Sibanye Stillwater Limited (SBSW) Q4 2022 Earnings Call Transcript

Start Time: 08:00 January 1, 0000 9:54 AM ET

Sibanye Stillwater Limited (NYSE:SBSW)

Q4 2022 Earnings Conference Call

February 28, 2023, 08:00 AM ET

Company Participants

Neal Froneman - CEO

Charl Keyter - CFO

Richard Stewart - Chief Regional Officer, Southern Africa

Charles Carter - Chief Regional Officer, Americas

Grant Stuart - Head, Recycling

Mika Seitovirta - Chief Regional Officer, Europe

James Wellsted - EVP, IR and Corporate Affairs

Conference Call Participants

Chris Nicholson - RMB Morgan Stanley

Adrian Hammond - SBG Securities

Richard Hatch - Berenberg

Operator

Greetings, everybody, and good afternoon. Good morning. Not sure what time zones everyone is in, but a warm welcome to our Year End Results Presentation for the year ended December 31, 2022. You will note from the subtitle, we've called this a decade of shared value. And that is because we've just had our 10th anniversary.

And we see this as a decade of having shared significant value with our stakeholders and our shareholders. And then, of course, the balance of that subtitle, we’re well positioned for future value creation. And I'm sure you will see that as we proceed through this presentation. Please take note of the Safe Harbor statement. There are forward-looking statements in this presentation.

I'm going to proceed with the first part and I will wrap up the event at the end after having invited other colleagues to join. Let me pick up on the salient features for the second half of 2022 and the year end 2022. Very pleasingly, I can really be proud of the achievement around safety. We continue to show very substantial improvements in all safety indicators with a fatal injury frequency rate having improved by 75%. Yes, 75% from 0.133 for 2021 to 0.033 for 2022. It's our best performance ever and it's something that we as a team are very proud of.

As I mentioned in the beginning, this is our 10th anniversary. It's been a remarkable journey of evolution and growth, resulting in us having established a more sustainable business, which is currently pivoting to remain relevant due to the ever changing environment we found ourselves in. And of course, we will remain relevant in the future as well.

We’re in a robust financial position. We generated positive free cash flow. Our net debt -- correction, sorry, our net cash to adjusted EBITDA remained at 0.14x, something we're very pleased about. We did declare final dividend of 122 South African cents per share or 26.98 U.S. cents per ADR that amounted to R3.45 billion or $191 million. We have retained our industry leading 6% dividend yield and the total dividends for the year amounted to R7.37 billion or $421 million. Again, we are pleased about that.

As you would know, we've had a number of significant disruptions or events this year. Very pleased to say that our operations, all of them are well positioned to perform in 2023. We achieved inflation-linked three-year wage settlements in our gold business that was after having to take or implement a three-month lockup. We have closed down some loss making areas of our business, Beatrix 4 shaft in particular, and the KP1 processing plant that is always a disruptive process and the Section 189 is now complete. And therefore we can confidently say that we have stabilized production and gold should be well positioned to contribute significantly during 2023.

Our South African PGM business remained a solid performer. We used our firm position in the gold wage negotiations that is to achieve an inflation-linked five-year wage agreement for Rustenburg and Marikana. That was a significant achievement in its own right. All-in sustaining costs came in at just over R19,000 per 4E ounce or in equivalent U.S. dollar terms $1,180 per ounce, that's 14% higher, but that's predominantly due to reduced volumes as a result of load shedding and cable theft.

And I think our cost performance was an outstanding feature of this year. And I do believe all our operations are going to continue to move down the cost curve. We’re still enjoying, as you can see from the last sentence there, more than a 50% adjusted EBITDA margin. Our South African PGM business remains in a really robust position. Our U.S. PGM division was impacted by extreme weather events. We also proceeded to restructure or reposition that business unit during the year. We did announce that.

We've de-risked, we've taken account of changing macroeconomic factors. And of course, we've positioned with increased flexibility by increasing the amount of development. So it's well positioned for the challenges that we all know about in the U.S. at the moment, lack of skills, ability to attract and retain people, workers. And of course, in the longer term, we do believe the palladium price will continue to weaken as ICE engines become less relevant, but I will say more about that further on in the presentation.

The repositioned business post a few years of increased development will grow to about 700,000 2E ounces and most importantly, at a cost structure of less than $1,000 per 2E ounce. And that's targeted by 2027. We received and provided the green light for Keliber based on the receival of new permits, and Mika will talk you through that. Very important to note that the revised capital cost of this project, which should take into account just about all the recent inflationary increases, and that amounted to €588 million capital costs. A large portion of that has already been funded through the equity infusion that we have put in through the acquisition of a majority stake in Keliber, so small transaction for us.

Our Sandouville nickel refinery, and I'll remind you that we never bought Sandouville for what it is. We bought it for what we're going to make it into, and that is a battery precursor nickel sulfate refinery. It's also going to form a base for our PGM recycling and battery recycling business in Europe. But Sandouville continues to be recapitalized. We've bolstered our management team. And I think we've got a few more quarters of heavy lifting. But post that, Sandouville should be a significant contributor to our business as well.

As I said, we are very proud of what we've achieved in health and safety. And we've moved really constructively along our safe production journey. And I'd like to just go through some individual safety results that are important to us. If we compare 2022 to 2021, we saw a 23% improvement in serious injury frequency rate. We saw a 27% improvement in lost time injury frequency rate. We saw a 29% improvement in total recordable injury frequency rate. We saw significant reduction in fatal incidents due to our focus on the fatal elimination plan. Having said that, despite our efforts, we still had five fatalities, which is clearly five fatalities too many. But it's the lowest annual number recorded in our history.

There's some interesting graphs. And as a large employer, you can see how workforce has climbed as we've grown this business from 36,000 to 85,000 employees, very pleasingly with even despite the growth in the number of employees been able to bring down and improve our safety record. Now that was done, if you move to the right-hand side of the -- at the top of the slide, that was done on the basis what I presented last year and that is we brought in an independent person to conduct a safety review.

And essentially, our safety strategy was endorsed. But there was a need identified to operationalise and institutionalise the commitment, and the responsibility for safety throughout line management. There was good ownership of our safety protocols and philosophies at the top, but we felt that it became weaker as we went lower down our operation. And of course, that has all changed.

There's been a focus on real risk reduction, and we've made good advances there. And if you look at the TRIFR frequency rate, you can see also how it’s come down from 2020 from 6.69 to 5.07 in 2022. We remain absolutely committed and passionate about safety. And we intend to compete with our ICMM peers who many of them don't run underground mining businesses. We do intend to compete with them on that basis as well.

Moving on, as I said, we've just recently celebrated our first 10 years as a business. We celebrated that by opening training on the JSE literally a week ago. You can see the management team enjoying that event. But let's have a look at some of the events that have led up to us being around for this 10 years and certainly we intend to be very relevant in the next 10 and 20 years as well.

We have built a business off the base of gold. I'm not going to go through this in detail. We've entered the PGM business. Early on, we focused on getting into tail injury treatment, PGM recycling. We build a very solid base in circular economy. And once having established ourselves as a leading PGM producer, we moved into the activities of building a portfolio of battery metals as well.

Both the move into PGMs and into battery metals was preceded by very significant amounts of planning. And the move into battery metals was preceded by acquiring SFA Oxford as a leading thought provider in both PGMs and battery metals. We've built up our battery metal portfolio. And more recently, you would have seen us taking control of New Century resources, which at the moment produces the greenest zinc in the world. That's our portfolio. We will be adding more sigmoid curves. But this is really about looking at the last 10 years.

When you look at it on a map, we have become global. You can see we built up this unique green portfolio with a combination of PGMs, battery metals underpinned by gold as an insurance policy. And you can see that we are positioning ourselves in very specific ecosystems from a battery metals perspective in both North America and in Europe, and our growth in those regions will continue. Very pleased to say that the strategy is underpinned by a very solid mineral reserve and resource base. You can see for the first time we've declared lithium and zinc reserves. They are outlined in the table. I'm not going to go through the numbers in detail. And you can see that combined with both uranium and copper.

