects that we've got when we forecast going forward. So certainly that's very much a through the cycle investment, and that wouldn't change. I think in terms of which shafts are currently operating above the spot prices, and I'd rather not go into absolute specifics on that. Clearly, there's a process that we are looking at there. But what I would say is that for many of those shafts, and I guess also the question to would we cut production.

In many of those instances, these are shafts that can really be right-sized, you know, in terms of focusing on higher margin, and really getting the size versus the output versus the overhead cost structure right, to improve those margins. So it's less about will they remain open or closed, but more about structuring them appropriately, which would have an impact on production in line with, I think, what the market would require. But more about how we optimize those shafts rather than open or close. I think when it comes to closure, you know, clearly, that's often more driven by reserves rather than just price. I think with pricing, you have to look through the cycle. As we know, with any shaft, there are very high barriers to entry, but also high barriers to exit.

So, of course, that's managing it. When shafts come to the end of their life and the reserves are gone, that is clearly when they would ultimately be closed. You know, at present, we do have some shafts that were due to close in 2019, that we've been able to operate for a further 4 years. And over the next 3-4 years, we do have a few shafts, particularly at Kroondal, that have also been scheduled to close. So, and that's due to reserves coming to an end of life rather than a price decision.

James Wellsted (EVP: Investor Relations and Corporate Affairs)

There's a question on the U.S. PGM business. What, what palladium long-term price do we use, and how should we think about potential impairments at the U.S. if the price is continually decreasing?

Neal Froneman (CEO)

So, James, I think we should pass that one to Charles. That's his focus area.

Charl Keyter (CFO)

Thanks, Neal. Firstly, our reserves are done at $1,250 at 2 ounce. And, you know, what we've been doing right now with spot prices in and around $1,200-$1,300, is think about our business at breakeven on current spot prices. So the plan that's going in for next year is doing a lot of trade-offs right now on how to make that work. I don't want to preempt where we come out on that because we've got good work on the go. And, you know, we're still trying to track to our longer term intent, which we conveyed in our rebirth plan last year, which is by 2027, to be up and around 700,000 ounces at around $1,000 an ounce.

So we've got to get back on that track. We've had a difficult first half, but we're confident about the second half. And then, you know, when we think about the trade-offs with lower spot prices to current plan, I mean, we're well below our plan prices right now on spot. You know, we've got a number of levers. We are obviously favoring development on an ongoing basis, because to get to the 700,000, you've gotta invest in these ore bodies, you've gotta create the mining flexibility, primary and secondary development, very critical. That's coming in at a sizable cost. So one of the levers that we'll look at in the ongoing plan reviews is how to think about contractors on development, which some of them quite specialist roles, but quite expensive.

So that's one lever we can pull on how to favor our own people, but it's got a build-up profile that's slightly different to using contractors. But we do have that sort of lever. And then we've got a lot of cost reviews on the go right now. So, you know, obviously, in a plan, you would look at your growth capital, and how to phase that with lower pricing. But right now, we're looking at all spends, you know, across the business, to pull back where we can. So, you know, our intent is to be making money in lower price environments, like we're currently experiencing. The first half, we...

You know, in the second quarter of the first half, that was tough, because it takes time to sort of turn the machine to a lower price environment than what we'd planned. But I think we're in good shape on that. So, I don't know if that answers the question, but let me pause there. Thank you.

James Wellsted (EVP: Investor Relations and Corporate Affairs)

Thanks, Charles. Some questions on the outlook for palladium, and I guess PGMs in general. Do we see the downturn as in PGMs as cyclical or structural? And you know, what, again, on the impact on, of a long-term downturn, down cycle and extended downturn, what are we more worried about that as a market we are not thinking about? So I guess, you know, given our... What, what is our actual long-term view on, PGMs and palladium, I guess, specifically? And is it cyclical or structural? I guess, Richard, would you be able to take that one?

Richard Stewart (Chief Regional Officer: Southern Africa)

Yeah, I could certainly, certainly have a crack at that. And I guess, look, in my mind, certainly cyclical rather than than structural. I mean, the long-term forecasts for PGMs are well-known. You know, I guess the story around BEVs versus ICE vehicles, et cetera, is out in the market. You know, I'd almost say I think there's more bad news in the market for PGMs than good news at the moment, in terms of what we're worried about. You know, ultimately, PGMs, I guess, just at a philosophical level, are such unique, rare metals in terms of what they can do in catalysis. You know, demand comes and goes in terms of uses often that are price-driven. So fundamentally, I firmly believe that it's cyclical.

You know, in terms of the short term or how we're positioning ourselves for it, as I say, I think you can see that we are taking a proactive approach. And to some extent, I guess it'll be, this is akin to Noah's rule, you know, try not to forecast the short-term weather, build the ark, and that is what we're doing with our operations at the moment. But as you saw from the life of mine profile that we put out, I think we have several opportunities to be able to turn projects on quickly, should that cycle turn. And I do think, as we've mentioned, that there is downside risk to the BEV penetration rates. I also think, as Neal highlighted, that there are some real downside risks to primary supply.

