Sibanye Stillwater Limited (SBSW) Q2 2023 Earnings Call Transcript

Sibanye Stillwater Limited (NYSE:SBSW) Q2 2023 Earnings Conference Call August 29, 2023 8:00 AM ET

Company Participants

Neal Froneman - CEO

Richard Stewart - Chief Regional Officer, Southern Africa

Charles Carter - Chief Regional Officer, Americas

Grant Stuart - Head, Recycling

Mika Seitovirta - Chief Regional Officer, Europe

Robert Van Niekerk - Chief Technicaland Innovation Officer

Charl Keyter - CFO

James Wellsted - EVP, IR and Corporate Affairs

Kevin Robertson - EVP, US PGM operations

Conference Call Participants

Adrian Hammond - SBG Securities

Raj Ray - BMO Capital Markets

Chris Nicholson - RMB Morgan Stanley

Cameron Needham - Bank of America

Leroy Mnguni - HSBC

Neal Froneman

Good afternoon and good morning ladies and gentlemen. Welcome to our H1 2023 Results Presentation. Just a few comments upfront. This has been another period of our results being impacted negatively by one-off events, some of them self-inflicted and some such as the extreme weather events in Australia, an Act of God or for those of you who believe in climate change also self-inflicted by humanity.

The economy and hence the running of mining operations is in a particularly tough place globally at the moment. And there could well be a downturn as we see it for some time. Remember, we refer to these more as pandemics, and this is where our anti-fragility culture or differentiator stands us in good stead.

As you will see from the title of the presentation, our antifragility differentiator is creating significant advantage to our peers, for reasons that I'm going to outline in the first section. Antifragility for those of you who are wondering, what it means, and I took this definition out of Wikipedia, is something that does not merely withstand a shock, but actually improves. Antifragility is beyond robustness and that is the culture we draft within our company.

Please take note of our Safe Harbor statement. I'd like to now discuss the agenda. I will continue with the introduction and cover the changing environment, or what I'll call, the Antifragility section. The Chief Regional Officers will present the operating review for each region separately, Charl will continue with the financial review, and I'll complete the formal delivery with a brief conclusion.

As you know, our company is all about the people. We've had some changes in the C-suite and some new executive management appointments, Dawie Mostert left us, Themba Nkosi has stepped in as the Chief Organizational Growth Officer, in other words, driving the strategic aspects of HR and we are looking to fill the sustainability position hopefully with a woman. Robert van Niekerk, in addition to his technical and innovation responsibilities, has taken responsibility for the Australian region.

And then with the resignation of Wayne Robinson in the U.S., Kevin Robertson has been promoted to Executive Vice President for the U.S. PGM operations and Charles will cover that in more detail. And very pleased that we have deep bench strength that we can make these changes relatively quickly and really what you don't see is the structures and a number of really good people we've got in our organization below these levels.

If we could go onto the next slide. This is our strategy. It's built on a strategic foundation. The essentials are our primary focus, 80% to 90% of our focus is on operating business. And then of course the differentiators and the area where I'm going to really focus today is highlighted in the red-green, and that's about building pandemic-resilient ecosystems.

And we've shared the strategy with you before, so I'm not going to go into the details, but pandemics we define as -- certainly COVID-19 was a pandemic, that's a vanilla pandemic in the sense of that's a viral pandemic. The Ukrainian invasion, we've referred to as the pandemic, and I think the current global economic crisis is the next pandemic we're dealing with. And if you deal with pandemics and you prepare for them well ahead, you become antifragile, which is really the theme we want to talk about today.

But of course, this is our results, and let me just move on to the salient features. And very pleasing, significant operational recovery at our gold business contributed to H1 earnings cushioning the impact of softer PGM process, and you are now starting to see in practical terms the countercyclical characteristics of gold having been confirmed and something we've alluded to previously, and this is enhancing our portfolio.

The South African PGM operations, another consistent and really solid performance, load curtailment and the strategy around that, Richard will cover that, very well-managed, industry-leading cost control with a 9% increase. I want to say only a 9% increase, a lot lower than our peers. And you will see it from some of the graphs I'm going to show you, we're really well positioned for the anticipated price weakness.

In terms of the U.S. PGM operations, unfortunately, impacted by the shaft incident at Stillwater West mine, which you won't see the progress being made in our results. I do because I go to the site often. But we were proactive in repositioning this business in 2022 already for this changing environment and creating sustainable value. Ongoing skill shortages are still impacting productivity, and I'm going to show you again a practical map of the number of jobs and the number of positions available across states.