If you look at our mineral reserve pie chart, a very significant mineral reserve of just over 70 million ounces. The resource that underpins that is just under 390 million ounces and you can see the split between the different geographies and the different commodities. What that translates into in my mind is very important for investors and stakeholders to understand. If you look at the life of mine portfolios based on these reserves, you can see these -- our operations have a significant life of mine. And I want to go through them.

In the South African PGM business; Kroondal 15 years, Rustenburg 29 years, Marikana and this excludes K4 19 years. If you look at K4 on its own, 49 years; Mimosa, excluding North Hill, 13 years; North Hill on its own 24 years; our surface resources at Rustenburg and Marikana, both three years. Moving to the U.S. Stillwater, 31 years; East Boulder 42 years. These are world class assets. Our South African gold business, which when unbundled 10 years ago literally only had five years of life.

Remarkably, Beatrix still has four years; Driefontein has 10 years; Kloof has 10 years; Burnstone 22 years; our surface resources, depending on economics, one to three years; DRDGOLD, in which we have just over 50% interest, 20 years. When you start looking at our battery metal lithium reserves, Keliber has a 16-year life of mine. We know that's the first phase. So it's going to be significantly longer than that. We are very, very proud and these are solid underpins for sustainability of our business.

When we look at earnings, we know it's been a year of disruptions. We had the gold industrial action. We were closed in the U.S. for seven weeks based on an extreme weather event in the Montana region. Yet, we produced our third highest adjusted EBITDA for the period and reviewing this graph. Again, solid financial performance despite significant disruption, so that's pleasing. When we normalize 2023, I think you can all look forward to a much improved adjusted EBITDA profile as long as commodity prices and macroeconomics remain as they are today.

Importantly, if you look at our net cash to adjusted EBITDA, it remained constant. We remain in a net cash position. And this already underpins a very solid balance sheet and something that, again, has taken a lot of work to retain and maintain. When we talk about shared value, we are very proud of how our shared value has grown. If you look at our revenue, there's a 790% increase in revenue from 2013 to 2021, a 326% increase in salaries and benefits. That's all value that goes to our employees and stakeholders. 110% increase in socio-economic development. Again, that's for the upliftment of the community.

So if we look at 2021 on the right-hand side of the slide, we have just under 85,000 employees. We paid 26 billion in salaries and benefits, R2.2 billion invested in socio-economic development, R17.9 billion paid to the South African fiscus in taxes and royalties, R969 million invested in training and development, R1.4 million paid over the last two years, 2021 and 2022 to approximately 46,000 beneficiaries in the form of dividends and other employee share option scheme payments. There is no doubt that when we celebrate 10 years, we celebrate 10 years of sharing value with all our stakeholders. And the bottom line is we are a force for good.

In terms of this audience, I'm again pleased to show that a year later we still have provided leading total shareholder returns versus our peers listed in this growth since listing in 2013. And again, this is a combination of total shareholder returns. So it's capital growth, it’s dividends and it’s market buybacks included in this graph. And, again, it's something we are very proud and pleased with.

Just to talk a little bit about strategy. Being as successful as these graphs and this presentation demonstrates, it's important not to lose your foundation. We've developed a 3D strategy. Our foundation is similar to what it's always been, but it recognizes a slightly revised purpose and vision. But it's not a radical departure from where we've been. Our values now include innovation, and they have to include innovation if we're going to achieve our strategic differentiators on the right side of this graph, and I'll come to those now.

What is of critical importance to us and our primary focus as a company, it is delivering on the strategic essentials and let me go through them. We started this presentation with safety and wellbeing, prospering in every region in which we operate. And there's lots of good stories that I went through in terms of shared value.

Operational excellence and optimizing long-term resource value. When we talk about our cost profile and moving down the cost curve, that's operational excellence. The very substantial life of mine that underpins this business is long-term resource spending. Being profitable. I went through our earnings. Despite events beyond our control, we delivered very significant earnings. And then embedding ESG as the way we do business. Those are essentials, those are not negotiable, those are essentials and is our primary focus as an executive.

Now what will differentiate us is listed on the right-hand side of that slide. Being recognized as a force for good. I covered that in the discussion on shared value for stakeholders. Building this unique global portfolio of green metals and energy solutions that will contribute to the reversal of climate change is a very significant underpin to our purpose.

Being inclusive, diverse and bionic is going to differentiate us in terms of the people that work in our business. They produce the results. It's all about the people. And then we use and we turn pandemic-resilient ecosystems as something that is an opportunity, not a challenge. When that challenge happens, we turn it into being pandemic-resilient. And we talk about being anti-fragile. So those are our strategic differentiators and they will underpin our thinking and the way we work and develop going forward.

We're creating a unique portfolio of green metals. As I've said, we've got gold which underpin the start of this company. It's an insurance policy. When macroeconomics all go pear shaped [ph], gold will be the last of value and it's important to us. That's a good metal and a good commodity, and it's good to have it in the portfolio of metals. Recycling tailings retreatment underpin our circular economy profile. The battery metals, and there's more of them, are listed at the top. And then, of course, being a leader in PGMs provides this unique combination of green metals that are going to reverse and be important for climate change.

As I've been saying, we've established a very significant presence in the circular economy. The first step in that was through DRDGOLD. DRDGOLD is a global leader in mine tailings reprocessing, produces some of the green gold in the world. It's a sound investment for the group but also removing environmental legacies of South African gold mining. And that's through the clearing of hundreds of hectares and restoring land back to its original profile and developing it or providing it for redevelopment.

Our U.S. PGM recycling business is one of the largest global PGM recycling businesses in North America. And to put it in perspective, recycling emits 6x less tons of carbon dioxide, 63x less water, and it generates 90x less waste than underground mines. And again, I would say this produces some of the greenest PGMs in the world.

New Century in Australia, where we've just taken a controlling position, is a leading Australian mine tailings management and economic rehabilitation company that produces the green zinc in the world by reprocessing legacy base metal tailings. And again, it makes a positive contribution to the environment. So very pleased and very proud of our growing presence in the circular economy.

I just wanted to talk a little bit about the markets and always qualify what we say about the markets. We are not experts in the markets. I think we've got a good feel for what's happening with all our links into the various parts of the PGM, gold and battery electric vehicle markets. But we have since conducted further research through SFA, and we all know that every time you open a new report on battery electric vehicles, the analysts have increased the projected penetration rate for battery electric vehicles.

Sibanye-Stillwater for some time we've been saying these penetration rates are overstated. I said them at last year's year end results. And I'll say them again at this one. These penetration rates are overstated, and I'm going to show you why. So if you look at the graph on the right-hand side, you can see that we have assessed projects from what are existing mines, what can recycling do and we just looking at lithium here, what is probable projects, what are low risk possible projects, what are medium risk possible projects and what are high risk projects?

And if we include all those, there is still a shortfall of 3.5 million battery electric vehicles that are not going to have significant -- they're not going to have sufficient or any lithium for the batteries. When you look at this, 64% of BEVs are at risk by 2030 of not having sufficient battery metals. And in this case, it's lithium for the batteries, which says to me there is going to be less battery electric vehicles. Now that doesn't mean it's not a good part of the economy to be involved in.

But what it does do and that's reflected in this graph which now shows the combination of gasoline fuel cell and diesel engines that are going to make up the global car park, what the previous graph is implying is that the long-term future of internal combustion engines is actually a reality and internal combustion engines are going to be around longer. And there's an assumption made when analysts look at penetration rates, I'm not sure that they look at technological advances that are going to take place with internal combustion engines such as sustainable fuels and so on.

The bottom line is Sibanye-Stillwater having a foot in the water or in the markets, both on the battery electric vehicle side and on the internal combustion engine side through PGMs, we're very well positioned. And of course, the hydrogen economy underpins the future energy requirements through PGMs as well. So our business is very well positioned. There will be growth in battery electric vehicles, perhaps not as much as being promoted and the perception that internal combustion engines are coming to their end relatively quickly now is also incorrect. So we believe we have a sustainable business both in PGMs and in the battery metals.

So with that, I'm going to now hand over to the operational team consisting of Richard Stewart in South Africa, Charles Carter in the Americas, Grant Stuart as the Head of Recycling, and Mika Seitovirta in the European region. So over to you, Richard. Thank you.

Richard Stewart

Thank you very much, Neal, and good afternoon and good morning, ladies and gentleman. As we talk through the operating results of the Southern African region, they were certainly two impacts that significantly hit our business last year. One, of course, is the ongoing failure of Eskom and the significant load curtailment that impacted not only us, but the entire industry. We saw significant impact on not only the levels but also the duration of load curtailment during the last four months of last year.

As a business, we've become quite accustomed to being able to manage the load curtailment well historically, and it hasn't had a significant impact on our revenue line. And this has largely been managed through a working capital approach, whereby we keep our key operations and rock breaking going. And through a stockpiling strategy, we are able to process that ore during off periods and holiday periods. Unfortunately with a significant increase that we saw during the last four months of last year, this became difficult to maintain and did start having a direct impact. That impact was small over the course of the whole of the year at our gold operations, we lost 38 kilograms. But I think importantly that 38 kilograms was lost as a result for the first time having to actually stop shafts for a few shuts.

At our PGM operations, we suffered a loss of just under 23,000 ounces. And that was despite having spare processing capacity where we were able to completely catch up the stockpiles that we had over the December period. I think what is increasingly concerning is the forecast for 2023. If we take into account what we saw in the last four months of last year, what we've seen in the first two months of this year, and forecasts are continually decreasing energy availability factor from Eskom, that actually paints quite a dire picture for 2023, particularly during the winter months of this year. And if that forecast comes to fruition, we estimate that it could impact as much as 15% of total production output in our operations and in the South African industry in general.

I think importantly to recognize that as the levels and the duration of curtailment goes up, the potential impact on production goes up exponentially because your ability to manage those working capital and stockpiles significantly decreases. This unfortunately has some significant unintended consequences, not just for the industry but for the country as a whole. Using revenue on our shafts will impact government's ability to earn revenue through taxes and royalties. And this is the exact revenue they require in order to address the challenges at Eskom.

Marginal shaft will become increasingly unprofitable, and this may force early closure of the shafts which will exacerbate the already dire job situation in the country. Of course, we understand the impact of our stakeholders downstream, smaller communities and suppliers to the company will be impacted. Ultimately, we are looking at a spiral here, which if not addressed will become significantly worse in the coming years.

The Minerals Council has indicated that the mining industry alone has a total of about 7.5 gigawatts of renewable projects that are currently in the pipeline. The only long-term solution to the load shedding and curtailment issue is firstly Eskom’s energy availability factor, getting their reliability back up, and secondly additional generation. While these renewable projects will significantly add to the generation capacity, that's not the ultimate solution for mining companies who still require a significant amount of base load. However, as stakeholders, we need to be working together to remove any red tape in order to get this additional generation online as quickly as possible. That has to be the single agenda for all stakeholders today.

When we move into looking at the gold business, gold last year was significantly disrupted by the industrial action we experienced in the second quarter of the year. And for the year as a whole, that pleasingly ramped up during the second half of the year with steady state levels being achieved during the fourth quarter. For the year as a whole, we produced 620,000 ounces of gold. And as I said, that normalized during the fourth quarter of the year.

All-in sustaining costs were of course negatively impacted by the much lower output levels. But I think very pleasing was the absolute cost control, both during the industrial action and during the subsequent ramp up period, where we managed to reduce our absolute costs by some R3 billion despite a very high inflationary environment. DRDGOLD produced 5% lower for the comparative period 2021 and they produced that at an all-in sustaining cost of about R800,000 a kilogram, some 20% higher, due to exceptionally high costs, specifically related to fuel, steel, ammonia and electricity.

I think pleasingly we did see a significant reduction in terms of the loss that was suffered. In H1, we had a R3.1 billion EBITDA loss directly as a result of the industrial action and that narrowed to R440 million during the second half of the year. Considering that the third quarter was still at the highly disruptive quarter, we were incurring full costs but only realizing a portion of our revenue. I think this business is well positioned for the upcoming year. Very tough decision was made towards the end of last year to look at a process to either restructure or close our KP1 plant and Beatrix 4 shaft, which have been loss making for an extended period of time.

And that process is due to complete in March of this year. I think those engagements have been constructive and a lot of effort undertaken to minimize the impact of forced retrenchment on employees. But certainly that will reposition us well in terms of the sustainability for the rest of the gold business as we move into 2023. Finally, Burnstone was also impacted by the industrial action. That project is in ramp up with a critical path being the development and ultimately that project has been delayed with first production from Burnstone now forecast for 2024.

Move on to the PGM operations. In addition to the load curtailment, the second factor that really impacted production this year was copper cable theft, particularly at our Marikana operations. There we saw almost a fourfold increase in the number of cable theft incidents from the first quarter to the fourth quarter that has now truly become highly organized syndicates that are participating in this cable theft and require a far more concerted multi-stakeholder effort to deal with this scourge.

Simunye shaft at Kroondal has been ramping down and reaching the end of its life. That shaft is planned to be closed during 2023. And Bathopele had a tough year last year as it mined through the Hexriver fault with both ground conditions and the extent of that fault were far more extensive than what we originally expected. It was, however, very pleasing that they got through the fault by the end of last year and managed to do so without a single serious injury.

We managed to process the stockpiles that had been built up over the December holidays but nevertheless, as mentioned earlier, lost just over 20,000 ounces of gold due to load curtailment. Particularly pleasing in PGMs, again, was the cost management. There in absolute terms we were able to contain our cost within inflation. That is despite the fact that mining PPI in South Africa was around 18% for last year, and largely as a result of the lower production, our unit cost did increase year-on-year but in absolute terms were very pleasing.

And this has seen us continue to move down the industry cost curves and our [indiscernible] will continue to do so as we move forward. PGM prices remained supportive over the year last year. And that equates to a very healthy 53% EBITDA margin for these operations, generating a total EBITDA of about R38 billion. I think we also look forward to 2023 where Rustenburg has now settled its earn out with Anglo Platinum which was associated with the acquisition of these assets. And from 2023 onwards, the full cash flows, 35% of which have historically been paid to Anglo Platinum will now accrue to the Rustenburg shareholders.

Just looking at the cost curves that have been published, and of course this has been published on our data and those companies that have reported, many still to report, I think very pleasing and we would expect to see our mechanized Kroondal operations in the first quartile. But equally pleasing is seeing Rustenburg solidly in the second quartile, given that these are predominantly conventional operations. As we see some of the benefits of the PSA transaction coming through, we would expect to see Rustenburg continue to move down the cost curve as some of these benefits are realized.

Marikana did have a tough year with the cable theft, as we mentioned, but also that is spending a significant amount of capital at the moment on K4. And as we see K4 ramping up and the benefit of that production coming through onto the bottom line and the capital coming off, we certainly look forward to the Marikana operations also comfortably making their way down into the second quartile. Stillwater as we know had a tough year, disruptions as a result of the flooding and a rebased plan. But as Charles will highlight to you, Stillwater is well set to continue down the cost curve as they ramp up to steady state on that new operational plan.

With that, I'll hand over to Charles to present the U.S. operations. Thank you.

Charles Carter

Thank you, Richard, and good morning and good afternoon to participants. I think you're all familiar with the research we did mid last year when we revised our plan and gave a series of presentations as to how we saw the medium-term and long-term optionality of the Stillwater ore bodies and all the work needed to reposition the business for long-term flexibility, cost management, and to do justice to a world class ore body.

And I think you're also all familiar with the fact that we had a significantly disrupted 2022 with flooding and other weather events. And we've had to manage the business accordingly in the short term, so obviously a frustrating 2022 year outcome. But I think the critical focus has to be on what we're doing to reposition this business long term. So you will have seen what we believe is a prudent response to the changing environment.

I think one that is impacting all the companies that you follow, and certainly us in Montana is a very tight U.S. labor market. So you have a 3.4% national unemployment rate and you have a 2.8% unemployment rate in Montana specifically. And so we've been battling that all year. And I'll talk both to the macro impacts and then what we're doing specifically to address that. But I think importantly, we've had to manage through the year significant employee turnover.

So average volume turnover has been 18% across the business in Montana in 2022. But much more importantly, when you go to specific job categories and key roles in the operations, you see 24% miner turnover, 20% mechanics turnover, 24% supervisory turnover, 25% geologist turnover, and 24% planner turnover. So that's not an issue that we’re complacent about, but it is a reality of our work environment both in mining in the U.S. right now and then on our two operations that have fairly remote access, long travel times and very limited housing options in proximity to the operations. And then where these skill sets are spoilt for choice on job opportunities both in mining and outside of mining, both in Montana and across the U.S., a very tough situation to manage. But I think we've started to get on the front foot on this, and I'll reflect on that in a moment.

So you've got a tough labor market. You've got skill shortages. You're having to pay up for skills. And importantly, you're having to adjust your work cycles, shift cycle times, and putting in various bonus incentives to both attract and retain for skills. And we've been doing all of that and we've been doing it with some success through the year and particularly as we hit late year. And as we go into this year, we feel like we are starting to get a handle on this with some good outcomes.

I think you would have also seen from our repositioning that we are positioning these assets through the commodity cycle. So right now we are enjoying very healthy pricing on the revenue side, and that's allowing us to do the difficult work we need to do to reposition while we've got that, that we’re repositioning with a view that over time, we will hit tougher price lines and we will have the flexibility to manage that accordingly. But in the short term, we have to do a lot of work to get that right.

So you're not seeing short-term gains on costs and you're seeing high inflation impacting the business. But we're doing the work needed to put in robust pricing structures, long-term skill sets, mine planning, and all of the support systems are being modernized with a view to a long-term flexible, high margin set of operations. You would have also seen from our presentation earlier, last year that we've cut growth capital. We think we've got the capital that we need for what we're doing, but we are spending a lot right now just on getting development flexibility right, and improving the overall developed state of the operations.

I think just to try and give a bit of context on that. It's important to understand at Stillwater West, we have limited flexibility currently. Our development ends in the depression zone and within the Stillwater East fourth zone. So we've got complex ground we are mining through. It doesn't have great grade. And it's given us a big focus on our mining methodology short term and what we have to do with that full complex ground conditions and variable grade. And so you've seen that in the reduced volumes and you've seen it in the reduced recoveries that we have to mine through these environments and position for the longer term where we start to get better grades, better continuity. And we can open up much more flexibility.

And so the focus right now is on definition drilling to assist mine design as we navigate this. We get through -- at Stillwater West, we get through that depression zone only in 2025. So we've -- just to manage expectations, we have a lot of work to do through this year and into next to get this right and we have no other option than to mine through it. And so you're going to see the lower volumes and you're going to see the higher cost structures while we do that.

The benefit of that is what gives us confidence around the volume, trade [ph] and cost improvements that you see in the medium term. Because when we -- through the depression zone, it's Stillwater West. We expect great improvement in the off-shaft East area. And we will lift production once we East of the Stillwater East fourth zone in 2026. We will also in that window have put in the engineering full underground that we've alerted you to and that's where the capital is in the next three years. And that really repositions the Stillwater East asset base for the kind of quality mining and the flexibility and the returns that we expect in the medium term.

I think what's also important on understanding what we navigating is we've had some good success. We've completed the 56 level all in on the Benbow decline, so we've opened up the significant footfall lateral [ph] that now needs to be drilled. And that's work that really takes us through this year into next. I think two to three years out, the benefit of that is you're going to start to see net reserve additions post depletion. So we're going to open up reserve optionality. And all of this is good for the medium to long term. But it's work that's costing us right now and it's work we have to do for the long-term benefit of these assets.

And then similarly at East Boulder, it's a slightly different set of conditions that constrain us through this year, but also give us flexibility further up. So at the moment, we navigating significant geological factors that have moved mining to the West at East Boulder, and here we've seen more and we have variable ore body continuity, and hence we have slightly lower grades than we are expecting. But we've put in a lot of short-term controls just to focus on quality of mining, controls on our ore body with sampling and our quality cleanouts.

And the factor that ties both the tight labor market, our recruitment strategies, and this kind of grade issue is the fact that we have a much younger geological workforce that we brought in now and that needs training and development on a very difficult ore body that is visually mapped each day by geologists on the face for the miner to exploit and needs quite a lot of training. But most of our face geologists have less than one year experience at the operation.

So a focus on training and development to focus on management controls and setting this up again for the medium to long term to get the right skill sets, processes and activities and behaviors in place to navigate to the medium term. So all of this is about a sustainable business long term. But just to manage expectations, lots of work to do through this year and into next to start to see the benefits.

Linked to that, we have a very strong focus on project interventions. So we call it Project 406 [ph] which is 52 different project managed focus areas that impact development, mining mix, equipment, procurement costs, HR, ESG, and safety, combined with a very strong innovation focus. And that gives us the confidence as well, together with the flexibility that we're opening up on these ore bodies over the next two to three years to believe that we can get our cost structures below $1,000 an ounce.

So on this slide you'll see that we've had a tough production and cost year in 2022 at the Montana operations. What this slide doesn't reflect on, and I think it's important to flag it, is we've had our best ever safety year. So that's reflected in the group results. And there's been a very strong focus on safety across all team members and with very strong outcomes. So we pleased with that. We've also had a good development here exactly on plan. So across the two operations, we've put in 44.9 kilometers of primary development in 2022 and 38.1 kilometers of secondary development.

And that really talks to the ore body flexibility in the medium term that we striving to open up. But in 2022 and also in 2023, you don't really see the development state seen the benefits of that that really comes a year or so out. But I think both on safety and on development, and development obviously quite costly in this market environment using contractors, that it's very much part of the spend we have to do right now to get the medium-term flexibility that will lift margins. 2022 obviously also heavily disrupted flood and other events that you're familiar with, and I've touched on the tight labor market and the kinds of inflation escalations that we're having to manage.

I think on the skills issues, it's important to note that we've put in interventions that are starting to bear fruit so we've piloted new shift rosters seven on, seven off to attract a more mobile, out of state workforce, and that's working alongside current shift cycles. We've put in recruitment and retention incentives. We’re working hard on solving for housing. And we’re starting to see the benefits of that. But it is a younger, more flexible workforce. And we've put in lots of training to ensure that we have the kind of continuity that will give us the productivity that we need. So all of that is starting to daylight [ph] green shoots and it tells us that if we work on the right things in the right way, we'll get the outcomes.

We also expect in this labor market to soften through the year. It doesn't make us complacent, but it means that people who've cycled out might start coming back. And certainly you'll see that in the next two to three years, I think. So on the labor side, I'm not unhappy with where we are. It is a tough environment, but it's a manageable one. And I think we’ve been quite innovative in how we work those challenges.

On things like the mechanic attrition, it's forced us short term to rely on contracting interventions alongside our mechanics and employment. So we've also had to draw OEM mechanics obviously at a higher cost. So on cost structures, short term you see the impacts from tight labor market by attrition rates through to better use of contracting, greater use of OEM on maintenance and mechanic skills and the like. So that gives us limited flexibility in Q1 now. But again, we believe we can apply the same sort of things that we've done on miner recruitment and retention to mechanics. And we’re busy working on that.

So through the year, I’m comfortable we will start to get back on the front foot on that, and that will help on the cost structures short term. All of this takes you to a caution about quarter-on-quarter expectation that we will see dramatic improvements. I'm trying to give you a strong sense that we've got a two to three-year game plan that's well in focus. It's starting to bear fruit. It's a slow grind to open up optionality and cost improvement. But the 406 interventions on procurement, equipment, on our maintenance strategy and the like will start to bear fruit through this year.

So I think we’re going to see a year ahead of us now where we targeting 500 to 530 odd answers and our cost structures are still going to be in the 1,400 to 1,500 range. But as we work the problems and open up flexibility, we start to daylight improvements both on the volume side and on the cost structure side coming into next year. But I think there's a really strong culture emerging at the operating level on buying into the medium-term to long-term strategy and the benefits of the current changes underway on systems and approaches to how we do things.

And I'm confident that we'll get an incremental improvement through this year, quarter-by-quarter hopefully. But it's not without its volatility and it's not without a challenging macro context that we have to really lift our game to address. All of this is about the long-term optionality and the quality of this ore body and doing justice to that, and being prepared to do the spend right now while we've got healthy prices to set us up for long-term value extraction.

So with that, let me hand off to Grant to talk about recycling and equally challenging context. Thank you.

Grant Stuart

Thanks, Charles, and good day to all. In 2021, recycled production was 755,000 ounces. Last year, that dropped to 600,000 ounces. And we believe that two key factors have really played into those declines. One, the market dynamics including Russia's invasion of Ukraine, rising inflation and sort of tightening financial conditions or financing conditions, and availability of new vehicles and high used car prices, which simply translated to all the cars or vehicles being kept for longer. And second, our principled approach to ensure a solid chain of custody for recycled material. In this regard, we are working with the International Precious Metals Institute in the auto cat 5th committee to promote policies regarding the prevention of copper cable theft.

The average 3E PGM basket price for the recycling operations decreased by 13% year-on-year to just over $3,000 or just over R50,000 per 3E ounce. And with that, we delivered an adjusted EBITDA number of $78 million. On a net profit basis, after financing income, the recycling operation delivered a healthy $92 million. In the longer term, we see recycled supply being a key source of total supply growth [indiscernible] auto cat with high loadings, and that given the historical jump in emission standards begin to increasingly into the recycling refining pipeline.

That is why we are advancing the autocat recycling facility at our Sandouville nickel facility or refinery in France where we are currently concluding an extensive test work study on typical European feed, autocat feed to conclude a prefeasibility study by the end of the quarter. And then by the end of September, we would have a definitive feasibility study to go with that. I guess with our large existing metals recycling footprint and our attractive growth opportunities, I think we're very well positioned to take on that green premium that we chasing.

I'll leave it there and hand over to you, Mika.

Mika Seitovirta

Thank you, Grant, and hello, everyone. My name is Mika Seitovirta, and I'm the Chief Regional Officer for Europe. We did quite some progress in the region last year. We finalized our European strategy work and we started to deliver on that one. We also advanced with our European organization and strengthening our capabilities in battery metals with several top recruitments. So we start to form the European leadership team running the businesses.

European region is currently our Sandouville nickel refinery in France and it's the lithium hydroxide project at Keliber in Finland. We are building our strategy around France and Finland for the time being and around those ecosystems that are to be created and developed. Why this? Because in both countries, the governments are very much demanding that we should have control over the critical metals, not only in France and Finland, but also when it comes to European Union. And obviously, this is supporting our efforts in those regions to develop our future business.

Let me first briefly comment on Sandouville. Actually we acquired Sandouville last year and we got the keys in March. The year has been two folded. First of all, the H1 actually really did have good production volumes. And we did improve our profitability as well. However, during H2, we had technical challenges, which led to prolonged maintenance break and we lost a lot of the production dates. You can actually see it in the adjusted EBITDA picture. For H1, we were positive on the EBITDA, good progress; H2, because of the reasons mentioned, was disappointing.

However, we're also planning to make losses there and we are well aware what we need to do and what kind of action we need to take in order to improve this year and for the coming years. First of all, we have developed a different commercial strategy than before. Instead of going for wholesalers that match directly, we have been going directly to end customers.

Secondly, we have a very clear industrial agenda how to do our refurbishment investments and debottleneck and make sure that we can stabilize the production. This year we have planned and budgeted 16 million of investments for only that purpose. And third but not least, we have also our people agenda. So we have strengthened our management, our senior management in Sandouville and in France and on a European level to support all these activities. We have also a new site manager since January this year.

On top of this, it needs to be mentioned that we are going to finalize actually three prefeasibility studies this year, one of them in PGM recycling where we are already big in U.S. as you know. The second one being that we also do a prefeasibility study on nickel sulfate. And the third one is battery recycle. These are all part of our strategy and we are going to look those market opportunities very careful.

And then over to Keliber, the lithium hydroxide project in Finland. We had a very busy year, but a very good year with Keliber. The project is now fully permitted and also fully funded. So we are going to move to the next phase of the project where actually we start the construction. And we start the construction from the lithium refinery in Kokkola. And it's very close to construction start. It's happening next week.

Now having said that, we have also updated our numbers and due to inflation reasons, also because we did some more detailed engineering work, so you can see that the 588 that's in October last year, updated CapEx total project capital number and that's excluding the sustaining capital. But with that capital and with the same price assumptions that we have had during the whole project where the lithium hydroxide price has been $26,000, you can see that we get an internal return rate 20% It's also very sensitive about pricing. You can see that if the price would be 37,000 in our forecast, so it would give an internal return of 27%. However, we have been conservative and we want to be conservative here. So we are still sticking to our 26,000 as a long-term forecast.

The capacity unchanged, 15,000 tons per annum and the life of mine 16 years. Our plan is that we are ramping up as first European lithium hydroxide producer from its own ore 2025 and this is unchanged target for us and it's very much something that we feel is doable, and we are today when speaking to you we are on track with our project plan.

Then let's talk a little bit about green lithium. One of the things we believe is that when we say that we go to battery metals, we often use the terminology that we go for the green metals. And this is very high on our agenda. Now concerning Keliber project, this is something very special that we want to highlight because we feel that we are absolutely one of the cleanest lithium hydroxide producers in the future.

And why is that? First of all, it is because we can use very clean energy. We can use 100% nuclear, so actually the CO2 is zero. If you want to, even the average in Finland is very clean in comparison with many other countries. We are also going to use the natural gas which is going to help us to keep our CO2 values low during the whole process.

And then thirdly, what you don't think that often is that our lithium hydroxide is not going to travel a long way, unlike lithium hydroxide to many customers in Europe today. So we want to prefer European production, European supply to European customers. And this is also what our customers want. And it means that instead of traveling to different continents from mineral, [indiscernible] to hydroxide and then back to Europe, so we are very close.

We are part of the Europe and the way to Continental Europe is not that far. And this is giving us a CO2 benefit. So in these studies, we look at the Scope 2. We will in the future look also into the Scope 3. And of course, we are looking for clean premiums here and providing our customers something which is very unique.

Thank you all. And now over to you, Charl.

Charl Keyter

Thank you, Mika. Good afternoon and good morning to all participants. Despite the challenges that we have endured during 2022, I'm pleased to present a very solid and may I say a resilient set of financial outcomes. Starting with the capital approval framework, I can report that we have delivered on all constituents of the framework. On project capital to date, we have spent approximately R2.2 billion, which is roughly R1.1 billion each on both Burnstone and K4. Our Board also approved the capital expenditure on Keliber of €588 million.

We have maintained our cash reserves and at year end, the balance was R26 billion or $1.5 billion. Dividends for the year amounted to R7.4 billion and the establishment of the Sibanye Foundation nonprofit company is in the last phase with a few regulatory hurdles still outstanding. This fund will go a long way to ensure social upliftment in the areas where we operate.

Net cash to EBITDA came in at 0.14x despite our investments into battery metals. The refinancing of the $600 million revolving credit facility is nearing completion and we are targeting an upsize of a minimum of $800 million. Again, this will be on a three-year plus two optional one year extensions as a tenor. And finally, just to repeat that we have increased our holding in Keliber to 85% and our further investment in New Century resources is now at approximately 53%.

Turning to the income statement. Revenue was down 20% year-on-year to R138 billion and this was driven by lower volumes and commodity prices across all our operating segments. Pleasingly, despite above inflation increases across almost all input costs, driven by global [indiscernible] on inflation, cost of sales before amortization and depreciation was down 6%. And here all credit has to go to our operational teams that have held cost steady in real terms.

Adjusted EBITDA for 2022 was R41 billion or $2.5 billion. Taxes and royalties were in line with lower profitability. Profit for the 12 months was just under R19 billion and normalized earnings was R21 billion. Using our dividend payout ratio of 35%, we declared a final dividend for the year of R1.22 per share. And this brings the full year payout to R2.60 a share which is a 6% yield, which is still industry leading.

Taking a forward look at our capital requirements, an area where we have received a lot of questions, it is really an undemanding capital profile. The capital expenditure will be in the next two years as the bulk of capital will be spent on Burnstone, K4 and the now approved Keliber project. At the gold operations, we expect our reserve development capital and stay in business capital to reduce in line with our end of life shafts.

Capital at the SA PGM operations will stabilize following the ramp up of K4. And at our U.S. operations, no further growth capital will be spent following the ramp up to 700,000 ounces. As reported earlier, the capital for Keliber was approved at €588 million and we are targeting a split of 50% debt and 50% equity.

175 million of equity has already been secured following our investment in Keliber and a further 118 million equity will be raised through a proportional rights issue at the asset. The debt funding is well underway with beyond expectation interest by lenders and providers of debt capital. And then lastly, on Rhyolite Ridge, our commitment is activated once and only once all permitting has been satisfied.

We are also very pleased with the support that we have received at the project level from the U.S. government through a loan from the Department of Energy for an amount up to $700 million. Finally, and just to reiterate, capital expenditure is focused, it is well planned, and it's undemanding on the organization.

Thank you. I will now hand back to Neal to conclude on our 2022 results. Thank you, Neal.

Neal Froneman

Thank you, Charl. And let me conclude by saying as I've said right at the beginning that we are very well positioned in 2023 and even looking forward to create further value. And let me tell you why? The South African gold business has been through the industrial action which was necessary to establish an acceptable wage agreement. The next wage negotiation is only in July of 2024. And hopefully, it'll be a different type of wage and negotiation. But the phase production build up is now complete and that was completed in November 2022. And we should have a pretty normal year in gold.

The South African PGM business achieved a five-year inflation-linked wage agreement, which was settled in late 2022. So we have a period of stability and focus, which also bodes well for good volumes and good safety and low costs. The one aspect that may have been missed by the market, the Rustenburg acquisition payments to Anglo American were completed late last year and that results in an incremental 35% of Rustenburg’s free cash flow flowing through to the bottom line. So that is something that you must consider when you look at your valuations for Sibanye-Stillwater.

The U.S., hopefully we'll not re-see extreme weather events. We are certainly where we've been able to make repairs, have ensured that we can cater for extreme weather events with the infrastructure that was damaged. But more importantly, the U.S. is well on its way to delivering on the reposition plan, attention and attraction of personnel is well in hand. And we can look forward to a phase build up over the next two to three quarters. It will not be smooth sailing. And in fact, that's why you will see there's a slightly smaller tick with a sign of some volatility for the next few quarters.

The European region has a very good battery metals strategy and they are busy consolidating their position. The Keliber project is now approved and the lithium hydroxide refinery is in construction. Sandouville is being integrated and the feasibility studies are underway. So our European region is in a solid position.

I want to say that just as a broad comment, there are significant supply risks in the South African PGM sector which in my mind will offset any destocking and possible demand reductions in the various markets where PGMs are used. I suppose what I'm saying is there's more supply downside risk than there is demand downside. So that bodes well for, let's say, solid and stable process for PGMs.

Probably more importantly though, I think it's probably now well agreed that a potential recession, global recession is becoming smaller and less. And if there is a recession, at one time [ph] it will be shorter but it will have less debt. So we are certainly working our way into an improving macroeconomic environment. So we have a stable operating outlook with a constructive metal price environment across the board. So we look forward to a much better 2023 than we saw in 2022.

Just very briefly, the operating guidance is contained in this slide. I don't intend to go through all of it. But output should increase in the U.S. Recycling should be stable. The South African PGM operations, again, very similar production forecast. Costs will go up slightly. But I dare say that our cost increases will be less than the rest of the sector. The South African gold operation should have a much improved 2023, and Sandouville should certainly achieve its design outputs for 2023 as well. And, of course, Keliber is a project in construction and should remain on time and on budget. And you can see the capital cost there.

So thank you for your time. We'd be very pleased to take any questions that you may have. So let me at this stage hand over to James. Thank you, James. Please go ahead.

Question-and-Answer Session

James Wellsted

Thank you, Neal. Just got a couple of questions from the webcast. We do have limited time, I'm afraid. So I'm going to try and consolidate some of the similar questions to make the response quicker. We've only got about half an hour before we have to close down the Q&A.

So the first question I think is on recycling, so probably Grant or Kleantha. Why are you guiding lower volumes for your recycling business when you expect global recycling volumes to increase by 8%? The second follow-on is can you maintain historical 4% margins at the U.S. recycling operations with declining volumes? And then the third is the recovery rate of auto catalysts in Europe. In the U.S., that's about 40% of the auto cat's demand eight years ago. Do we have an idea of what the comparable European recovery rate is given the strict intercompany export and import rules for spent auto catalysts? Thank you.

Grant Stuart

Yes, good. Thanks, James. Appreciate that. I think in respect of the 8% in the growth, I think what we need to appreciate is that these recycling growth forecasts are very regional, with China being a big growth story after the Day Zero COVID rules ended. I think chip shortages have also been less of an issue in China, meaning that they use cost scrappage rates are a lot higher in that region. In contrast, the U.S. market, which is a relatively mature market, has been characterized by reduced volumes over the last 12 to 18 months for the reasons that I mentioned earlier. But you're also seeing I guess as a result of the lower price environment and thinner margins holding [indiscernible], so less flow. We have also taken a very principled and measured position to responsible sourcing in the customers with whom we engage. By no means should you see us as being complacent in this space. We do see green shoots, and I think we're well positioned to welcome that growth when it does come in and we anticipate that sort of towards the middle of this year. James, in respect of the answer to can we maintain the margins? I think the short answer to that is yes, our business model is not heavily geared or sensitive to price given our limited sort of commodity exposure. We do have a hedging policy in place. We have a relatively low fixed cost base and with our treatment charges largely aligned to the volumes that we process, I think I'm fairly confident to say that we can maintain those margins as we have historically done. In respect of the recovery of the European market, I think there's a huge opportunity there. I think that that market is largely, and it's not as mature as the U.S. market. I think the silicon carbides and the diesel cats that are going to come through are certainly going to increase those volumes. So I would -- and I'm not the expert in the field, but I would certainly hazard a guess that those numbers would be similar to what you've quoted there, James. Thanks.

James Wellsted

Thanks, Grant. The next question has also been asked by quite a few people, and maybe Neal or Richard can tackle it. It's about really our assumptions for this year, given the ongoing load curtailment and what we've anticipated for the year ahead?

Neal Froneman

Rich, why don't you respond to that?

Richard Stewart

Thanks very much, James. And, yes, I guess firstly, I should perhaps place in context the 15% possible production loss that we put out there and what that forecast actually means. If we take a look at what happened last year, there was a significant change in load curtailment levels from September onwards, both in terms of the levels we experienced and the duration. I think the second factor you've got to take into account, that is if we look historically at Eskom, we've seen over the last five or six years a constant decline in terms of the energy availability factor, which is essentially how much power they can generate. And we've seen that decreasing by about 4% or 5% a year, currently sitting below 50%. So if you take the base off last year and you extrapolate a similar continued decline in the energy availability factor, that is where the potential for up to 15% production losses comes. And I think the key message to take away from that is that is a downside scenario. But a scenario we should all be very aware of. Because if we don't do anything different or don't address it, that could be the situation that the entire industry faces. I think, of course, as management, our job is to mitigate against that and we do have plans in place to try and mitigate against that. Part of it is, of course, how we manage our business. But I guess increasingly, it's also becoming how we manage it on a regional basis which does mean your more marginal shots are going to be impacted rather than the higher margin one. So you’re managing not just to output, but ultimately managing to profitability. In terms of what we've included in our guidance, that is largely based on what we saw in the last quarter of last year. That is what we can forecast forward. That's what we've seen in the first two months of this year. So that's what's incorporated into the guidance. And that obviously makes the assumption that we will put plans in place to mitigate the downside scenario. And that we'll see all stakeholders including Eskom trying to at least maintain, if not better, that energy availability factor, but it will require all parties to come to the table. Thanks, James.

James Wellsted

Thank you, Richard. A couple of questions on the U.S. PGM operations, asking about the costs this year when we see them coming to breakeven, et cetera. I think Charles covered that in quite a lot of detail in the presentation. So I don't think we need to really go through that again. As he said, there's a period where costs will be relatively high as we develop -- trying to increase the developed state of the ore bodies. And as we build the cemented backfill plant at Stillwater East, but then as the production builds up, we expect cost to come back down to below $1,000 per ounce. Maybe an additional question though is for you, Richard, is gold mines are free cash flow negative at spot prices and guided AISC costs. What is the plan to get costs down at these operations, the timeline involved and where we see the costs coming?

Richard Stewart

Thanks very much, James. At current spot, they’re actually marginally positive but I think we are definitely focusing on those costs quite extensively. Over the coming months, I think obviously we'll realize the benefits of the restructuring of Beatrix 4 and KP1 which will come in. They don't come in immediately. That does take some time to realize those. I think there's also a lot of work going on, on how we can streamline our operational footprint. The two big ones that do come into the gold aspect as we move forward are our care and maintenance costs which we are managing across the footprint and we have plans in place to reduce those. There are quite a lot of investments going in there to minimize that. And then, of course, also Burnstone ramping up and contributing to overall unit costs in terms of adding on or assisting with that fixed cost base. So we are, of course, also looking at how we can, across the entire region of South Africa, optimize our total overhead costs as we have initiatives regarding integration of some of the overheads across the gold and PGMs. So those are all initiatives that we have on the go and we believe can drive that guidance down further, but not currently included in the guidance.

James Wellsted

Thanks, Richard. And then Neal for you, I think some questions on Mopani Copper. What is our interest in those mines? How do we see the process unfolding? And if we are selected, how would we likely finance this deal? And then what is the potential we see in Mopani given that it's previously been a high cost operation? So that's quite a few questions, and my apologies.

Neal Froneman

Thanks, James. Look, it's very early days in the Mopani process and it's unfortunate that it's become quite public. But let me start from the top. We think we refund contender wide because, a, we have deep level mining skills which are absolutely necessary in that environment. I think we're a company that has demonstrated its ability to deal with difficult situations and are referred to, to London. And there's no doubt that Mopani is a difficult situation, perhaps not as difficult as London, but we also a company that I think can implement quite intrapreneurial structures such as the Rustenburg structure where the commitment is upfront or relatively low and you can focus on looking through the ore body and investing in the ore body. So we see the opportunity to leverage those attributes probably ahead of most people that would be interested in Mopani. I personally think that the commitments will really rather be in terms of capital, and as Charl showed you the capital profile of the company is relatively light. So we have a lot of flexibility. Timing is not driven by ourselves. It's really driven by the people running the process. We like what we see. We still got to conduct significant due diligence. So I really don't want to speculate on potential. But I can assure you that if Sibanye Stillwater moves forward with Mopani, it will be in a value accretive way. Otherwise, we won't do it. Thanks, James.

James Wellsted

Thanks, Neal. The next question also related to M&A. It's about higher capital requirements in the next two years. Persistent inflation, softer PGM basket price, although in Rand, it's not significantly softer, I think we've pointed that out. And then 15% potential impact on the SA operations due to load shedding. What does this mean for our M&A ambitions in 2023 and I guess 2024?

Neal Froneman

Yes. So clearly what you heard Richard describe is a situation that we need to manage in the next couple of years. Of course, we are also working towards solutions. We're not going to, let's say, remain dependent on Eskom and its poor performance for forever and a day, and most companies you would know are probably driving renewable energy projects primarily to reduce their carbon footprint but of course it will make them less dependent on Eskom. The problem with renewable energy is that it's not base load. We are looking at some base load projects. And once we've got more definition around those, we will share it with you. So I would suggest, although load shedding or load curtailment may be with us for a long time, as South Africans obviously as a business, we are making plans to reduce our exposure over the longer term. So I wouldn't fact in a 15% reduction forever and a day. That is significant and that is something we need to acknowledge in the next year or two. In terms of our capital profile, I think Charl demonstrated that our capital profile drops off very significantly, and in fact drops from roughly 19 billion to about 10 billion. And that includes things like Keliber and so on. And that's Rand per year. So there's lots of flexibility in our ability to fund and manage. Software PGM prices I think is short-term volatility. And where I'm leading to with all of this is that the company remains in a very robust position, remains in a position to progress that strategy without betting the farm. But let me come back to PGM process. That short-term volatility that we're seeing, the fundamentals for PGM, especially if you factor in a 15% plus supplier risk and you factor in a lower or a shorter recession, the downside risks are more on the supply side than the demand side. So I think we're moving through a period of weakness, but the medium and the long-term remain very good, which is also what I tried to present. So our M&A, let's say, strategy, it's not the primary focus of the group. But I do think as I've said before, you'll probably see some more movement this year than you did last year. And I think that's off a base where the underlying strength of the company remains very good. Of course, there's many ways to finance these. These acquisitions, it's not going to be through our equity. We understand our equity is undervalued because we in a pivot, but there's many ways to fund M&A without resorting to your own currency. Thanks, James.

James Wellsted

Thanks, Neal. And then last question from the webcast is just on the Keliber decision on the permitting decision for the mine, the second mine and the concentrator, question on details on submission for changes and clarification and the two external appeals? Mika, could you provide some detail on that please?

Mika Seitovirta

Yes, absolutely. Thank you, James. First of all, I can confirm that there are two appeals on top of our own one, this appeal from private persons. And it goes without saying that we take all the appeals very seriously. So also in this case, we have studied them and analyzed them carefully. And what we can say is that as per today, there is no new information or any particular reasons that we would change or adjust our already disclosed time plans for the mine. So we believe that the authorities are doing the normal work. And yes, we will hear about them. But today, absolutely our time plan sticks.

James Wellsted

Thanks, Mika. That's the last question from the webcast. I think if we can just go to the calls and see if there are any questions on the calls.

Operator

Thank you. The first question comes from Chris Nicholson from RMB Morgan Stanley. Please proceed with your question, Chris.

Chris Nicholson

Hi. Good afternoon, Neal and team. Thank you for the time. I'll ask two questions, please. The first one, if you could go back to the U.S. PGM operations, it does look like there has been some slippage if I look at your guidance for FY '23 relative to what you disclosed in August this year. Many of those factors that Charles mentioned in his presentation I think you would have known back in August. Could you comment specifically on maybe what's caused a little bit of slippage cost do seem higher? And then the second question really looks onto renewable projects in South Africa. Appreciate the comment that it doesn't give you base load. It does seem that certainly that gold solar project has slipped in its timelines by 12 months, maybe the PGM one has to. Specifically, could you comment on some of the permitting requirements and where you are in the process of those and where the potential delays in these could be? Thank you.

Neal Froneman

So Charles, why don't you pick up the first one? And then James [ph], if you can prepare yourself to answer Chris' second question on renewable sets.

Charles Carter

Yes. So I think short term, what we've had to do in the start of this year is slightly more heavily on contractors than we planned in August. This is mainly around maintenance and development. It's at both operations and more maintenance contracting at Stillwater and slightly more development contracting at East Boulder coming in at a slightly higher price, but we will pull that back through the next couple of quarters. And then obviously unit cost heavily dependent on volume, so slightly slow start to the year. But again, we'll pick that up. There's no dramatic swing on what we have planned, but it's a skills pressure short term that still shifting us more towards contracting to try and keep on the mine plan.

James Wellsted

Happy to jump in here on the renewable energy projects. Unfortunately, we have experienced delays on our solar PV projects. The primary today stems from land claims to unearth on the sites we intend to use. The first was on the South African gold operation site historically hadn’t quite [indiscernible] but identified a second land claim through inquiry through the National Lands Claims Commissioner. Through a legal process and an investigation, we overcome that issue now progressing the project due to financial close and hopefully in the first half of this year. It did, however, create a significant delay. On operations within the SA PGM, we have three solar PV projects we're also pursuing across the three projects that were two land claims across two of the project sites, we're following a similar legal process and investigation. And we are confident that we will overcome this. Unfortunately, in South Africa, we are not alone in the delays on our renewable energy projects as we look to the same struggles our peers are encountering. On our South African wind projects, the primary delays they have stemmed from good access, although it has been secured. And those projects we are looking to close within the first half of this year as well. Thank you.

Neal Froneman

Thanks, James. Any more questions from the calls please?

Operator

Yes. The next question comes from Adrian Hammond from SBG Securities. Please go ahead.

Adrian Hammond

Hi, Neal and team. Two questions, please. First one is about the balance sheet. And first of all, there's a lot of CapEx that’s been guided for this year. My estimates are 24 billion. It's up some 60%. Is it fair to say that Sibanye is entering an investment phase? And I'd like to understand how you think about the balance sheet going forward in terms of funding specifically around Rand and dollars. So with Stillwater and the gold business seem like they just mildly positive with spot. What do you think about funding for the business with debt, particularly given interest rate environment [indiscernible] can feed in here and what are you seeing in the debt markets? And what do you think about funding the Keliber project in dollars when you don't really generate much dollars? And then secondly for Mika, you talk about a green premium for lithium. I'm curious to know how realistic that is given much of the new production coming on will be produced from renewables and it's very unlikely an OEM will want your lithium if it's not green? Thanks.

Neal Froneman

Okay. Thanks, Adrian. And I'm going to ash Charl to deal with the capital one. And then Charl if you can hand over to Mika on the green premium. But, Adrian, I want to say I actually met someone yesterday that is getting a green premium, a major player. So it is happening. And amazingly here at OEMs, we have every major car manufacturer at the BMO conference, except for one. That tells you what's happening in this market. But Charl, if you'll pick up Adrian's question on the balance sheet and the debt markets, and then hand over to Mika. Thank you.

Charl Keyter

Thanks, Neal. And yes, thank you, Adrian. If you look at the balance sheet, and specifically on the CapEx, Adrian if you look at the slide that I presented, capital there is estimated at about R20 billion. But that includes the Keliber portion of which we've already secured 176 million through our investment into Keliber. So you really have to knit that offer, because that funds have already flowed and we're just showing the total capital, less the Keliber portion. I wouldn't say we're necessarily going into an investment phase. But we need to conclude on our major projects, which is the Burnstone project and the K4 project, which we have guided would be R6.3 billion for those two projects. And that was over a four to eight-year period, K4 being shorter and Burnstone being slightly longer. But as I've said, the profile is really not demanding on the organization. Without plugging in the spot numbers and just looking at conservative numbers that we use for budgeting purposes, this is still a profile that we can maintain. Bearing in mind that if we see softening in commodity prices or anything whatsoever, this is a lever that we will pull if and when required, but business as usual. As we see it going forward, that would not be required. Looking at debt funding, and specifically around Keliber, we targeting a 50% split on Keliber. So the total Keliber CapEx in round numbers is 600 million, 588 million to be precise. And there we’re targeting about 50% equity and 50% debt. On the equity portion, there's a further rights offer that needs to go through. And we believe that we would get proportionate participation, which means we will probably put in about 85% and FMG would put in the balance. So that's a further 100 million or so. We are currently evaluating the RFPs on the Keliber debt. And we've had lots of interest from numerous debt providers. Looking at the market, we are seeing a tightening in credit spreads. If we look at what we could get six months ago if we had issued a bond versus what we're getting now, it's currently already between 100 and 150 basis points lower than what we saw six months ago. So we're not out of the woods yet. But we’re definitely seeing things trending in the right direction. As it stands, there's no further debt that we have to specifically take on considering that our Rand facility and our dollar facility is undrawn. And what I would say lastly is that we are in the process of renewing the dollar facility and we targeting a slight upside there. We're hoping to get a minimum of about $800 million, just to make sure that we have adequate liquidity for the enlarged group. So I'm going to hand over to Mika to take us through the second part of the question.

Mika Seitovirta

Thank you, Charl. And concerning your question, Adrian, thanks for that question first of all, about green premiums. So we have analyzed the market a lot and obviously, especially from the European point of view. And we can clearly see that when you go up to 2030, there's going to be a deficit between the supply and demand. So there's not going to be enough lithium hydroxide. On top of that, we can clearly hear from other customers, and as you know, today we haven't committed Keliber to any off-take so far, but we have potential many good customers who we are talking to. And we know that everybody wants to go towards a net zero in their businesses. And therefore, it is important that the less CO2 kilos ton produced product we can offer so the customer is, in our understanding, willing to pay a green premium in those cases. The other thing that we need to remember that especially in Europe, European customers would love to have European suppliers. So we are not yet fully regulated. So there are still some directives in the European Commission under preparation, and that will also drive suppliers to have much greener products than what they had earlier. So those are the reasons why we believe that we can get green premiums from the market after we have ramped up '25. Thank you.

Operator

Thank you. Do we have time for another question?

Neal Froneman

James, you’re on mute I think.

James Wellsted

Yes, one last question and then we'll have to wrap it up. Thank you.

Operator

Thank you. The final question comes from Richard Hatch from Berenberg. Please proceed with your question, Richard.

Richard Hatch

[Technical Difficulty]

Charles Carter

So what I was trying to convey was an incremental build. Certainly quarter-on-quarter through this year, it's going to be -- you're not going to see marks dip changes, but we're working on everything we can to try and reduce cost structures and build volume. But it's a three to four-year build and it's a progressive build. And you'll see that in the graphs that we spoke to last year. And we stand very much on that plan. Thank you.

James Wellsted

Thank you, Charles. Thanks everybody for attending. I’m afraid we're going to have to wrap it up now. We do have other commitments. There are a couple of more technical and more detailed questions online, and we will respond to those. If you have any other further questions, please don't hesitate to contact the IR team and we'll get back to you as soon as possible. Neal, if you'd like to say any last remarks?

Neal Froneman

Thanks, James. I think it's all been said. I know the market’s disappointed with our results. We see the underperformance where it's occurred. I think our message is that we continue to drive operational excellence. We are very well positioned based on not having the same type of disruptions in front of us in this year. Our strategy remains intact. In fact, if anything, we seeing good signs of being in the right place at the right time. We appreciate your time today. And as James said, apologies that we've had to cut it short. But some of us are on the road and we have other commitments as well. So thank you for your time and we look forward to talking to you next time. Thank you.