I think when we put that together, you know, in the medium term, we've got, we've got quite a different outlook. In the short term, a lot of what we've been seeing in the PGM market has, has still been destocking and volatility, you know, associated with return demand post-COVID, longer-term contracts that autos companies have maintained. So I think we're still seeing a lot of volatility that needs to wash out in the market over the coming few months. Neal, not sure if there's anything you'd like to add to that.

Neal Froneman (CEO)

Yeah. Rich, I agree with you fully. It's definitely cyclical. I think very important that we state publicly that the long-term fundamentals for PGMs remain very good. We've done a lot of analysis on what are the forms of how the forms of energy are going to change, and the big winners are hydrogen and electricity in general. And electricity is is generally the growth is driven through renewables. And all of those underpin some of the PGMs. Of course, we've always said palladium has the highest risk, but we're doing quite a lot of market development work on palladium in terms of its longer-term future. But Rich, I agree with your assessment.

James Wellsted (EVP: Investor Relations and Corporate Affairs)

Thanks, Neal. The next set of questions are around EBITDA and debt levels. So how should we think about net debt to EBITDA evolving in the next 12-18 months if current spot prices hold? And then on the same kind of theme, what is our net debt to EBITDA threshold should we need to gear up as a result of M&A? And also, how much net debt would we be comfortable taking on? Charles, would you take that one?

Charl Keyter (CFO)

Happy with that. Thank you, James. And the evolving picture is effectively that we'll maintain our net debt to EBITDA position. You know, at a marginal net debt position. As expenditure on the projects increase, there might be some movement where the net debt to EBITDA slightly moves up, but nothing to lose sleep over. I mean, we've enjoyed a very sunny summer in terms of our net cash position, and clearly we've dipped into a small net debt position now. But I think the long-term fundamental for us is still our own internal target, or our own internal comfort level, not necessarily a target, 'cause it's not something we aim for.

But the comfort level sits at around 1x net debt to EBITDA. And that's a number we've always quoted, and we've stuck to that number and said that we feel comfortable that that's a number that we can manage throughout the cycle. Thanks, James.

James Wellsted (EVP: Investor Relations and Corporate Affairs)

Thanks, Charles. Charles, the next question, just around the IRA credits that we got at the US PGM operations. Can we explain what we mean about our comments on the IRA expected to benefit the US PGMs through credits of 10% of qualifying production costs for 10 years? Do we mean the government is paying for 10% of our production costs, or is it a 10% loan? And assume that the Canadian mines would not benefit from this. So maybe if you can give us a bit of detail on that, Charles.

Charl Keyter (CFO)

James, I'll pick up that one. So I think in short, yes, the government's effectively paying for 10% of our qualifying production cost. The Inflation Reduction Act was enacted in August 2022, and that did introduce several new tax credits to encourage production and sale of critical minerals, of which platinum and palladium are two. In the Inflation Reduction Act was the 45X Advanced Manufacturing Production credit, and that includes a credit, as we've said, equal to 10% of the qualifying production cost. Now, guidance on this is still not firm, and we are awaiting final guidance. But effectively, government will be returning 10%, so they will be paying back 10% of our qualifying production costs.

So this is not a loan, and this will be in force for a period of 10 years. So if you think about this more as a grant, then, you know, that's the way to think about the advanced production credit.

Neal Froneman (CEO)

Charles, as far as I know, it's really only applicable to the U.S.

Charl Keyter (CFO)

That's correct. Yeah, apologies. It's the Inflation Reduction Act is U.S. legislation. And that's why it's only applicable to the U.S. at this stage.

James Wellsted (EVP: Investor Relations and Corporate Affairs)

Thanks, Charles. That obviously aligns with the positioning ourselves in favorable ecosystems and the DOE loan that we spoke about as well at Rhyolite Ridge. So that comes together quite nicely. A question probably for Richard: What drove the decrease in gold AISC, given that production was lower this half than December 2022, second half of 2022?

Richard Stewart (Chief Regional Officer: Southern Africa)

Thanks, James. I think that's actually just a bit of a technicality. Our produced number is obviously what is produced over the period. Our All-in Sustaining Cost number gets calculated on sold gold. And we did have some gold that carried over at the end of H2 last year into early this year. So in fact, we sold more gold in the first half of this year, which gave us a slightly lower All-in Sustaining Cost. In absolute cost terms, between the two halves, the costs were actually quite similar.

James Wellsted (EVP: Investor Relations and Corporate Affairs)

Then some questions, and probably for you, Neal, is around Mopani. Do we. Sorry, just give me one sec. Is our interest in Mopani opportunistic, or do we believe it can be a great asset?

Neal Froneman (CEO)

Well, it's actually both. I think, as I highlighted, Africa is becoming more and more interesting. Mopani is a great asset, and has really, really high-quality resources. Copper is a metal which we've alluded to before. Mount Lyell is an option, we will most likely exercise, so we will hopefully soon have two copper assets. The Mopani process is still running. As far as we know, there's really only two companies left in the process, one of them, which is us. And of course, it's an opportunity to partner with the Zambian government. And you heard me speaking earlier about the importance of partnerships as opposed to buying assets from shareholders.

You know, the old adage of the pleasure is mine, and the baby is yours, is something we've experienced where you do that. We like to invest or earn into projects by investing in the actual project itself or into the assets. Rich, do you want to add anything to that? You are closer to the process. You're actually running it.

Richard Stewart (Chief Regional Officer: Southern Africa)

Neal, thanks. I think you've, I think you've summed it up well. You know, suffice to say, I guess in many aspects, just, just technically, it's also a project that, that in many ways fits the, the skills and capabilities that we've developed. You know, most notably, it's, medium to deep-level operations, labor-intensive. I think that's exactly where we've cut our teeth in the South African environment. And also operating in a, in, in a political, social environment that is, that is sensitive, and I think, describes well to our, our values or, or our purpose of, value for all stakeholders. Again, something we've, we've really developed well, amongst our existing operations. So, so it is an opportunity that fits well with our, with our strengths and capabilities.

James Wellsted (EVP: Investor Relations and Corporate Affairs)

Richard, while we're on the topic there, just some questions on the, on the markets. How long will OEMs destocking take place before we see prices stabilizing and improving? Do we have any views on weaker rhodium prices? And then, other question around the near-term read on the m-PGM market demand from customers. Are we seeing incremental changes, from customers requesting to take more or less material, than contracted? And, how do we assess PGM inventory levels across the value chain? So I guess a similar question around destocking potential.

Richard Stewart (Chief Regional Officer: Southern Africa)

Yeah, thanks, James. I think quite difficult to give absolute numbers in this regard. That's obviously not something that's easily published and clear see-through. You know, what we've really been seeing is that sort of contractual volumes have remained fairly steady, and that has been all the way through COVID, the dip in terms of demand, post-COVID, and into now. You know, so what that's telling us is that the base sort of uptake in terms of PGM remains, but what we have been seeing over the last quarter, few months, has been that the spot sales have certainly significantly weakened amongst the OEMs.

And that tells us that they are currently utilizing their spare stocks ultimately to manage the volatility, which they would often normally manage through spot sales. Exactly, you know, how long it'll take to wash out, not 100% sure. You know, I think we're probably looking at a couple of quarters, probably towards the end of this year. I think more specifically on the rhodium side and what impacted that, you know, that was really the substitution of platinum into glass, given the high rhodium prices we've seen. And with that, a lot of stocks that were held by glass manufacturers, particularly in China, you know, that were put on the market in one go. And again, that will sort of wash out as part of the destocking as well.

So yeah, difficult to give an exact answer, but you know, I'd guess in a couple of quarters to go.

James Wellsted (EVP: Investor Relations and Corporate Affairs)

Thanks. Neal, probably for you, or maybe Grant as well can come in here: What's our view on the global PGM recycling business, and I guess, how does that tie in with our strategy? And then, the legal challenge against the Appian transaction, you know, what's the status at the moment on that? Maybe if you can just update us on those.

Neal Froneman (CEO)

Yeah, perfect. And Grant, please come in with your views as well. But certainly, let me start with Appian. Appian is a process that's ongoing. You may have seen that they sold the assets again. The buyer is finding difficulty in funding a portion of the purchase. In terms of our legal process, we are in the phase of preparing witness statements. So, we don't expect this to go to court until probably sometime next year, middle of next year. Again, we remain very confident of our position. In terms of global recycling, it's a business we really like. Autocat recycling is only one part of this business.

It's the part we know, and it's the part that we're going to expand, should the feasibility study in Europe turn out to create the right value. Recycling strategically, as I've mentioned, is a very important part of being a responsible miner, and acknowledging the stewardship of these critical metals. It's part of the solution. If you can't get enough from primary supply, certainly it's our responsibility as an industry to recycle what we can to add to the supply side.

Of course, in certain metals that are, you know, haven't been in circulation for long, that takes time to establish, but, a country like the U.S. is almost completely independent of primary supply, from outside of the U.S., based on what's produced in the U.S. from primary supply and, of course, recycling. So it's a very important part of sustainability, and as I've said, stewardship. But Grant, you've been doing a lot of work on recycling, in a broader context, so perhaps you can share with the audience, some of your views as well.

Richard Stewart (Chief Regional Officer: Southern Africa)

Yeah, sure, Neal. Thanks. I think first and foremost, just to address the direct question in terms of the volumes and the low volumes that we see moving through the furnaces as we speak, our focus within the recycle segment is to remain flexible, to remain competitive, and to attract additional waste streams, like autocats, into those furnaces. There is no doubt that the auto catalytic converters that are the foundation of the business as we see it today will remain in circulation. They are in circulation, and they will return to those furnaces, and we are more than prepared to handle those volumes when we can.

I think if you look at the business as it exists today, and we recognize the opportunities, the sustainability, the circular economies that exist around the business, and the importance of geographic diversification, the importance of not only relying on a sole waste stream to be part of that energy transition going forward, you quickly start to see how the opportunities can grow and develop in the space. So we remain excited about it. I think we've got the flexibility, we've got the foundation, we know the business, and we're ready for the growth and development in this segment. Thanks, Neal.

Neal Froneman (CEO)

Thanks. I think let's go to the phone lines for now, and then we'll come back to webcast. I see that there are some people who've got questions queuing.

Operator (participant)

Thank you. The first question comes from Adrian Hammond of SBG Securities.

Adrian Hammond (Executive Director, Mining Research)

Hi, good morning. Yes, Neal, thanks for the very detailed presentation. Just curious a bit more about the lithium prospects. Certainly, the price outlook for lithium looks very prospective. But could you give us some idea when your Keliber will produce, and then, of course, Rhyolite, and also the EBITDA those assets could generate? And then, for Charles, just curious to consider what he thinks about the balance sheet going forward, thinking its spot gearing will rise, and given the leverage of this business, being so high, your gearing can change very quickly. So I just want to know where the parameters are at please. Thanks.

Neal Froneman (CEO)

Yeah, thanks, Adrian, and I'm actually going to ask Mika to comment on the lithium market. Just so everybody knows, within the company, we have commodity champions who are responsible for ensuring they understand the supply and demand. Richard is our commodity champion on PGMs. Mika is our commodity champion on lithium and nickel. He runs those parts of the business, and Charles is our gold commodity champion. I also know Mika has done some, let me say, very preliminary estimates of what the EBITDA could look like from Keliber. Rhyolite Ridge is it's a little bit early, Adrian, to give you any sort of guidance there. But Mika, please come in.

Mika Seitovirta (Chief Regional Officer: Europe)

Thanks, Neal, and hello, Adrian. Maybe just to start with some comments about the general market. As you have heard already a couple of times, so we are not as positive as the most positive outlooks are stating about electric vehicle volumes. And the reason being that there is just not enough metals, and this outlook is going to give a little bit different growth than in most of the forecasts. However, the growth is still significant. Right now, we are having a 40% growth in the EV penetration in different markets. Lithium is obviously a key for the current technologies, and we believe that lithium is also a key metal in the future technologies. We see a very strong position for lithium and nickel.

There will be other technologies as well, however, they are going to be very complementary in this situation, where we need to go down with the CO2, and we need to help this transition to the electric vehicles. Keliber is, the project in Europe, as you know, and Keliber is aiming to 15,000 tons production, ramping up 25. Now, this is only a small part of the production and supply that could be used by European customers in the future. So there is a lot of more demand in lithium hydroxide than what we can produce. But at the same time, I can say that we can, we can grow in, in, in lithium as well.

We are doing a lot of exploration and first we need to get Keliber right, which we will do, and then we can grow in this space, and there is a lot of good room for that and coming synergies as well. Concerning the numbers, we have good EBITDA levels there, and obviously everything is depending on the price. If we look at the current forecast towards 2030, the consensus is everything between $40,000 and $20,000. We believe that it's going to be $30,000 plus the price of lithium, and in our own model, we have been using flat $26,000. We have been very conservative in this one.

In all the cases, we can clearly produce EBITDA in absolute terms, clearly more than $200 million in the future, as a yearly when we have full production in the current plans.

Neal Froneman (CEO)

And Mika, just to confirm, that's EUR 200 million or $200 million?

Mika Seitovirta (Chief Regional Officer: Europe)

Euros. Euros.

Neal Froneman (CEO)

Euros, EBITDA, yeah. And Adrian, Charles is probably best placed to pick up the second part of your question.

Charl Keyter (CFO)

Yeah. Thank you, Neal. And hi, Adrian. Yes, Adrian, obviously, you know, if we just continue to manage the business as is, and just take into account the effects of spot prices, then clearly that will have an impact on our gearing. However, you know, this is a position that's not unfamiliar to ourselves, and clearly, as we move forward, we will reevaluate what our triggers and our levers are, that we can pull to preserve that balance sheet flexibility. But as we've said, you know, we've got significant liquidity, Adrian, at this year, probably sitting at around half a year of operating expenditure. But not a position that we'll just sit on our hands. We'll actively manage it.

You would know that as a mining business, there are different levels of cost being production critical, and then as you move further from the shaft head, there are costs that we can start addressing. So we will actively start managing that, but also, not to the detriment of the operation. So it's more watching brief and careful planning going forward.

Neal Froneman (CEO)

Thanks.

Charl Keyter (CFO)

Thanks, Charles.

Neal Froneman (CEO)

Are there further questions from the phone lines?

Operator (participant)

Yeah, there are, sir. The next question comes from Raj Ray of BMO Capital Markets.

Raj Ray (Managing Director, Metals and Mining Research)

Thank you, Opera. Very good afternoon, Neal, team. My first question is looking at your portfolio, Neal. I mean, SA PGM, which accounted for close to 84% of your group EBITDA, I mean, that part of your portfolio is really working well. The remaining part of the portfolio seems to have, well, like, an outsized impact on your share price performance, just going by what's happening today. I mean, how do you address that? I mean, you had highlighted steady-state costs for the U.S. PGM, and let's say gold operations, we are still far off from there. I do understand some of those external factors, including skilled labor shortage, not only in U.S., I mean, one of your peers in the gold operations or Gold Fields, recently highlighted the skilled labor shortage at South Deep.

I mean, what's the timeline or sort of timeline you have in terms of, let's say, reducing your costs? And can you even go back to the costs that you had highlighted at 12 or 18 months ago for these operations? And the second part is, at what point, specifically for the gold operations, do you look at other strategic options? I understand you see that as a counter-cyclical part of your portfolio, but if it doesn't perform as you expect, what other strategic options are you willing to consider? So that's one, first off, my question. I understand there's multiple parts to it. The other, I'll ask on your green metals portfolio after this.

Neal Froneman (CEO)

Okay, perfect. Thanks, Raj, and good morning. Look, let me say that our... Sorry, let me take a step back. You're spot on there in that our South African PGM business is the mainstay of our business and is a very solid producer. But the fact that it's based in South Africa creates its own overhang with all our eggs effectively in one basket. We fully understand that, and our aim, our strategic aim, is to get a more geographical production base contributing to earnings to reduce the dependency on the South African PGM business. And let me say, we're working towards that, and we believe we can get there.

Let me talk about some of the timeframes. So you would see we've looked at many strategic options for our gold business. And the one that we are proposing that is based on the graph that I showed right at the beginning of my section, where I showed that the majority of our gold business is actually very profitable. And with some minor restructuring or minor optimization, I think we can deliver a very different, let's say, value proposition. And we can do that, and Richard's working on it, probably within about 6-9 months. Nine months on the very outside. 6 months I think is doable.

And that's not just, let me call it the marginal sort of changes you think about, maybe, you know, cutting out, you know, non-profitable production. It's a complete change in philosophy in terms of how we run that business, because you've got to address the overheads, and we've got some other ideas there, and Richard is working on that. In the U.S., we are absolutely convinced of our ability to turn the Stillwater operations back into a profit, despite the skills shortages. I want to point out, you mentioned skills shortages at South Deep and how it might be impacting them. We use very different skills within our gold business, so that's not a...

A constraint in South Africa, but it's a very significant constraint in the U.S., and but it is changing. It's changing for two reasons. The one is, I think, high interest rates are biting. I think some of our initiatives around retention and attraction are starting to kick in quite nicely. And as soon as we get the volumes back up at Stillwater, the unit costs will come down, and as you know, we've got a plan to get those well below $1,000 an ounce. The shaft incident in this period put us back probably six months, even though it was, you know, not. It didn't take six months to fix the accident, but you will not see the improvements that we are seeing on a monthly basis.

I would say we are only going to get back to plan, our original plan, in the last quarter of this year. And we will show you that when we present our results next time. So the US will get back to that. In the longer term, you started hearing some numbers from lithium coming out of Europe within a few years. But in the longer term, the aim is to get our revenue mix into something more like a third from PGMs, a third from battery metals, and a third from gold. And of course, the more we can geographically diversify that, the more our multiples will increase.

So, Raj, happy to talk more detail offline, but in essence, strategically, we recognize the problem that you've highlighted. And of course, I've shared with you some of the thinking and the solutions we are actually implementing as we speak.

Operator (participant)

Further questions from the line?

Raj Ray (Managing Director, Metals and Mining Research)

On the battery metals, portfolio. One is just a clarification on the appeals at Keliber. I've also the understanding that while the appeals are outstanding, you cannot start the mining or the development of the concentrator. Can you comment on that? And the second question is on Mopani. Do you have a sense on how long the Zambian government's process is going to take before they announce who the winning bidder is going to be? And then second, assuming Sibanye is the winning party, are you looking to partner with somebody on that project, or are you going to or are you looking to go ahead with it by yourself?

Neal Froneman (CEO)

Yes.

Raj Ray (Managing Director, Metals and Mining Research)

For me, please.

Neal Froneman (CEO)

That, that's a good question as well. So let me start with Mopani, and Mieke, if you can just ready yourself for the question on the permit. In terms of Mopani, yes, we are looking to partner with a company. One thing I should have pointed out when I mentioned this tug-of-war that's occurring between the East and the West, and the role that Africa is going to play in terms of providing solutions. The one thing, the one competitive edge, and I think it's probably the only competitive edge we have as South Africans at the moment, is that we can be this bridge between the East and the West.

So, although we're a Western-facing company, I do think we can involve Eastern companies as partners, and to some extent, that goes a long way to resolving a conflict that the Zambian government are probably dealing with, because they also have relationships with the East and the West. So yes, we do have a partner, and we think we've put in a very good offer. It's probably not the best offer, but as Richard said, our ability to, and our track record of handling these difficult socioeconomic type of situations stands us in very good stead. In terms of the timing, I think we are pretty close, probably in the next two to three weeks of having an outcome.

Now, when I say an outcome, that would be an outcome of then negotiating, let's call it the stability side of an arrangement with the government. To date, it's really been a focus on the actual assets. We haven't had the stability discussions that are absolutely necessary to provide us with the appropriate comfort and the right commercial environment to conclude the transaction. I think we've found the process good, fair, and our relationships with the government and ZCCM are very good. So Raj, that's about all I can say on Mopani for now. Probably one thing I should say, because I don't want to create an overhang on our stock, I tried to allude to the type of transaction structures that...

That we consider when we do transactions of this nature, is that we prefer working with partners, and we prefer earning in. So please don't factor into your thinking, you know, a large capital outlay upfront. These assets require significant capital investment, but it's going to come over a good number of years. So please keep that in mind as well. Mika, do you want to just comment on the permitting and the fact that we can continue construction, even with the small permit dispute?

Mika Seitovirta (Chief Regional Officer: Europe)

Yes, with pleasure. The thing is that we have those appeals, but we have also an enforcement order in place. And these processes, how they normally go forward, is that the administrative court, if they see a reason to take it away, they take it away after the appeals. Our dialogue with the administrative court has been very professional, and they are not planning to take the enforcement order away. So actually, we see that we can do the construction of the concentrator and the mine and the refinery and the whole project exactly as it was planned. Thank you.

Neal Froneman (CEO)

Any further calls?

Operator (participant)

Thank you. The next question comes from Chris Nicholson of RMB Morgan Stanley.

Chris Nicholson (Equity Analyst, PGM, Battery Metals, Energy and Chemicals)

Hi. Good afternoon, and good morning, everyone. Thanks for the call. I'll make it brief because I know it's gone on for a while. Just two questions from me. Just to go back to the balance sheet and the earlier comments around the net debt to EBITDA positioning. I know that there's a potential large payment that would be triggered on the Rhyolite Ridge when the environmental approvals come through. I think it was last guided to around $500 million, potentially higher than that. That or any other acquisitions you're looking at, would you look to equity fund those rather than fund them through debt? That's the first question.

The second question is just New Century, just $28 million EBITDA negative in the first half, burnt over 600 million rand in free cash flow, sorry. Clearly, we had some one-off incidents there. So could you just give us a bit of guidance on kind of what the glide path is here to kind of free cash flow breakeven, or profitability? Or if you can't really give that, I mean, just what kind of a zinc price do you require for that business to be able to stand alone? Thank you.

Neal Froneman (CEO)

Perfect. Thanks, Chris. And Charles, please come in. I'm just going to make a general comment. I think, Chris, it's highly unlikely we will use equity at these levels. I did see on the webcast a question about share buybacks. That would be a much better use of proceeds. But I also don't want to create the impression that there's an endless supply of debt. I think we will be prudent. As you know, there are a number of ways of also funding these without you know resorting to vanilla debt, if I could call it that. But Charles, and then Rob, I think it would be prudent for you to comment on New Century Resources.

But again, let me just make a general comment. We are acutely aware of the one-offs that have caused the pain. But as we all know, this is mining, and if you keep on having one-offs, they cannot become excuses. If we are serious about preserving value, we will not hesitate to close down underperforming assets. Now, let me make that general comment. The same can be said for Sandouville. We went through a phase of, you know, issues beyond our control, such as riots, such as, well, riots and, and, and the socioeconomic issues in France were beyond our control. But there were maintenance issues that resulted in electrowinning cells not being available.

There's only so much we're going to accept, and a number of our operations have been put on notice that by year end, if these one-off events or if there's no reasonable prospect under these depressed commodity prices, they will be put on care and maintenance. Chris, so we don't say that lightly, but we are not going to burn cash. We look at it, we actually know exactly what each one of these operations cost us in missed, let's call it dividends. We could have paid a higher dividend. So we understand that fully. But that's a general comment that applies not only to New Century Resources, not only to Sandouville, but could even apply to the US PGM business. I don't...

I'm confident in all of them having been, let's say, addressed and having plans that get us much closer to at least a breakeven situation. But Rob, come in on New Century, but Charles, just pick up on the balance sheet and the use of equity as well, please.

Charl Keyter (CFO)

Yeah. No, thanks, Neal, and I think you've summed it up. I mean, obviously, you know, equity is not a currency for us at this moment. And you know, we have factored in the Rhyolite Ridge payments. And Chris, just to remember that, I mean, from when we received the permitting, that $500 million will obviously be phased in roughly over a two-year period, so it's not necessarily a bullet payment. So, you know, it can be funded from a combination of depending on commodity prices, and where they play out, but it can be a combination funded through earnings and then vanilla debt. Thanks, Neal. Thanks, Charles. Rob?

Robert van Niekerk (Chief Technical and Innovation Officer)

Thank you, Neal, and hello, Chris. The New Century operations have come out of a particularly difficult period at the moment, so absolutely they have bled a bit of cash. Going forward, I see this bleed to actually stop, and we've run our numbers at future consensus pricing, just as a matter of interest, that's about $1.30 per pound, and that's.

Charl Keyter (CFO)

Is that just Rob that we've lost?

Robert van Niekerk (Chief Technical and Innovation Officer)

Hello, Neal, are you still there?

Neal Froneman (CEO)

Yeah, yeah, we still here. James, are we still online?

James Wellsted (EVP: Investor Relations and Corporate Affairs)

Yeah, we're online. Can hear Rob.

Robert van Niekerk (Chief Technical and Innovation Officer)

Okay, James, I'm sorry for that. As fate would have it, as soon as I started talking, we had load shedding, so I was actually cut off, and I had to go onto an alternate system. I don't know if you got that message, but my message was that at consensus pricing, the operation shouldn't bleed anymore, and the operation should wash their face going forward. The operations will wash their faces going forward.

James Wellsted (EVP: Investor Relations and Corporate Affairs)

Thanks, Rob.

Robert van Niekerk (Chief Technical and Innovation Officer)

Thanks, Charles.

James Wellsted (EVP: Investor Relations and Corporate Affairs)

I believe we've got two more calls on the line. Two more people asking questions.

Operator (participant)

Correct, sir. The next question comes from Cameron Needham of Bank of America.

Cameron Needham (Equity Research Analyst, Metals and Mining)

Thanks very much for the presentation. Just two quick questions from me. Firstly, on Sandouville. Just on the back of the cut to production guidance and, and some of the issues that you've outlined in your presentation, are you still confident in delivering the anticipated, improvement of asset performance longer term, or do some of these headwinds change the picture? And then just secondly, is the amount of management time that asset turnaround is demanding, okay, is it kind of proportionate to the amount of capital, and the potential returns you see, from the asset or that it could generate? Thanks very much.

Charl Keyter (CFO)

Perfect. Thanks. Thanks, Cameron. And Mika, you are probably best placed to answer that question. Please go ahead.

Mika Seitovirta (Chief Regional Officer: Europe)

Thank you, Neil, and thanks for the question. As we mentioned earlier, we have a completely new management team now in place, and actually they have started to work at the very end of March this year on different options for Sandouville, and as we call, optimization of that plant. That means that the work will be done later this year, and we will also come with a comprehensive plan, how and what are we actually doing in order to radically improve the performance of the plant. Today we are working with the options through modeling. We are going through the mass balances. We are doing very professional and careful work, which we are taking seriously.

Today, we are not in a position to give you an understanding of the long-term returns, but later on this year, we will tell you how and what we are going to do.

James Wellsted (EVP: Investor Relations and Corporate Affairs)

Thank you,

Charl Keyter (CFO)

Thanks.

James Wellsted (EVP: Investor Relations and Corporate Affairs)

Last caller.

Charl Keyter (CFO)

Thanks, Mika.

Operator (participant)

Thank you.

Charl Keyter (CFO)

Okay.

Operator (participant)

Question comes from Leroy Nguni of HSBC. Please go ahead.

Leroy Mnguni (Mining Equity Analyst)

Good afternoon, guys. So I've got a few questions. The first one is, if PGM prices do not recover from these levels, how long would it take in your quest to turn around your Stillwater operation to reach sort of a free cash flow breakeven level? And then my second question is... I'm just mindful of that slide you presented around this time last year with the restructuring of Stillwater. You gave that sort of balanced outlook for palladium, and I'm just curious as to whether if you could go back in time and face the decision of funding the tri-metallic catalyst, if you would still fund it, or how you would maybe change your approach, given what it's done to the palladium market. I think I'll stop there in the interest of time.

Charl Keyter (CFO)

Okay. Thanks, thanks, Leroy. And, Charles, if you can just prepare yourself for the how long it will take, assuming no PGM price recovery, to get to a breakeven price. But, Leroy, on the tri-metal catalyst,

Neal Froneman (CEO)

We had a situation where the demand across the basket was unsustainable. So there is absolutely no doubt in my mind that we would've still pushed for the tri-metal catalyst and the substitution of palladium with platinum. Obviously, the price differential today is less of an incentive for that to happen. But I also want to say that I don't believe that has really been the driver of the decreasing palladium price. And Richard, perhaps you want to just come in on that. But you know, we really do approach the business on, with sustainability, and that's a fundamental in terms of whatever we do.

But Rich, your views on palladium price, I don't believe it's driven by the tri-metal substitution. It's probably had very little impact. Before you come in, Charles?

Richard Stewart (Chief Regional Officer: Southern Africa)

Yeah, thanks very much, Neal. And Leroy, I think, you know, to answer your question directly, absolutely, we still would have done it. You know, I think what's critical in PGMs is that ultimately you're looking at a basket. That basket would get produced in a certain ratio, and the better that you can manage that basket balance is better for both producers and ultimate end users. And essentially, what that technology does is gives us flexibility to be able to manage that balance. So I certainly think that helped when it needed. You know, I think what we're going to see is a lot less substitution, because clearly the price differential between platinum and palladium has now come right down.

But it does also give us an opportunity moving forward, that should we need to reverse that or go back, you know, that technology now exists. You know, we're doing some of the research and market development in other PGM metals as well. You know, where demand for select of the more minor metals, iridium, ruthenium, et cetera, where future demand is looking like it could be very tight. You know, and how can we balance that with other PGMs? It's the beauty of these metals, is that they can substitute each other. And I think the more we work on that, you know, the better it is for the overall basket going forward, and we always need to look at this as a basket.

Ultimately, it'll come back to some level of parity. So, I still think that was absolutely key research, and I don't think it's been a fundamental driver. I think at the moment, the fundamental driver on palladium is more around the destocking in the short term. And I think people taking a very long-term view on the down, sort of downgrade of ICE vehicles, which, as you've heard today, I think we are-- we're far less bearish on the on the ICE vehicles. In fact, I think we're a bit more bullish than most. So, I can see that balance working. But yes, it was still a good investment, and one I think we'd still make.

Neal Froneman (CEO)

Yeah. Thanks, Rich. Charles?

Charl Keyter (CFO)

Yeah. Thanks, Neal. And, Lerroy, to your question, you know, earlier I gave a comment on the sort of medium-term plan work underway and the trade-offs that we're still working through. But I think you should be under no illusions that right now we're looking to make cash at depressed prices in real time. So it takes a bit of time to shift there, given what we've planned for the year. But I'm encouraged by what I'm seeing, July through August, and, you know, the team is very mindful of a strong second half. So we're not looking to continue to lose cash if we can help it. And I think Neal gave you a very clear sense that, you know, every cost element is under review.

So, you know, we are not just working on the mining trade-offs and the development trade-offs and the capital trade-offs, we're working on all the levers to be pulled across the Montana setup to reduce our cost profile and to make cash, you know, as we have historically done. So, I'm encouraged by what I'm seeing for the remainder of this year. And, you know, given the skills shortage, this is not a scenario where you cut labor in the hourly paid, or hourly paid being miners, mechanics, geologists, et cetera. This is where you pull very different levers, and some of those we are still building. So our whole procurement strategy has big levers that'll unlock value longer term. But right now, we're moving from decentralized mine-based procurement to centralized regional procurement.

Good work on the go. And, and that goes for the HR strategies, it goes to all the support strategies across the two operations. These have historically been thoroughly decentralized. That has its merits, but, but actually, what we need in depressed prices is bigger levers that you can pull with confidence over and above simply how you mine and develop and how you spend capital. So that, that's where a big focus is, and it's, it's good work on the go. And it's, it's for long-term, sustainable performance of these assets. It's, it's not just knee-jerk, quarter to quarter, depending on prices. So short answer to your question is, we, we look to make money through the remainder of this year.

Obviously, if there's further price downside, we have to then have a different mindset to the one we currently have, which is how to favor and protect development, and reduce mining costs, and reduce overhead costs. Nothing is off the table on cost reduction if we have more dramatic scenarios. But I think from this presentation, you should also be mindful. This is a team that believes mainly, you know, possibly there's price upside on what we're experiencing right now in two-year pricing, but we can't bank that until we see it, so we have to be prepared for downside. But, you know, I think this is a peculiar market, a lot of destocking, a lot of trading dynamics short term.

And, you know, my job is to make money and build a sustainable long-term business that does justice to a world-class ore body, as well as build the region in the right way. So, that's my focus. Thank you.

James Wellsted (EVP: Investor Relations and Corporate Affairs)

Thanks. I think that's the last question that's on the call lines. I think we do have to wrap it up. We have been going on for quite some time. There was a question around New Century, but I think we've said that we're still integrating and obviously doing a feasibility study on Mount Lyell. So we'll release more information when we've completed that feasibility study. There was some questions on the buybacks. I think, Neal, you already responded to those. And then some PGM market questions, which we'll respond to directly. So at this point, I think we'll wrap it up. Neal, I'm not sure if you have any final words before we wrap up the session.

Charl Keyter (CFO)

It's been a long session, so thank you for your patience. We appreciate your time, and we look forward to delivering an improved result at year-end. So thank you, and have a good and safe day.