In terms of the European region we started out at lithium refinery, I'm going to talk more about that, received the permit for the concentrate on the second mine. Our rights issue, the equity component of funding the project capital is now concluded. Our partners, the Finnish Mining Group has increased their stake to 20% contributing to that number. And the balance of that funding will come from debt. So effectively, it is now fully funded. We continue to have challenges at Sandouville, they are being addressed, Mika will talk more about that. Our feasibility studies on PGM autocat recycling in Europe, battery recycling and conversion of that plant to Nickel sulfate plant will be completed in the second half of this year.

In terms of our financial position, strong balance sheet, our net debt is only ZAR262 million, which translate to 0.01 net debt to adjusted EBITDA. We did declare an interim dividend. We are very mindful that the dividend yield is low. You have my commitment to review this at year end. Depending on market conditions, we will look to again reestablish a leading dividend yield from our dividend policy, but that's final dividend decision at year-end.

All right, Embedding ESG, this is not just green washing. Our tailing storage facilities conformed with the GISTM audits. We have advanced our renewable energy program with a commitment to 89 megawatts of the Castle Wind Farm, first step in our carbon neutrality journey. And then very pleasingly, when we start looking at our safety strategy and how it is improving our performance relative to our global peers, I'm going to cover that in fact in the very next slide. So all-in-all, a reasonable H1 impact, as I said, right at the beginning by one-off events.

So let's have a quick look at safety. As you can see, this is the ICMM peer group. The 2021 peer ranking is the top graph, and you could see we were not in a good place. In 2022, you can see how we have, despite our deep level high-risk mines, we've moved into a much better position on this ranking. Certainly being in the midst of Barrick and Newcrest and better than the ones on the left is very pleasing considering all the hard work and our relative risk exposure that has been so well managed. This is a very pleasing outcome.

So I want to talk about this antifragility and the current and changing environment that we are finding ourselves in. So let's have a look at, let's call it, the global context and the grey elephants. We believe this is a compelling framework to understand the external context, a great elephant has been presented to you before, a grey elephant is a highly probable, high impact, yet often ignored trends that are shaping the 2020s. You can see those are pandemics aging workforces angry planet, inequality, big squeezes, angry people, multipolarity and intelligent advances.

On the next slide, you will see a few that I just want to highlight that there's been clarity and that these are real issues, I think on climate change. Climate records are being broken literally every day, every week. And if anyone ever doubted global warming, I think you really need to look at some of these trends. Global carbon emissions being covered by active carbon pricing initiatives are increasing exponentially. And of course, this is the fundamental driver of the metals business that we are busy building. So it gained confirmation that we are in the right place unfortunately due to climate change.

In terms of big squeezes, again, becoming very apparent increasing scarcity of raw materials is putting a huge premium on these materials. I'm going to show you our entry points and what the pricing looks like today. But more importantly, the stewardship related to the responsibility of producing these metals is increasing on miners and being involved in recycling and recovery of these metals from waste is becoming a global imperative, and again, I want to say we've been early adopters of that.

In terms of angry people, well, we've just experienced a very disruptive period in France with strikes and riots that impacted on Sandouville was not the only issue and Mika will cover that in more detail. We fully are aware and sensitive to the social tensions in South Africa, but well positioned to manage that, and I will share a bit more on the South African landscape in the next few slides.

In terms of multipolarity, very interesting, we are very pleased with having established ourselves in North American and European ecosystems. We are starting to see the geostrategic importance of Africa with its mineral wealth, intensifying again early adopters of being in the right places at the right time.

Just on the South African political landscape, it's evolving rapidly. I want to say, first of all, all credit to the Center for Risk Analysis, and I would urge you to -- if you're not familiar with this scenario planning in terms of the changing South Africa, I'd urge you to make contact with John Andrus (ph), the CEO. Of course, this is not predicting an outcome. It's actually understanding the possible outcomes that are in front of us with a 2024 election looming next year.

The buffalo is the ANC and you can see they were phases where the Buffalo was charging. We've moved from a developmental phase or first age to a second age being detrimental under the leadership of Zuma, and we're now in the third age, which is an emasculated stage, which is why I am, let's say, motivated as business that we can make a difference. And there are various outcomes, we can go back to a detrimental phase, we can stay in emasculated phase or we could move into a very constructive lean phase, you will see references to our hyenas, you will see references to wild dogs, and clearly it's about being prepared for these changes that are coming.

Thanks. If we can go to the next slide, which really just encapsulates what I said about in an emasculated phase, business does have the ability to influence outcomes and should be influencing outcomes. And what you see here, and I'm not going to go through the detail or the structures that have been put in place together with government to address energy transport, crime and corruption, and these structures emulate what was put in place for the vaccine challenges around COVID-19, and as you know, we had a very successful outcome in business and government working together to deliver vaccines to the nation. This is in the national interest, and I do believe all these workstreams are making and are going to make a very significant difference which makes me a lot more positive about South Africa and our future.

As I said, I would just include a slide showing the skill shortage and the challenges in the U.S., you can see all the shaded states have more jobs than people, for instance, in Montana. They are 46 people available for 100 jobs, and that's our challenge in our U.S. PGM segment. It is changing, we've got some smart initiatives in place.

But if you want to summarize, there are currently 9.8 million open jobs in the U.S. and only 5.9 million unemployed workers. I really wish South Africa was in this situation, but it's got its own challenges, but I think this represents -- it's not a unique Sibanye-Stillwater issue in Montana, it's its national U.S. challenge. It's only Washington, California and New York that has sufficient people to full openings.

So what I want to do is just work through each one of these in terms of the operating context that we find ourselves in high mining inflation, the potential for impairments across the industry, and of course, restructuring. We are preparing for a prolonged and possible PGM down cycle, loadshedding and curtailment is affecting South Africa, being very well managed by my team.

I will cover that -- the global call for lower carbon footprint and better TSF management, we've delivered on that. The critical metals or the green rush with regional incentives driving multipolarity, and then of course, this becomes an opportunity for those companies that are well positioned to drive value accretive and well-structured M&A, and I'm going to refer to some of the M&A we've done and being early adopters and having an antifragility culture has put us in a really good space. Thank you.

Let's just move on to the first one. So high mining inflation and potential impairments, what have we done about it? Well, we have timelessly restructured and closed end of life shaft at Kroondal, Rustenburg and Marikana in 2016 and 2019 and then some of you would remember we closed Beatrix 4 shaft in 2022. That is just the nature of owning mature assets and being proactive in terms of avoiding cross subsidization.

We've executed integration across our new acquisitions, realized synergies and we've moved our assets down the cost curve. I'm going to show you that as well. We've proactively repositioned our U.S. PGM operations in 2022, you would remember in anticipation of PGM price weakness, so in addition to some technical challenges that we had.

So let's just look at some of those things. There's the cost curve, you can see where most of these assets were sitting on the right. Four of them are really in a good place, there are some areas at Marikana that need attention, I'll show you that. And then, of course, Stillwater was impacted in this period by the shaft incident, and of course, that is not a true reflection of its potential and I would hope in the next year to 18 months, you will see it in a very different place on this cost curve.

So let's look at the next slide in terms of -- this is a South African PGM business, and you can see there's a very small part of it that needs, let's say, to be optimized for sustainability. We are busy with those processes, Richard will talk a lot more about some of the long-term life of mine planning we've done and I think you will find it particularly pleasing, but we are proactively looking at these things and have been prior to spot prices moving down to the sort of levels.

On the next slide, you will see the same approach for our gold business. The market generalizes about our gold business being high cost and profitable. But you can see there's a very large portion of it that sits below the spot price line, clearly, those areas that are sitting above are being addressed and we are considering a number of scenarios, and we will look to provide more guidance in the next few weeks. But again, just because of a higher gold price environments will not sitting on our hands.

So preparing for a possible downside fall, what have we done? Well, you've just heard me talking about optimizing operations for profitability. We've had a disciplined transparent capital allocation framework, which we've stuck to for a good number of years now. We have financial flexibility, a strong balance sheet, we have restructured our debt recently low coupon bonds and the dollar RCF was increased to $1 billion in April 2023. And both our rand and dollar RCFs are undrawn. Our multi commodity portfolio diversifies our risk exposure as well.

So let's look at a couple of slides setting that out. There is our net cash or net debt to adjusted EBITDA. You can see we've been in a net cash position for some time but we're still in a very strong balance sheet position without net debt, just at 0.01, net debt to adjusted EBITDA.

Next slide please. In terms of our capital profile, even with Keliber, Rhyolite Ridge is not in this graph, but with Keliber. As I mentioned right at the beginning, the equity portion of the funding has been raised and the balance will be in debt, and that's very manageable. I just want to point out if you think you're going to add a capital hemp on for Rhyolite Ridge, I want to point out that the purchase price is meant to cover the capital, of course, we don't know exactly what the capital cost is going to be, but feasibility study is being completed. But certainly the acquisition price is designed to cover the capital, so please keep that in mind when you model our company.

Next slide please. I'm not going to go into the details on the left but sufficed to say PGM basket prices whether you look at the main 4E or 2E. In 4E, they're down 41% to date, in 2E, which is our North American basket price, it's down 27% year-to-date. That is very, very significant reductions in our revenue line.

Next slide please. Obviously, the demand side needs to be well understood. Again, the bullets on the left hand side underpin what we see is effectively a balanced market now in 2023. So we don't see a lot of demand drivers despite light vehicle production having increased or forecast to increase from 80.6 million units to just under 84 million units. So nevertheless, we have taken a prudent view and relief at best the market will be in balance.

So let's move onto loadshedding and curtailment affecting South Africa. Our South African operations, as I said, were well managed. There were no stockpiles that or major buildups in infantry at the end of the period. We now have a renewable projects plan of over 600 million, sorry, 600 megawatts with the first 89 megawatts wind farm project having now reach to a financial close. Very pleasingly, our first concrete step in investing in assets to ameliorate load curtailment, and of course address our carbon footprint.

Next slide, please. So this is just a picture of the earthworks taking place for the new Castle wind energy project, which achieved financial close in May 2023, and of course there's more to come. Thank you.

Next slide, please. In terms of a global call for low carbon footprints and better TSF management, well, of course, our PGMs and battery metals contribute to a greener future. So that's fundamental, and is the foundation of our business. We are on track to meet our carbon neutral target by 2042 and we had a very successful outcome, as I've mentioned, to the global tailing standard with all very high and extreme consequences TSFs in our South African and U.S. regions conforming to the standard, so very pleasing.

This is a slide you should be familiar with. It shows our planned decarbonization pathway aiming to achieving carbon neutrality by 2040. What is new on this slide, however, is that we've increased our renewable energy plan to over 600 megawatts of solar and wind projects. And you can see it set out on the right hand side of the slide. Again, I'm not going to go through it in detail, but this is a slide you're familiar with and has really just been enhanced with additional commitments.

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

The inflation Reduction Act, and again very pleased that we targeted the North American system -- ecosystem, I should say, is benefiting our U.S. PGM operations already. From the end of this year, we will be getting a credit of 10% of qualifying production cost and that's going to be in place for 10 years. We've taken the initial estimate in these financials, but I think we've been very prudent. And then of course, the IRA advantages for our Rhyolite Ridge, we've also seen through a $700 million conditional funding from the Department of Energy in the U.S.

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

So the Keliber project is being built. James has indicated to me that that many analysts do not include the, let's call it, the value of Keliber, but they include the capital, that just doesn't make sense. Yes, it's a new project processing might be tricky but there's very little risk to this project. So I would ask that analysts to really start giving us credit for something that is already happening.

In terms of the Rhyolite Ridge lithium project, myself and some of the technical team together with the U.S. team spent time on site. This project has advanced. The permitting risk has decreased significantly with the revision to the mine plant with the south basin and now not impinging at all on the battery. There's very significant upside potential as well, not only in the north basin, where we've agreed with IRA to continue with some exploration, which we will fund.

In addition, in the south basin, there's additional potential which we hope to explore shortly. I think that's all on the base of, as I've said earlier, the commitment from the Department of Energy for a conditional loan of $700 million. So both lithium projects in a really good space. Of course, remember Rhyolite Ridge should be a low cost producer, even though the grade is low because of the boron credits.

I just wanted to make a comment, we have been involved in a number of assessments in Africa, and it is very clear to us that Africa is emerging as a key player in the energy transition. And in fact, there's a bit of tug of war going on between the east and the west, and certainly I want to make it clear, we're a western facing company and we look forward to bringing some of these resources to account for the west, and this will be an interesting landscape that is going to evolve.

So I wanted to conclude the section just talking about value accretive and well-structured M&A. Of course, I'm really proud about what we have achieved as a team in terms of our PGM acquisitions, and I will remind you of that again in the next few slides. And in fact, these acquisitions have petted for themselves multiple times over. And I think there are many, many examples for assets, they never pay for themselves, which is why some companies don't embark on M&A, I think it's a strong point of ours and of course we will continue to look for value accretive opportunities.

Approaching value-driven growth with smart structures and innovative financing is something that I need to bring to your attention. We do not really like competitive processes because you end up being sucked into overpaying or you lose out because of your positioning around what is fair value. The shorter structures that have worked very well for us and while the shorter structures you will see us implementing and there is many good examples is where we invest in the asset rather than buying assets from shareholders.

I've just spoken about Rhyolite Ridge, Keliber was the similar investment, predominantly investing in the prefea's and the feasibility studies, exploration and rather investing in the ground. There was some shareholder takeout, but investment in Africa, for instance, in Mopani are not going to be paying shareholders upfront as an example. Probably the best example of smart structures is Rustenburg Platinum, where there was an earning, both Anglo and ourselves that extremely well out of that structure. Those are the top structures we think of, and implement. Obviously, partnerships are important and that enables optimum value creation.

So let's look at a couple of the underlying slides in this. You all know the sigmoid curves that have taken us to where we are. I want to point out and I really want you to focus on the red areas there. We initially leveraged our operating skills for commodity diversification, in other words, we did well in turning around the original gold field's assets that gave us the credibility to move into PGM's utilizing our core skills. Once we are done there, we can establish a bit of a base of PGM's, we were able to leverage those exact same operating skills in a new commodity to move into the U.S. and start our geographical diversification, and you can be critical of Stillwater, but it's paid for itself, and please remember that with probably still another 30 or 40 years of life.

What we learnt in moving into the PGM's was doing things somewhat different to our peers in this industry. We realized there was a lot of benefit in terms of understanding the value chain and moving down further to the end user, and hence we leveraged our market and value chain knowledge tied to diversifying to green metals, tailings and expand recycling, and I'm going to come to that stewardship of those three elements now. But moving downstream is a very, very important part in terms of the business we are entering into.

So, as I said, when you understand these big squeeze, when you understand the importance of decarbonizing the planet and the metals are critical constraint, the intention is not to abuse it, but to embrace resource stewardship, and it's not just through primary mining. In our view, you can't be in the sector if you only are conducting primary mining.

So, as you know, over a period of time, we've built our secondary mining business that now has two rigs, DRDGOLD and New Century Resources, and of course we are in the recycling business in Montanna with Autocatalysts, one of the biggest recyclers in the U.S., but we are actively exploring opportunities for further recycling of precious metals and of course ultimately electric vehicle battery. So that's a very important concept and it does move us downstream in a responsible way. We are not going to build giga factories, we may invest in giga factories in a small way, but this does move us downstream.

Next slide please. So, if you look at our timing in terms of our entry into the PGM business, it couldn't have been better and that's really the only point I'm going to make and when you couple that with our early entry into the lithium market, again I think you can see a track record of doing things at the right time.

Next slide please. This is an interesting slide with two key messages, we fully understand our current multiple and what causes that. But you can see, when you look down the multiple column, you can see diversified companies do attract a bit of multiple because they are less risky, less exposure to market cyclicality. And then, of course, as you move downstream, you also see an increase in market multiples, so that boards well for us.

The one aspect on this slide, in case you didn't think payback of all our (ph) assets was enough. If you compare our return on invested capital to some of our peers, you can see that in really good company, we have also provided a better return to our shareholders in terms of invested capital. So the strategy, the concept of moving slightly further downstream boards well for us, our returns to our shareholders through doing things at the right time in the commodity markets has provided very significant benefits, doesn't matter how you measure it.

Next slide please. This is an interesting slide and the critical minerals that we are focused on are a very small part of the metals market. So if you interpret my comments as we are trying to emulate a Rio Tinto and Anglo America or a BHP, we are not. If you follow these bars, you can see iron ore or other metals translating to the orange spec bar with aluminum, manganese, copper of course is a significant block, but when you move into the little green block at the bottom, and I probably should highlight nickel at 2.8 million tonnes, if you move into technology and precious metals that's at little green block expanded into the bigger green block, you can see the type of metals that we are looking at, and if you expand the precious metals into golden PGMs, you can see it's a tiny portion.

My point is that, this is a very small market, even including lithium in the bottom middle of the green block and copper which we see as a critical metal. We are still operating in a very small segment of the market, that's a niche part of the market and although we're going to be diversifying -- we're not trying to diversify unlike your traditional diversified mining company, so hopefully, that's also useful in understanding our strategy and where we're focused. Thank you.

So at this stage, I'm going to hand over to the Chief Regional Officers to go through their regions in detail. And the first one up is Richard Stewart. