Sibanye Stillwater - H2 2023

Transcript

Neal Froneman (CEO)

Ladies and gentlemen, welcome to our 2023 H2 and year-end presentation. Please take note of the international safe harbour. We gave considerable thought as to what would be the appropriate way to signal our focus on the balance sheet, and we thought this was the most appropriate way to indicate our focus for a challenging 2024. We are not trying to create a silk purse out of a sow's ear. So let's move on. First of all, please take note of the safe harbor statement. There are lots of forward-looking statements, especially around what the markets may or may not do. What we intend to cover today is, I will go through the salient features of 2023. We want to start with it all starts and ends in the market. We really just want to focus on the PGM market. I think that is the priority.

We want to share with you our priority of focus and, and our protection of the balance sheet. That is definitely our priority for 2024. I will also discuss a concept that I introduced, at the last presentation, a little bit more on resource stewardship. I will then hand over to Charl Keyter, our CFO, who will do the financial review. Charl will hand over to the chief regional officers, Richard, Charles, Mika, and Robert, for the operational review, and then I will pick up again, to conclude, today's presentation.

Charl Keyter (CFO)

So let's, just look at the salient features, for the year ended 31 December 2023. I think in terms of embedding ESG as the way we do business and work, we certainly can celebrate a record low serious injury frequency rate.

Unfortunately, we did suffer regression in fatalities year on year, predominantly due to the Burnstone conveyor contractor incident, where we unfortunately lost 4 human lives. We are pleased to say that we well advanced with our renewable energy projects with 267 megawatts in construction. We're also pleased to say that we achieved conformance for our storage facilities, tailings storage facilities, according to GISTM. In line with our capital allocation model, we established the Sibanye-Stillwater Foundation, and the first allocations for the benefit of social upliftment have been made, and Richard will cover that in his section. In terms of financial performance, earnings and cash flow were significantly impacted by a steep decline in PGM prices.

We have been looking after our balance sheet, not only recently, but for some time, and I'm pleased to say that we ended the year on a net debt to adjusted EBITDA ratio of 0.58 times. We have a low-risk and well-structured, staggered, I should say, debt maturity ladder. Of course, we applied our dividend policy, but due to the losses in the second half of the year, there is no final dividend. In terms of the South African PGM operations, again, another really consistent and solid operational performance. We achieved industry-leading cost control with only a 4% increase in our all-in sustaining costs to approximately ZAR 20,000 per 4E ounce.

I want to point out, and Richard will do more of this, well, there is significant revenue generated by our byproducts, and in particular chrome, and I think that it's not well understood how much revenue comes from chrome. But in terms of byproduct credits, ZAR 10.9 billion, it was the impact. Load curtailment was very well managed, and we ended the year with effectively zero inventory, which is a good outcome considering what other companies have had to report. We were proactive in restructuring many parts of our business, but in the South African PGM operations, we started just after mid-year results presentation, and that restructuring was completed in February of 2024. The South African operations, I'm pleased to say, both gold and platinum, are profitable despite the depressed PGM basket price.

In terms of the South African gold operations, again, another good outcome, a very significant turnaround from a ZAR 3.5 billion Adjusted EBITDA loss to a ZAR 3.5 billion Adjusted EBITDA profit. That's a ZAR 7 billion swing. Load curtailment was also managed very well. Kloof 4 shaft was restructured again, proactively, due to a constraint resulting from seismicity and the implementation of our safety strategy resulted in the closure of that shaft. Obviously, the final catalyst was a shaft accident in the shaft. The South African gold operations, as I've said, are also profitable and generating positive cash flow. Important, we often ask why do we continue to pursue gold as part of our commodity mix? Well, I think it's very clear in global economic downturns that gold safe haven status is a positive.

You know, just to note, if we could create value by growing our gold portfolio, we would. Gold is a good commodity to have when you have a large base of industrial commodities as well. In terms of the U.S., the first half of 2023 was also impacted by a shaft accident at Stillwater West. We moved in quarter four to right-size the operations for the lower palladium price environment. That has worked extremely well. We've got a number of other levers we can pull, and there's ongoing work to ensure that these operations become profitable. They're still loss-making at the moment.

I will note, when we look at reserves and resources, that Stillwater is a strategic asset, both for ourselves as a company and for the U.S., and we have really no option but to ensure that it becomes profitable even at these depressed palladium prices. So it's not due for closure at this stage. In terms of the European region, the construction of the Keliber lithium refinery is on schedule and on budget. Late last week, we received a court ruling on the appeal regarding the environmental permits for both the Rapasaari mine and the concentrator. The court upheld the permit, but referred certain of those conditions back to the permitting authority. We suspect that may have an impact on when we bring Rapasaari mine into operation, and it may also require some rescheduling of capital.

Once we have done that work and we are clear on the impact of this, we will provide the market with more guidance. The Sandouville nickel refinery in France was severely impacted by the collapse in nickel prices. However, we had a very good outcome from the work that we initiated to look at the conversion of that refinery into a nickel sulfate processing plant, incorporating battery recycling. That study done morphed into a study on PCAM, on producing PCAM, and we had a positive outcome from that transition, and we will now take this to the next level of engineering. For the first time, we have, I think, a positive way forward for Sandouville. In the Australian region, again, good news. We completed the acquisition of New Century Resources. We now own 100% of the company.

The Adjusted EBITDA turned positive in Q4 after the very extreme weather event in March of 2023, and we also exercised our option in the second half of 2023 to acquire 100% of the Mount Lyell copper project. So let me move on to it all starts and ends in the market. And that's a quote from one of our previous non-executive directors, Barry Davison. And as you know, Barry was instrumental in building Anglo Platinum, and we learned a lot from Barry, and this is one of the things I would like to acknowledge that he taught us, and very often listens into our calls. And if you are listening in, Barry, greetings. I'm not going to get into the nuts and bolts of supply and demand as it relates to the PGM.

I want to take more of a bit of a philosophical view of the market. Our view has been consistent. We recognize the issues of the day, but the underpinnings to PGMs remain very solid and very positive. Let me share with you why. The graph on the right-hand side indicates the makeup of light vehicle production by powertrains. On the left-hand scale is millions of units of light vehicle production. And you can see the different colors indicate what is ICE, what is hybrids, what is BEVs, and fuel cells are hardly seen in this period. The point that needs to be made is the following, that absolute light-duty vehicle production is forecast to grow over the rest of this decade, to well in excess of 100 million units per annum.

I think the second point is that electric powertrains are expected to increase in market share in coming years. Now, that does mean that battery electric vehicles will increase in market share. But for some time, we've been saying those penetration rates are overstated. But what seems to be forgotten is the role that hybrids will play, and what's becoming much clearer to us, as we get to understand supply constraints, consumer preferences, and technology advances, the use of PGMs in the hybrid and internal combustion engine segment of the market is well supported. More recently, you had GM, Ford, Toyota, BMW, and, in fact, about a week, 10 days ago, Mercedes have all made public announcements pulling back on battery electric vehicle plants. And that type of messaging drives sentiment. Sentiment impacts short positions in the market.

From a palladium point of view, you're starting to see that unraveling. The point of all this is that those technologies that use autocats, and that's ICE engines, in the purest form, and plug-in hybrids, in this decade, are expected to provide approximately 70% of the powertrain mix, which is a very solid underpin to the PGMs. I think it's clear and it's well understood that the majority of PGMs, especially platinum, ruthenium, and iridium, have significant industrial underpin as well. In other words, they're not really impacted by what happens in the auto segment. So again, another underpin to the demand side of PGMs. We do expect primarily supply cuts from loss-making production. We've cut back, you know, 40,000-50,000 ounces on shafts that have come to the end of their lives, on some loss-making production.

I expect other companies will do exactly the same. So-called recycling and extrapolating, recycling of autocats in straight lines is not going to happen. Recycling remains subdued for very good reasons. There's very little price incentive to collectors. Logistics are difficult at the moment. People are not scrapping cars. The steel price is not underpinning the scrapping of cars either. So where we've ended up is in a bit of a volatile situation where supply chains have created major disruptions for end users who, through the experience of COVID and the Ukraine invasion, have stocked up and built up inventory. What we're seeing in the depressed environment at the moment is that that inventory is being reduced, and there's destocking taking place. That's what's depressing the price. None of the fundamentals have been impacted negatively.

And of course, inventory is finite, and we're already seeing a little bit more activity in the spot market from end users. So we remain positive and constructive regarding the PGM markets. Now, this is some company information, coupled with, of course, forecasts of others from a base data point of view. But it's not; it's very difficult to look at platinum and palladium as separate metals. And we initiated the substitution of palladium with platinum for very good reasons, and we'll get to more of that later. But the graph that you see here indicates a base case market balanced in red. It indicates through the gold bars, our view as a company of lower BEV growth.

Of course, you can see in terms of platinum and palladium looked at from a 2E perspective, the deficits increase from the base case just through that out into 2028. When you look at supply rationalization, and you develop what we call a combined scenario of both BEV, lower BEV growth, and supply rationalization, you can see why we remain constructive and bullish regarding these two metals, with deficits all the way out, in our view, to 2030. In terms of rhodium, it's also not too different.

When you factor in our view of lower BEV growth, which we've maintained, as I've said, early on in the presentation for some time, when you look at supply rationalization, and yes, we're very mindful of the changes occurring in the fiberglass industry in China, you can see, again, from a combined scenario point of view, rhodium remains only moves into a surplus in 2030. All of this bodes very well for the underpin to our PGM business. In addition to that, and I said I was going to come to this, we have, as a company, been driving what we believe is innovative market development. Now, I referred to the Trimetal Catalyst work that we did with BASF in 2020. We felt that the palladium demand had entered a phase where it was not sustainable in terms of the way we are mining.

We looked at the international basket weighting and recognized that it was important to look at the potential substitution of palladium with platinum. Now, today we receive many comments that you've actually undermined your own business. That's not true, because the reverse is also true. As platinum will increase in price, that provides the underpin at a logical point in time for palladium to be substituted for platinum. And therefore, we are very confident that we've done the right thing from a sustainability point of view to ensure that our baskets are balanced. In addition to that, we've more recently embarked with Heraeus Precious Metals on two projects. I'm not going to go through these in detail, but the one is a ruthenium-based catalyst for PEM electrolysis.

And, and again, that is to ensure that there are cheaper options for producing hydrogen and not having to revert to scarce iridium. The other one is we are exploring new applications for palladium in the hydrogen economy. So, palladium has had, in our view, very little market development, investment, and we are following through on that. I'd like to now move on to what we believe is a very proactive focus and protection of the balance sheet, which is going to be a key focus for us in 2024. But before I go into the details, I think it's important to just look at the external context, in terms of the world we're operating in, and again refer to the gray elephants. And the gray elephants, you would know, are those highly probable, high-impact, yet often ignored trends that are shaping the 2020s.

We spent quite a bit of time on talking about these gray elephants. Today, I really want to pick up on just a few. We had noted previously the increasing trend in temperatures. 2023 was the warmest year on record, and that's accelerating this imperative for climate change. Of course, our metals are key and underpin what is necessary to protect the world from this runaway climate change. That's not the focus of this, but I think the global trade patterns and supply chains are being significantly disrupted, and geopolitical developments are making deeper and deeper impacts. I referred to the destocking that's currently taking place. I have not yet referred to, you know, palladium that we believe is coming from Russia via China at a discount and impacting and undermining what is a commercial palladium price.

Those are all patterns that come from the grey elephant of big squeezes. We are very cognizant of them and of course have strategies to deal with that. I have said many times in these presentations, the issue of multipolarity, or in another word, the deglobalization of the world is happening at an accelerated rate. Our positioning in Europe and the U.S. was not by chance. It was taking recognition of this multipolarity. And of course, those are markets that are short of these critical metals. Those are markets that we can support and jointly prosper in together with our stakeholders.

I think when you look at the fact that 64 elections will take place, country elections, that is, in 2024, and you look at what is happening in the division between the East and the West, this is a very significant platform for angry people to express their discontent all over the world. And it is something that can really undermine, very quickly, the underpins and the changes to market. So it's something we are monitoring very, very closely, but that is the broad external context. When we bring that into the company, you, you're all familiar with our strategic thinking, our three-dimensional strategy, the strategic foundation, the strategic essentials, and of course, our strategic differentiators. In a challenging environment, the primary focus has to be on strategic essentials, and that is where our focus is. And just to remind you, what does that actually mean?

It means, first of all, we've got to ensure the safety and well-being of our employees. So safety first. Prospering in every region in which we operate. That means having good stakeholder relations, with all stakeholders in the regions we operate in. Achieving operational excellence and optimizing long-term resource value. We're going to cover a number of those aspects in this presentation. You saw increases within our South African PGM business of only 4% in a high inflationary environment. I will get on to our recently declared reserves and resources and show you how we've optimized long-term resource values. Those are some of the key assets within the company. Maintaining a profitable business and optimizing capital allocation. In this presentation, I believe, I will talk about capital allocation, Charles will talk about capital allocation, and Richard will talk about capital allocation.

But dealing with loss-making shafts in a proactive way, dealing with loss-making parts of our business in a proactive way, considering capital allocation, and even rescheduling capital such as Burnstone and perhaps even Keliber, is important. Embedding ESG as the way we do business, that was the very first strategic highlight for 2023 that I covered. So that's what we mean by strategic essentials, and focusing on the strategic essentials to protect the balance sheet is what is critical in a year like 2024. So let's talk about the proactive actions we've taken to protect and strengthen the balance sheet. I want to do that against the backdrop of the table on the right-hand side. What we've got listed there is some of the restructuring benefits that have been achieved in our business over the last year and early into this year.

I'm not going to go through it in detail, but you can see that our growth savings and CapEx deferrals, from the period that we're going to talk about now, has amounted to ZAR 6.6 billion or $375 million. And this, you do not do overnight. This has been a journey, and I will share with you that journey. So, in February 2022, at our year-end results presentation, we noted the prospects of a global economic downturn post the invasion of the Ukraine by Russia. And we knew it was going to drive up energy prices. We knew it was going to drive up inflation. And of course, the only way central banks can really manage inflation is to raise interest rates. So we could see that come. Added palladium price weakness in 2028. And that was the first round of restructuring at our U.S. business.

In February 2023, we closed the Beatrix IV shaft and Kloof II, Kloof number 2 processing plant. From May of 2023, we started to protect the downside, in terms of, gold price, at, at let's call it, significant levels, probably even record levels. That is protecting the balance sheet. In November of 2023, instead of using our balance sheet to acquire Reldan, we raised $500 million through a convertible note to fund the Reldan acquisition. And that was actually raising $500 million dollars at an interest rate of 4.25% in, in a, in a time where interest rates were well north of that, bond rates were sort of at 7%, 8%, 9%. Yes, you can talk about dilution, but there's no, there's no reason why this convertible note has to actually convert. In November of 2023, we closed Kloof 4 shaft, mainly due to safety reasons.

In November of 2023, we went through a further round of U.S. PGM operational restructuring with the very fast decline in the 2E basket price. In February of 2024, we completed the Section 189 process for the closure of Souminyat shaft, the right-sizing of Super Melele and Roland shafts, and conditional operations of our 4 belt shaft. That is, in my mind, being proactive and being on the front foot in dealing with changing economic circumstances. Our operating guidance for 2024, again, I'm not going to go through it in detail, but you will note that the U.S. region is now being pinned from primary mining at about 440,000 2E ounces a year. Our U.S. recycling business, excluding Reldan, is expected to generate about 300,000 3E ounces.

Our South African PGM operations, again, solid performer at about 1.8 million ounces of production with costs around, just under ZAR 22,000 a 4E ounce. Gold is profitable with an expected production of about 600,000, just over 600,000 ounces. The Sandouville nickel refinery is unfortunately still going to be loss-making, but we are working our way to reduce those losses at the current nickel prices and, of course, minimize the losses as we progress the feasibility study to convert that plant into a pCAM plant. The Keliber lithium project is ongoing. As we noted early on in the presentation, we are still understanding the impact of the court judgment, and that might require a little bit of rescheduling, both on the capital and the output side. The Australian region is profitable.

Of course, we exercised, as I said earlier, our option on the Mount Lyell Copper Mine, and we will continue to take that up the value curve. As I said right at the beginning, I wanted to talk a little bit about resource stewardship. I did introduce the concept at the previous results presentation. I think it's really about saying that if you are going to position yourself as a metals producer producing green metals, which are designed to address climate change, you need to think broader than just primary mining. Secondary mining has been something we've been part of for some time through DRD Gold, and of course, more recently, Century. We are looking to grow that business.

Recycling or urban mining is an area where we're quite active, and we have recently announced the Reldan transaction, which I'll get to now. But those are the three operating legs of the company. And let me just provide you with a bit more detail on Reldan, which is a U.S.-based metals recycler based in Pennsylvania, and has joint ventures and operations in both India and Mexico, spreading our footprint. So, in November 2023, we announced the acquisition of Reldan at a $211 million enterprise value. And of course, the taking from enterprise to the cash consideration will result in $155.4 million cash outflow. It's anticipated to be value accretive on day one. It's not a big ticket in the big scheme of things. It reprocesses industrial and electronic waste to produce various metals.

I think it's important to understand the scale of these businesses. So we've really highlighted the amount of gold a recycler produces. And in this case, for 2022, it was 140,000 ounces of gold. Now, that compares very favorably, 264,000 ounces that DRD Gold produces. And DRD Gold is considered a large gold mining company. It also produced just under 2 million ounces of silver, 22,000 ounces of palladium, 25,000 ounces of platinum, and 3.4 million pounds of copper. So, a significant producer, significant scale. As I said, got a presence in Mexico and in India. And it boasts a number of environmental certifications and accreditations, which attract blue chip suppliers. And we expect this transaction to close during this month.

Let me then move on to the bigger part of resource stewardship and just talk a little bit about our reserve and resource base, as recently declared. Obviously, the pie charts on the right-hand side of the slide are important. What stands out before I even go into the text is the very large reserve base that we have in the U.S. You can see why that is so strategic in terms of our own company and, as I've said, also for the United States. Very pleasing to announce a 55% increase in attributable lithium mineral resources. We will, I do believe, in the not too distant future, be able to upgrade the mineral reserve as well. We have a very sizable PGM mineral resource and reserve base with long-life operations and lots of optionality.

As I've said, the U.S. resource and reserve base is strategic and significant. The South African PGM base is also significant and large. The South African gold resources and reserves went down, impacted mainly by the closure of Kloof IV shaft and Beatrix IV shaft. The New Century operations, we have an attributable zinc mineral reserve of 1.7 million, which we've declared for the first time. And for the first time, Mount Lyell has just under, or just over, I should say, 1.6 million pounds of copper mineral resource, which was added. Lots of questions on uranium. As you know, we've been sitting on our uranium, waiting for the prices to be what they are. We have 32 million pounds of uranium resources on the Cooke Tailings Dam, with DRD having now finalized their regional tailings facility.

that can be brought to account, very quickly. And then, of course, we've got the Biser uranium mine, with 27 million pounds of, of resource. and we're actively progressing, the thinking around that. So, with that, I'm going to hand over to Charles, our Chief Financial Officer, to take us through the financial review. Thanks, Charles.

Thank you, Neal. Good morning and good afternoon to all participants. Having now spent almost 30 years in the mining industry, you very quickly learn that summers are short and that the winters can be long. Starting during the second half of 2023, financially speaking, we entered a period which is beginning to feel like autumn as we saw a pullback in commodity prices, specifically PGMs. This has had a significant impact on our results, as you will see during the financial review. Our balance sheet remained strong, and we maintained our financial flexibility.

However, for the first time in four years, we moved into a net debt position. Net debt to Adjusted EBITDA increased to 0.58 times, and this was driven predominantly by lower commodity prices, capital expenditure, and timing of year-end payments. Now, debt maturities, as can be seen on the slide, remains manageable. Gross debt, including borrowings, increased by approximately ZAR 15 billion, and this was due to ZAR 4 billion drawn under the ZAR Revolving Credit Facility due to the earlier payments in December 2023, associated with the South African mines closing around 23 December. We also issued the convertible bond at the end of 2023. Cash on hand was at ZAR 25.5 billion, and net debt was just under ZAR 12 billion. Liquidity still remains very strong, and we have headroom of just under ZAR 50 billion, which is split roughly half cash and half available facilities.

Our North Star remains the capital allocation framework and the decisions taken around cost cuts and production right-sizing bears testimony. Looking at project capital, Burnstone has been slowed down, and we will continue to review this based on the financial position of the group. For now, we will continue with our two major projects, K4 and Keliber. If we look at stakeholder shared value, as stated, and based on the financial performance and in line with our dividend policy, no dividend has been declared at year-end. If we now move to stakeholder shared value again, the Sibanye-Stillwater Foundation nonprofit company was conceived at the end of 2021, but it was only finally registered in 2023. The historical allocation of GBP 212 million has flown, and more on that later.

At the end of 2023, we issued a convertible bond of $500 million, and the proceeds will partially be utilized for the funding of Reldan. The message I want to leave you with on this slide is that we are well aware that we are on a much tighter period, but we will continue to evaluate all investments and expenditures based on this capital allocation framework. Looking at the income statement, revenue at ZAR 114 billion was down from ZAR 138 billion in 2022. Volumes at all our major primary producing operations were up, but were offset by pullbacks in PGM basket prices of between 24%-32%. The gold price was the shining light and was up 21% year-on-year. Costs were down almost ZAR 5 billion, and this is a function of solid cost control by the operations, and a major contributor was lower volumes from recycling.

Adjusted EBITDA halved year on year and still came in at a respectable ZAR 21 billion, and we forget that not too long ago this was considered record performance, but it has been completely overshadowed by the last three years. We also, as signaled in our trading statement, booked impairments to the value of ZAR 47 billion. This was at our US PGM operations, Mimosa, Sandouville, New Century Resources, and the Burnstone operation. The biggest contributor was the significantly lower consensus price outlooks. We also fully impaired the now closed Kloof 4 shaft. Taxes and royalties were much lower and reflect the lower profitability. The net impact of all of the above was a loss for the period of ZAR 37 billion or ZAR 13.34 per share, and this was primarily driven by the impairments that we booked during 2023.

I'm now going to pass you back to our Chief Regional Officers to take you through the operational reviews. Thank you, Richard.

Richard Stewart (Chief Regional Officer)

Thank you very much, Charles, and good afternoon or good morning, ladies and gentlemen. It gives me real pleasure today to share with you our operational update. I will specifically be sharing some of the Group Safety and South African Regional update. I'll then hand over to Charles to talk us through the Americas region. Grant will update us on the recycling, and then Mika on the EU region, and finally, Robert will pick up on the Australian region. Thank you very much. So, I guess just starting off with what is our number one priority, both in our operations and as a group in terms of safety. 2023 was really a story of two tales.

I think it was very regrettable that we saw an increase in the number of fatal incidents that we had from 5 in 2022 to 8 in 2023. Very sadly, one of these incidents was a multiple fatal where we tragically lost 4 contracting colleagues when a conveyor belt that was under construction at Burnstone collapsed. Our sincere condolences go to the families and friends of all of our lost colleagues. I think while the number of fatal incidents experienced is deeply regrettable, and I think it took a hard toll on the team, we have since 2022 been implementing our fatal elimination strategy. I do think that there are many underlying trends that show us that we are progressing well along this journey.

This strategy, at its heart, really looks at eliminating high-energy or high-risk incidents, and we mitigate against those risks through our critical controls, our behaviors, and also through our management routines that make sure we enable safe work. Some of the trends that we have seen that tell us we're on the right journey would be instances such as our serious injury frequency rate. This we use as a measure since the energy that's involved in a serious incident is quite often similar to what could result in a fatal. And having seen a consistent year-on-year decline with many of the serious injury frequency rates we experienced last year being industry-leading and certainly records for ourselves, does tell us that we're on the right trend.

I also think last year, for the first time, we saw that frontline stoppages, safety stoppages by our frontline employees, exceeded the number of safety stoppages we saw from management and from our safety officers. This is important because it really tells us two things. Firstly, that our frontline employees are able to identify risk within their working areas, but more importantly, that we're developing a culture where our frontline supervisors stopping for safety incidents rather than continuing work is embraced and really seen as part of our overall commitment to not working in unsafe environments. We've also seen a real reduction in risk where historically some of our top incidents that resulted in fatality, such as fall of ground, we've now gone 25 months without seeing a fall of ground incident, showing us that where these controls are implemented, we are able to eliminate fatalities.

I remain absolutely confident that if we can continue to implement the strategy and drive it throughout our organization, we can show that deep-level mining is possible without fatal incidents. Moving on to social, I think Charles did highlight the formation of the Sibanye-Stillwater Foundation last year, I think a key achievement towards delivering on our ultimate vision of shared stakeholder value. The specific foundation allocated its first funds to the South African region last year, and through that, we've disbursed our first set of funds to two very esteemed partners in Gift of the Givers and Breadline Africa. This specific foundation is really aimed at uplifting our communities around our operations and also from where many of our employees originate, with a focus on infrastructure.

Gift of the Givers will be working with us in uplifting infrastructure around schools, around our operations, and Breadline Africa investing those funds into creating sanitation and replacing pit between toilets in many of our originating areas. I think two absolutely key initiatives that really underpin our commitment to social upliftment and ultimately education in our country, which is core to providing equal opportunity for all South Africans. Onto energy and the E and ESG, I think very proud to say today that Sibanye is one of the top three private power purchasers within the country. And in fact, as we stand today, have the largest amount of energy projects currently under construction. Last year, we concluded the financial close of three significant projects that are currently in construction and will deliver 267 megawatts of solar and wind renewable energy to our operations from 2025 onwards.

Neal Froneman (CEO)

This is estimated to contribute about 15% of our total electricity requirements from 2026 and will also significantly reduce our scope 2 emissions by just under 1 million tons of carbon dioxide per annum. In addition, we've got 5 further projects that are currently under development, and we are looking forward to reaching financial close on those during the current year. Those should be in operation by 2026. These 5 projects will deliver a further 365 MW of energy and that will ultimately provide about 30% of our total energy requirement from 2027. Not only does this have a significant impact on our scope 2 emissions and carbon footprint, but in addition comes in at tariffs that are lower than current Eskom and certainly where we forecast Eskom tariffs to be going over the coming years.

This has come at a significant capital investment of between ZAR 12 billion and ZAR 14 billion, and largely funded from third-party balance sheets with ourselves providing power purchase agreements to underpin that capital investment. Moving on to our SA Gold operations, I think 2023 we saw a very pleasing turnaround from 2022, moving from an EBITDA loss of about ZAR 3.5 billion in the previous year to an EBITDA profit of about ZAR 3.5 billion last year. This came on the back of a 30% higher production output, coupled with a 20% increase in the gold price received over the year. With the increase in output, our all-in sustaining costs dropped by just over 10% year-on-year.

I think this output was particularly pleasing given two significant operational disruptions we experienced during the year, one being the Kloof IV shaft incident where at the end of July, we had steel on the counterweight of a conveyance system that fell down the Kloof shaft and resulted in a decision to close that shaft, a process that was concluded in December of 2023. We also had a significant fire at our Driefontein V shaft, our largest operation at Driefontein, and that largely resulted in no production for the third quarter of last year and a ramp-up during the fourth quarter with more production only normalizing in November and December of 2023. The net impact of that fire was almost a tonne of gold that was dropped out of our production.

DRD production decreased by about 8% to just under 165,000 ounces, and all-in sustaining costs rose by about 10% to just under ZAR 900,000 per kilogram. Nevertheless, this did contribute a 13% higher EBITDA to the group of ZAR 1.75 billion, driven largely by a 20% increase in gold price. As was mentioned earlier in the presentation, we have made a decision to defer much of the Burnstone capital over the coming years, and this will be evaluated on an annual basis. Moving on to our PGM operations, I think production from PGMs was pleasing and consistent year-on-year.

In total, we produced just under 1.75 million ounces, and that excludes about 21,000 ounces that came from Kroondal towards the end of the year in November and December, where we now account for 100% of production given the transaction with Anglo Platinum, which I'll talk on in a bit more detail in a second. Very pleasing was the continued and sustained industry-leading cost performance. Our total unit costs last year only increased by 4% to just over ZAR 20,000 per 4E ounce, significantly below both inflation and mining PPI experienced across the industry. This, of course, has given us the benefit of continuing to move down the industry cost curves and increasing our resilience to the overall PGM environment that we are facing at present. This cost performance largely comes off the back of two things.

The first one is a very tight and stringent cost control, but also through the increased focus we've had on delivering additional byproduct benefits, most notably in chrome, which I'll expand on, overall creating a credit benefit of about ZAR 6,500 per 4E ounce to our PGM costs. It was also mentioned that we were very proactive in terms of restructuring our PGM operations, with four shafts being impacted last year, a process that was concluded in February of this year. Overall, we expect that to deliver about ZAR 750 million of annual benefits to the PGM operations. Adjusted EBITDA was down by about just over 50%, and that was largely driven by a 32% decline in the total PGM basket price that we received, largely as a reduction of palladium and rhodium prices.

I think we also highlighted that at the end of 2022, the deferred payment agreement with Anglo Platinum came to an end, and that last payment was made in the first half of last year, the benefits of which going forward will accrue to the Sibanye-Stillwater Group and, of course, our empowerment partners at the Rustenburg operation. I do think we're in quite a unique position in many ways in the industry with our current processing capacity. We do have spare capacity, especially in our base metal and precious metals refinery. And that puts us in quite a unique position to manage load curtailment and ensure we can keep work in progress down to a minimum. But in addition, also the ability to unlock future value.

I'm sure many of you would have seen the announcement by Ivanplats where we have agreed to purchase a concentrate agreement with them for their future expansion projects due to come online later this decade. I'll touch a little bit more just on the focus on byproducts. When we commenced our operations or started the PGM operations some 4 or 5 years ago, chrome sales amounted to about ZAR 1 billion per annum. Over the last 4-5 years, we've placed a significant focus on enhancing our chrome production, both on our existing underground operations as well as looking at ways to optimize a significant surface resource that we have in terms of our tailings. This has seen the production from chrome increase to where it was forecast to be currently.

We've increased that by more than 25%, which, when you combine it with the current chrome prices, means the revenue we received from chrome last year was just over ZAR 5 billion or some 10% of our total revenue basket. This is, given that chrome comes at a very small incremental cost, this has had a significant benefit to the overall revenue or credit towards our overall PGM costs. We still see a lot of upside with chrome and look forward in the coming months to share with you some of the plans we've got to further increase our overall chrome production and become a significant provider into the global chrome markets. Just moving on to the Kroondal transaction, this is a transaction that we've shared with the markets before and essentially includes us buying 50% of Anglo American share in what was called the PSA or the Kroondal operations.

The consideration for that transaction was a delivery of 1.35 million ounces into the existing PSA structure, and we expect to complete that delivery by the middle of 2024. In addition, we do pick up the closure liabilities for the infrastructure we have purchased from Anglo. This transaction has added significant value to the overall Kroondal infrastructure. In total, we've unlocked almost 1.7 million ounces of additional reserves that could not have been done outside of this transaction. As we know, we had significant resources at Rustenburg that could not be mined from the existing Rustenburg infrastructure but can be mined from the low-cost Kroondal mechanized infrastructure. This adds about 1.4 million ounces to the overall Kroondal life of mine.

In addition, through having this critical mass in terms of production, it also means we can unlock a lot of the Kroondal tail, and that's about 300,000 ounces that previously would not have had sufficient production capacity or could not have covered its costs as a standalone operation. But by being incorporated into Rustenburg, we are therefore able to unlock the 1.7 million ounces and extend the life of these assets out well into the middle of the next decade. I think importantly, and as a as a heads up to the market, when we do close the transaction in the middle of the year, Kroondal effectively gets amalgamated into Rustenburg. And that also means that we will transform from a purchase of concentrate agreement that we currently have with Amplats to a toll treatment agreement. What this essentially means is that our overall operating costs at Kroondal will increase.

So essentially, we will incur additional tolling costs that will increase the total operating cost base. However, we also achieve 100% of revenue. So under the current purchase of concentrate agreement, we only receive a percentage of the total revenue basket, whereas under the toll agreement, we receive 100% of the revenue basket. The net increase in the revenue received does exceed the increase in the costs, and therefore the overall margins will increase from the Kroondal operations once the tolling agreement is instituted around the beginning of this year, albeit you will see that increase in unit costs and increase in associated margins. Thank you very much. And with that, I will hand over to Charles to take us through the U.S. region. Thank you.

Charles Carter (Chief Regional Officer)

Thank you, Richard. We've obviously come off a challenging year with production just over 427,000 ounces.

We lost almost 25,000 ounces due to the shaft incident at Stillwater Mine, which impacted the West Mine in particular. The average basket price declined 33% year-on-year to $1,243 an ounce. And we're obviously very focused right now on a 2E basket price in the 900s, which means that we have to continue to both meet the new plan that we've put on the table and indeed move beyond it where we can with an ongoing focus on costs in particular. Importantly, we did significant restructure in late last year. We restructured the leadership team. We took out the COO position with the GMs reporting direct to Kevin Robertson. We strengthened the central technical function under Cornay Stradam, and we did a number of other streamlining adjustments to the leadership spans of control and accountabilities.

More than adjusting the leadership team, we revised the mine plan significantly with a lower for longer production profile, and we constrained near-term growth and deferred growth capital knowing that we can come back at this as prices permit. We also did a workforce restructure. We took out 270 contractors and 111 employees for a workforce reduction of around 16%. This was well executed by the teams, and I want to thank all employees for their responsible approach to this reality and in particular to the United Steelworkers for the professional manner in which they dealt with a difficult situation. The revised plan is starting to see an estimated $400 an ounce benefit on all-in sustaining costs. We are continuing to work on ways to improve this with every cost element currently in focus.

We have already seen a reduction in gross mining costs of around 19% over the past four months at Stillwater Mine, and we're starting to see a much better run rate with improved efficiencies at both mines. And most importantly, we've seen a good safety start to the year. While 2023 was a tough year from a performance perspective, we completed a number of key infrastructural upgrades at both mines that will better position these operations for the future. At East Boulder Mine, we completed the tunnel two-rail upgrade, and we commissioned a heat exchanger line for additional intake, resolving a longstanding ventilation constraint at East Boulder. At Stillwater Mine, we commissioned the new mill at the start of this year, and that is working well.

We completed and commissioned the West Fork ventilation infrastructure, and there will be a major vent changeover late in the second quarter going into the third quarter, but that's all looking good. We did significant restructure on the fleet. We removed 140 units to simplify and focus our maintenance efforts and our efficiency gains. At the Met complex, we completed the second furnace rebuild, and we'll bring this back online once recycling volumes pick up. As you'll see in the numbers, we had had an all-in sustaining cost of $1,872 an ounce, as seen in these results, which is mainly due to lower-than-planned production, increased ORD, and sustaining capital expenditure. In the detail of our earnings report, however, you will see that in the new mine plan, we have production marginally higher this year than last year. We have development rates maintained at around 25,000 meters for the year.

We have total operating costs reducing by at least 18%, and we're looking to go beyond that. We have ORD and sustaining CapEx reducing by between 55%-60%, and we have project CapEx reducing by almost 70%. As I've noted, the growth capital is deferred for the next several years, but we will come back to that as we are able to. We are repositioning for profitability and sustainability to ensure delivery of a significant long-term value while cutting our cloth right now to meet the challenges of markedly lower pricing. As I've noted, we've had a positive start through the first two months of 2024, and we're working hard to keep improving our safety performance and to ensure that we achieve our production plan while continuing to address every element of spend as we move forward.

I'm confident that we have the right plan for the times that we're in and our real pride in the hard work underway by all team members who are affecting a significant shift at our Montana operations. We are also doing significant activities off mine sites, such as lobbying for the Inflation Reduction Act tax credit. At the moment, the latest draft from the IRS really hands this credit only to final refiners, and we believe the original intent of legislators was that this should also impact critical minerals mining and not just processing. So that's an ongoing lobbying effort. We'll see where we get to. But I think importantly, you know what's happening in the U.S. right now is that we need to ensure that we are safeguarding the competitiveness of an industry that is pivotal for American green metals production in the U.S. for the long-term future.

To that end, any enabling legislation is helpful. The improved operating performance we are seeing at the start of this year is also being seen in slightly stronger recycling volumes through the first two months. As I hand over to Grant Stewart, who will take you through the recycling performance, let me just echo what Neal has covered, and I'm excited by the potential of the Reldan transaction. In short, it has scope to broaden our recycling feeds beyond autocats. It adds new metals to the character of Americas business, and it strengthens our earnings and free cash flow capability going forward. Our US metals recycling business is an important complement to our mining business, and we are working aggressively to develop a cost-effective and highly leveraged platform for any future price upside while ensuring a competitive cost base that is sustainable beyond the current price squeeze.

We have started 2024 on the front foot in all parameters of the business, and all things permitting, you will see us moving down the global cost curve through the year. Thank you. And with that, let me hand off to Grant.

Grant Stuart (Head of Recycling)

Thanks, Charles. Undoubtedly, the continued downcycle in the recycling volumes has been a cause for concern. PGMs from unrecycled totaled just over 310,000 3E ounces, 48% down on 2022, and influenced by a relentless and complex set of factors within the U.S. auto industry. Towards the end of 2022, a notable dip in the U.S. auto sales became apparent, driven by compressed disposable income levels, heightened financing costs, and near-record vehicle prices that deterred potential new vehicle purchases. Today, buyers grapple with the same impact of interest rates on car loans, with average vehicle prices hovering around $48,000.

These factors have no doubt contributed to the recycling volumes decreasing by 30%-50% year-on-year for various recyclers in the value chain. Beyond the macroeconomic complexities, lifestyle changes post-COVID, including increased remote work and reduced driving, have led to a shortage of end-of-life vehicles. Consumers are running their vehicles for longer periods, and our customers are confirming average scrapage rates moving from averages of 12-15 years to beyond 20 years. In 2022, our Adjusted EBITDA stood at $78 million, whereas in the current period, it has been adjusted to $33 million following a 24% drop in the average realised 3E price received and a 45% decrease in the volume fed. Despite encountering volume challenges over the past three years, we maintain an optimistic outlook grounded in the resilience of our recycling platform to facilitate sustained growth within the circular economy.

Several factors bolster our confidence, including forecast supply deficits for platinum, palladium, and rhodium in the short term. Additionally, the dissipation of China's destocking cycle, downgrades in battery electric vehicle sales, potential Fed rate drops, recategorization of hybrid vehicles as ICE vehicles, and IRA credits applicable to both battery electric vehicles and plug-in hybrid electric vehicles all contributing to this positive outlook. Moreover, heightened auto catalyst loadings to mitigate emissions and supply cutbacks further reinforce this position. Our outlook is underpinned by a comprehensive assessment of the auto catalyst recycling landscape, with upside potential anticipated following Reldan's integration as we explore consolidation opportunities, the integration of collector and logistics networks, and anticipated resurgence in volumes.

Mika Seitovirta (Chief Regional Officer)

Variable cost, mainly due to inflation, also than we thought we would need in order to stabilize the production needs. And it shows encouraging results. It's a market where there is a huge deficit between.

the end of the year, including also a transition. Fewer incidents than the year before. And I'm happy about this safety trend as well. We achieved a lot during 2023 at Keliber. We started the construction, which means that we are constructing for the time being in three. And we are on time with that construction. That's unusual in these processes.

And we have restructured the company to optimize both the regional as well as operational efficiencies. 10,000 tons of payable zinc metal, and their all-in sustaining cost of less than $2,000 per tonne. Over the same period, we have sold 77,000 tons of zinc metal. As we've reported previously. That was a good operational outcome under the circumstances.

Hopefully, you've seen the proactive austerity measures that we implemented essentially over the last 18 months, recognising the potential that has resulted in in savings on both. At the right time, we're in the right global scene. Diversify and grow our global portfolio. Continues, and the strategic. Priority for 2024. So with thank you. Thanks, Neal. I'll try and punch similar questions together just to save a bit of time. We'll first ask from the webcast, and then we'll go. Structure down to $1,000 a 2E ounce. But Charles, you can you can comment on that. Just in terms of your question on the very different cost structures between South Africa and the U.S., that is real. They're two very different operations. The the workforce. That accomplished quite a lot of growth capital through last year at the East Boulder. Tailings pushing on that, and we're also favoring grade.

It is an environment that's going to be with us for a long period of time. Having said that, doesn't mean that we're betting the farm on improving or increasing basket prices. But I think we're in this for the long run. We are not going to damage our business by taking knee-jerk reactions. I think in terms of the question on, let me call it other levers, or perhaps even when you refer. The levers that we've already pulled is obviously, you know, looking at how. Vanilla ones. And those would typically be looking. Those can come in the form of pre-pays. Historically, we've looked for iron ore hedges. It'll be very carefully considered at the right time. However, let me say. The EMEA team. It's a project that deserves to be built.

There is an impending Record of Decision towards the end of the year. We will consider our role based on the economics of that project, just like any other partner would. I've always maintained that the funding of a good project, even in tough times, is achievable based on good economics. You can fund just about everything as long as the economics are sound. We expect the economics of Rio Grande to be sound. So it is financeable. Again, we will make those decisions towards the end of the year. Mika and Charles, Robert, anything you want to add? Thank you, Neal. I think you covered it well.

But maybe I just add there that concerning this permitting situation, I just want to repeat the fact that we are doing this overall assessment, whether it has any impact on the Keliber project timeline or not. And that is ongoing work. And at the same time, I just want to highlight to everybody that we have the permits. The court ruling didn't have any impact on the Syväjärvi mine permit nor on the refinery in Kokkola permit. So those are all valid. So there we can move according to the plan. And I think there was also a question concerning the external feed. And that's right. We are starting with the external feed as from 2025 to ramp up to production. That plan is still valid. And we have a couple of alternatives where we are going to get that feed from. Thank you. Yeah, spot on.

I think it's important just to note that that was, in my mind, a very smart and appropriate decision to use third-party concentrate to prove up the technology, you know, debottleneck, debug what will inevitably be a challenging startup. But it's also profitable to start up that plant in that way. So that third-party concentrate startup was a very, I think, prudent approach to starting up Keliber. Charles, anything you want to add on Reldan? No, Neal, I think you've nailed it. You know, important decisions last year. We're excited about what we've seen, and we have a good partner. So time will tell. Thank you. Thank you. Next, I think, let's go to the phone lines. To Chorus Call, please, for the next series of questions, and we'll come back to the webcast questions. Thank you, sir.

Neal Froneman (CEO)

The next question comes from Chris Nicholson of RMB Morgan Stanley. Please go ahead.

Christopher Nicholson (Analyst)

Hi, and good afternoon. Good morning, Neal and team. I have three questions. You've taken quite an eye-watering impairment at Sibanye-Stillwater, ZAR 38.9 billion. I see from the notes that you're assuming a $1,281 an ounce basket price, which is quite higher than spot. Could you give us some details around what you have assumed around production volumes and level of CapEx relative to today and to the future in that calculation? That's the first. Second question, SA PGM costs, I see you've guided these higher 9%-12% year-on-year. I'm surprised by that. You've obviously restructured those four shafts this last year. I would have expected that to be lower.

Then the final one, I guess maybe perhaps less a question than just a comment, is that ultimately, you know, we have probably the market's been quite disappointed, I think, by the level of net debt build, free cash flow burn. I'm not quite convinced that another further ZAR 8 billion-ZAR 10 billion of free cash flow burn this year is really good enough. And from what I can see, I think the market's primary concern is that you will actually have to raise more capital later this year. Welcome to comment on that. I think you already have. Thank you.

Neal Froneman (CEO)

Yeah, thanks. Thanks, Chris. So let me start at the back, and I'll ask Charl and Charles to comment on Stillwater, what was considered in the impairment.

And then Rich, if you can come in on the cost increases in the South African PGM segment. Chris, you know, I can say that we are going to raise additional capital, but this perception that it's going to be a rights issue is completely wrong. I think let's talk some nuts and bolts. We have very successfully used streams in the past. We have very successfully used pre-pays. None of that is debt. None of it is a dilution to shareholders. So, you know, the figures quoted by Charles are certainly our view. But I can tell you, we're not going to wait until we see whether Charles is right or wrong. We're already progressing some of those issues. And they are smart.

They are smart ways of raising capital on assets, especially those that are difficult to find partners for or difficult to sell. You know, so please don't think we're sitting on our hands and not doing anything to further strengthen the balance sheet. But it's also not, and I'll try to explain that right at the beginning, this is not about a rights issue. That's, as Charles said, that's maybe the fifth or sixth parachute that you pull. So I wanted to just answer your third part to that question. And then perhaps we can go first to Charles on Chris's questions around Stillwater and the impairment.

Charles Carter (Chief Regional Officer)

Yeah, so Neal, I'll take that one. Chris, so what we have assumed is a production profile similar to what we've guided for the next three years.

And then, you know, over a period of 2 years, it builds up to around 600,000-650,000 ounces. And then we've kept it at that level, you know, based on the production profile, you know, basically into the future. In terms of capital expenditure, again, you know, again, looking at this year, what we've guided, you know, that is the level of capital expenditure we aim to keep going forward. There might be some slight investments in 2025, 2026, but thereafter, we're probably looking at R 170 million-R 200 million. So significantly down from what we've got now. I think the number you are seeing there, you know, although it's expressed as a per 2-year ounce, it does include the 3-year ounces from recycling as well. So that was just expressed as a 2-year ounce. But yeah, I think that's the numbers, Chris.

Flat profile next three years, slowly building up, and then basically a flat capital profile for the remainder of the life of mine.

Neal Froneman (CEO)

Yeah, thanks, Charles. And Rich, would you please pick up Chris's question on the 9% increase in unit cost at SA PGMs?

Richard Stewart (Chief Regional Officer)

Thanks. Perfect. Thanks, Neal. And Chris, good afternoon. Yeah, I think there's three aspects to the SA PGM costs that are worth noting. The first one is that when we do our forecasts and budgets for the year, we do build in our budgeted price parameters for byproduct credits. And as you would know at the moment, some of those byproducts, chrome in particular, is at quite a high price. So our assumptions in terms of the credits we get from byproducts are a little bit lower based on our sort of through-cycle pricing.

That's probably got in the region of about a 3% impact on those costs if spot prices were to persist. So that's the one. I think the second point is just we obviously do quote all-in-sustaining costs, not cash costs. So those all-in-sustaining costs do take into account development. And we are investing significantly in the development of our assets, especially around K4, where we're seeing a ramp-up in development at those assets during the course of this year. So ORD costs do feature. And then I think the final one, which you touched on, yes, the benefits of the restructuring are considered in those cost forecasts. Importantly, of course, in this year, there are some one-off costs that do come with that restructuring that we had to incur, and that gets built in.

So that $750 million benefit that we referred to is the annualized benefit we'll see going forward. But that does need to be offset this year with some of the one-off costs with the restructuring. So overall, our base number was, in fact, still you know below or very close to inflation in terms of what we're looking at.

Operator (participant)

That, Adrian Hammond of SBG, please come ahead.

Adrian Hammond (Analyst)

Good day, everyone. Question for Charles, just a bit more understanding about your balance sheet, please. I would like to know what your working capital needs are for the entire business, so could you clarify what debt facilities you have, including the U.S. dollar RCF, and what you've drawn down of that? And then in terms of your covenants, it's quite obvious you're going to get close to that covenants by June.

What mechanisms do you have in place with your lenders regarding extension of those covenants, please? And then I think a bit I'd like to ask a question around the gold business. A massive free cash flow loss of ZAR 10 billion in 2H. How how how do you get there? I just want to understand what's happening within that business. And then on Stillwater, the cost that you've given us, is that a that IRA credit included in that stipulated cost? And if so, how much? Thank you.

Charl Keyter (CFO)

Yeah, thank you, Adrian. And and obviously, I'll start. I just missed your first question. Sorry, there was just a slight dip on my side. It was something on the balance sheet. Would you just mind repeating that? Yep, of course.

Adrian Hammond (Analyst)

Sure. Just so your working capital needs, how much cash you need at all times, and then on the debt facilities.

Charl Keyter (CFO)

Yeah, so Adrian, our financial policy is to have liquidity or working capital for the business of two months of you know operating expenditure plus CapEx. So you know if you look at our liquidity headroom sitting at ZAR 50 billion, that's probably between five and six times or five and six months of operating cost and CapEx. So you know but on the numbers is two months. So you know just working back from that, it's probably in the order of about ZAR 20 billion. You know that would be a safe number. In terms of facilities, we've got two facilities. We've got the $1 billion revolving credit facility. That was fully undrawn, so we've utilized zero of that facility. And then we've got the ZAR 5.5 billion facility. And at year-end, that was drawn ZAR 4 billion.

That was mainly due to timing of payments. You know, we have an early closure in December, which does bring that working capital need you know earlier. Those payments would normally either flow month-end or immediately after month-end. So and then we also at any one time have available facilities, which are uncommitted lines, you know overnight facilities, roughly about ZAR 1 billion-ZAR 1.5 billion. So we also have the ability to utilize those. On the covenant side, our covenants are, I think the two main ones are the leverage covenant, which is 2.5 times net debt to EBITDA, and then the interest coverage one, which is EBITDA divided by our net finance charges. And there we have to exceed four times.

So, Adrian, I mean, running the numbers and assuming that these prices stay where they are, we are probably getting to a number that starts with a 2 by year-end. But as Neal said, you know for that reason, that is why we are looking. And that assumes we run the business full tilt, spend all the CapEx, you know do everything that's required. That's without pulling any levers. You know, we know we have the ability to flex certain elements within CapEx. So that's a big lever that we can pull. But you know we are looking at what are the other forms of you know bridging that covenant. So yeah, you know as I said, we've been here previously. And you know we'll definitely make sure that we don't go into breach.

But it's a number we'll continue to keep an eye on. But you know I think probably by our August results, we'd be in a much better position to say you know how the world has moved on, and then we can provide you with an update and the planning accordingly.

Adrian Hammond (Analyst)

Sure, thanks. Just on the 45X.

Neal Froneman (CEO)

Oh, sorry, go ahead, Charles.

Charles Carter (Chief Regional Officer)

Yeah, sorry, Neal, just on the 45X credit, we've made no assumption of that credit in the guidance we've given for the cost range for the year. So we'll we're lobbying hard to try and get that credit. If that comes through, that's an opportunity, but it's not in the guidance.

Adrian Hammond (Analyst)

Okay, cool. Yeah. And then on the gold.

Neal Froneman (CEO)

Yeah, that's where I was going. Adrian, Charles, can you just comment on the free cash flow from gold? Adrian, maybe you just want to ask it again.

Adrian Hammond (Analyst)

Pick that one up. Sure. I'm just a bit confused about the large loss in 2H.

Charl Keyter (CFO)

Neal, do you want me to pick that up? Yeah. Oh,

Neal Froneman (CEO)

yes. Are you or Charles? Yep. Let me.

Charl Keyter (CFO)

Thanks, thanks Adrian. Yeah, look, I think in the second half of the year last year, we had those two significant events that I mentioned. So in July, we obviously had the incident at the K4 shaft, and we had the fire at Driefontein. So effectively, what it meant for H2 was that we carried the full costs of K4. That restructuring was only completed in December, but essentially carried pretty much the full costs of that shaft for six months without any revenue. And at D5, we carried the full costs for a quarter and then ramped up during the fourth quarter.

So production was significantly lower. In total, the impact from each of those, Driefontein 5 was just over 900 kilos of gold that we didn't produce, so basically lost revenue. And at Kloof 4, it was also just under a tonne of gold that we lost there. So I think that drives the major discrepancy with those two incidents I referred to earlier in the presentation.

Adrian Hammond (Analyst)

It just seems larger than what you're saying. But if I can then just ask Neal a question. Neal, you're sitting on one of the significant uranium resources. What would it take to monetize that in terms of bringing it to market?

Neal Froneman (CEO)

Yeah. So Adrian, and again, Richard, stay online if I can put it that way. Adrian, we've been working for some years on how do we monetize the uranium assets that we have.

You know, the Cooke dump is a spectacular asset that is the primary reason we actually acquired Cook, not for the gold business. So we've explored many options. It's been difficult not being able to process the Cooke dump until more recently with DRD having now announced that the regional tailings facility has been approved. So you now have a way of reprocessing that dump. I think in line with protecting the balance sheet and being careful in terms of where we spend money, and what I can say is we're not going to bring these assets to account using our own balance sheet. Richard has had a lot of inbound calls. We've got a couple of ideas we can't really share with you now.

We will make a decision over the next probably quarter, two quarters on exactly how we're going to take that initiative forward to realize value. It's probably not going to be, let's say, instantaneous cash. There's probably a better scenario of realizing the value for those assets by doing some smart things. Rich, I don't know if you want to add to that.

Richard Stewart (Chief Regional Officer)

Neal, thanks. I think you've covered the key aspects. I mean, your point on the DRD unlocking it through the deposition, that was always one of the problems with that project. So that's really been solved for now. You know, just to add it, the Cooke Dam itself is really a co-product project. It's got a significant amount of gold. So of course, there we've got the relationships with DRD.

And as Neal says, I think we've got several opportunities to look at how we can optimize value with that through that asset with partnerships. I think some of the other uranium assets are not assets that we would look to develop ourselves, but they certainly may have opportunity within broader strategies and groups. And we are engaging with various parties to explore what could be possible there. So Adrian, yep, is receiving attention, but have to give more detail in the future. Thanks.

Neal Froneman (CEO)

If I can just come in quickly, Adrian, I'll give you a we'll talk offline on the cash flow issue, but if you look in the book, under the cash flow table, there is an explanation and a big amount, a big part of that ZAR 10 billion you mentioned is due to intercompany working capital accounts payable.

So it's actually money flowing from the gold operations to the SA PGM operations. It happens every period, and there is an explanation, albeit a bit confusing, underneath the table, but we can cover it offline if you wish. And then I just wanted to add, in addition to what Richard said about the costs at the SA PGM operations, in 2020 or last year, we guided for all-in sustaining costs from the SA PGM operations of $20,800-$21,800 per ounce. And this year, it's $21,800-$22,500 per ounce. So that's only a 5% and 3% respective increase in costs year-on-year in the guidance. And actually, we came in, if you look on the front page, the actual all-in sustaining costs came in well below the $28,000 bottom of the range that we indicated, coming in at $20,054.

So yeah, as Richard said, it's a bit complicated due to by-product credit movements. Can we take the next call?

Operator (participant)

Thank you. The next question comes from Raj Ray of BMO Capital Markets.

Raj Ray (Analyst)

Thank you, operator. Good afternoon, Neal and team. My first question is a follow-up on that Adrian asked on the gold operations. I mean, your all-in sustaining cost is sitting around at $2,000 an ounce. Is there even a possibility to get it closer to 1,600 or lower? Because remember, two years ago, we were presented with this plan to get the cost down. It seems to be pretty sticky around the 2,000. So we can talk to that. And my I've got three other questions related to your battery metals portfolio. One, Keliber, the depending on that delay, how does it impact your CapEx?

Second, on Sandouville, is there a timeline, like tentative timeline on when you make a decision? Because we're looking at losing ZAR 70 million in EBITDA. That was last year. We don't know what this year is going to look like. And then third, on New Century, the flooding event last year seems to have repeated this year as well. What steps has the company taken to manage the operations around that? Thank you.

Neal Froneman (CEO)

Yeah, thanks, Raj, and good morning. So I'm going to ask my chief regional officers to step up and talk about the lowering of cost in gold. Mika, why don't you start with Keliber and Sandouville? And then Rob, if you could come in on New Century and what you've done to, let's say, protect the assets against these extreme weather events. Mika, if you wouldn't mind starting.

Mika Seitovirta (Chief Regional Officer)

Thank you, Neal, and thanks for the questions. If I start from Sandouville, first of all, we are doing a lot of work in order to reduce the losses at Sandouville, and we can do a lot of things there. So we are moving forward. However, I want to emphasize that what we have said is that as an outcome from our strategic review, so as Sandouville is not going to be profitable enough for us with the current business model. So therefore, we are doing now the feasibility study. The timeline is a good question, but it's a little bit too early to give you a timeline. I'm absolutely sure that we can give the timeline of the transition when the feasibility study and the transition plan are ready. And that's going to be later on this year.

Then we can also say that the transition will take this time and then the ramp-up of production, provided that it's as encouraging as the scoping study results have been. So that will come later on. Then obviously, we can also tell to you much precise numbers concerning the CapEx demanded and also the profitability numbers and the returns on that potential investment. Concerning Keliber, we need to remember that as it is today, so most of the CapEx is already either used or committed at this stage. We are constructing in three different places. So that means that the work goes on. We shouldn't have too high expectations that there are possibly a lot of CapEx that can be reduced or cash outflows that can be reduced.

Now, having said that, we say also that we are assessing the full impact, if any, of these new permitting decisions. And we will come back to you and update the market as we are a little bit more advanced in that work. It came so recently, the court ruling, that we still need to do our homework first. Thank you.

James Wellsted (EVP)

Rob, will you go ahead on New Century?

Robert Niekerk (Chief tecnical and Innovation Officer)

No, I will do that. And hello, Raj. I would like to say that the flooding we had last year at New Century is very, very different to the, albeit difficult, start we've had this year. You know, last year, we had a flood which took our operations out totally for about 21 days, and it took almost a full month to recover from that flooding event.

At the same time, a lot of the infrastructure at the Century operations were damaged. This year, we have had excessive rainfall in January. We've had excessive rainfall in February as well. So the start of the year has not been pleasant at all. Having said that, you know, the terrain and the infrastructure has not been damaged nearly to the same extent as what it was last year. And I am able to report that we are up and running again. And like I say, we didn't go and use 21 full days of production the first two months of this year. We did put a lot of, call it, anti-flood mechanisms in place. We put additional pumping capacity in place. We put additional pit access in place.

We made it possible to protect the water required for the operations and the infrastructure to dewater flooded operations a lot easier than what it was at the same time last year. Raj, so I hope that answers your question.

Neal Froneman (CEO)

Perfect. Thanks. Thank you. Thanks, Robert. Richard, if you can answer Raj's question on the stickiness of the gold costs.

Richard Stewart (Chief Regional Officer)

Raj, thanks, Ben. And yeah, let me comment on it like this. I think so firstly, listen, I don't think that these operations, we're targeting a cost at the moment of close to ZAR 1,600. I think what we're really looking at getting down to is probably closer to about ZAR 1,800 at the moment. Let me say that the first one of the first issues that we've got to get right in gold, we've had a couple of years with real disruptions.

So we had a strike impact in 2022. Last year, we had the two significant incidents, as I've described, at K4 and D5. All of those incidents, besides losing production, which obviously ups units' costs, comes with their own costs and build up again. So so getting stable production is one of the first keys to to ultimately being able to manage your costs. I'd then say we've got a few levers that we are still looking at at pulling to to get the cost down in gold. The one that I did describe earlier was energy. You know, energy costs at the moment in gold is our second highest single cost after our employees. And that is going up above inflation. That's been a big driver of the costs over the year that's driven some of the stickiness you've referred to.

You know, with incoming some of our own energy sources, as I say, that should benefit some of that. I think the second big lever that we are looking to pull is you would have seen that the restructuring that we've done so far has really been on an operational basis. So we've been addressing loss-making operations, restructuring those, and operations that are coming to the end of the life, closing those. Clearly, with a slightly smaller operating base through that restructuring, we are also looking at how we can optimize our central and support services to those operations, which would reduce ultimately allocated costs and overhead costs that those operations are currently carrying. So that's a lever we're pulling.

And then I think the final one, where gold carries quite a significant cost relative to most, is on old care and maintenance assets, where we have been battling to get closure of those assets for various regulatory and other reasons. And those costs continue to be carried by the gold ops. There again, we do have a strategy to address those costs over the next year and two years and get those down. And that should again benefit the bottom line. So, Raj, I hope that helps. As I say, at the moment, I think sort of ZAR 1,800 is what we have in our sights. So it's clearly not what we've guided to. Those are plans that we have this year that we'd like to implement to get that down there. Thanks. Thanks, Richard. That's it from me.

Operator (participant)

Thank you. Thank you. The next question comes from Nkateko Mutunze of Investec. Please go ahead. Nkateko, your line is open. You can ask your question. Not getting a response. Going on to the next question, which comes from Arnold van Graan of Nedbank. Please go ahead.

Arnold Graan (Analyst)

Yes, good afternoon, Neal. Yeah, I've got an overall question. So you've been very clear on your strategy and your outlook for commodity prices. But you know looking at your your asset base, you know you've got lots of different assets, different commodities, different jurisdictions, different like life cycles, capital needs, and and nuances, as we've heard from a lot of the questions on the call already. So so for me, it seems as the business is becoming large and unwieldy, especially in a in a down cycle environment.

So do you believe that the business is still fit for purpose in the current environment? And can you effectively manage it in this environment? And where I'm coming from is you know you've got some smaller assets that cause lots of attention, lots of management time. So generally, when you see this in companies, they tend to move away from this, move away from these large unwieldy asset bases. And you have added quite a few of these over the last couple of years. So maybe just comment on how you plan to deal with this, especially in this environment. I guess it's much easier in a higher metal price environment. Yeah, that's it from me. Thanks, Neal.

Neal Froneman (CEO)

Yeah. Thanks. Thanks, Arnold. And that's a good question.

And it's really a question that is best answered through the strategy that we're pursuing. And remember, we have been pivoting into a producer of green metals, which we've done off a substantial base of PGMs. But the combination of PGMs and let's call it other green metals, which in this case, we have direct investments in nickel and lithium, you know some in copper now, are all part of that pivot. Now, again, you've got to go back to strategically, what is the purpose? Well, the purpose of our business is to safeguard global sustainability through our metals. And I dare say that is playing out very well for us. It doesn't mean it's easy. And as you quite rightly point out, in economic downturns, it becomes more challenging.

But having a purpose like that, having the base of metals that we have and being able to expand into the ecosystems that we identified early on are proving very actually helpful and constructive. Our relationship in both the European Union and the U.S. is at the highest levels. And we get good advocacy both from the U.S. and the E.U. And we certainly are seen as part of the solution. That doesn't help the pivot or your specific concern. But if you believe in your strategy, you continue with that, but you cut your cloth to suit, which is exactly what we've been doing. And yes, there might be some smaller assets, but they are smaller assets that are building blocks in terms of growing, let's call it, that portfolio.

But also, as I explained in the presentation, it's also about three operating legs: primary mining, which is normally of very significant scale. You know, so that's you know hard rock, underground, and open-pit mining. The secondary mining is a business where you might say we have some small you know some small challenging operations, but they are, again, building blocks of expanding the tailings retreatment business. And you know we're not the only ones doing that. I think you've seen both Glencore and Rio start moving into that environment. And where we are probably, together with some other major mining houses, at the leading edges on the recycling or the urban mining. And that's off the base of autocatalyst recycling and building the urban mining recycling leg.

And that we're able to do in small bite-sized chunks, and it is somewhat countercyclical. So that's the strategy. And the strategy remains very much intact and very much informed by the external environment and the gray elephants that we refer to now. In terms of being unwieldy, I think the new structure that we implemented about two years back and regionalized the business has worked very well. And certainly, I think internally, we don't find it unwieldy. I think you should have seen today, we have Chief Regional Officers that are totally on top of their regions and their assets. So I think from a group perspective, again, it's really managing this pivot. But we are a modern mining company.

We are not going to become dinosaurs in the mining industry and revert back to what is traditional. The world is changing, and we're changing with it. So Arnold, probably no comfort for you, but it's being managed, and it has been well thought through from a strategic perspective. Thanks, Neal. Listen, we're pushing over time. So I think just one last question. We have had quite a few questions about uranium, how we're going to unlock value from our uranium assets given the current boom in the prices. So maybe if you've got a final comment on that, and then I think we'll have to close the lines. Yeah, I'm not sure we can add much more other than you know uranium is something that I certainly understand well. And in fact, a lot of my team was part of the Uranium One experience.

So we've got the knowledge. We like uranium. We've consciously held uranium assets. We have been in the background working on what is the best way to realize value. It is part of the green metals portfolio. But under these circumstances, it is most likely going to be brought to account utilizing more appropriate structures and certainly not our balance sheet. We're in a very good position with uranium production available in the short term and relatively quickly. And it's not complex compared to many other projects in the rest of the world. So I can really only summarize and repeat, James, what we've said. There's a lot of hype, and be careful, a hype in the uranium market. It's a bubble that can burst.

I would suggest that there's more solid fundamentals underpinning the uranium market at this stage. These things can turn very quickly. I'll leave it at that. Thanks, James.

James Wellsted (EVP)

Thank you. And if there are any more questions, please direct them to the Investor Relations team by email, and we'll follow up online. Thank you very much for attending the presentation today, and have a good evening and a good day.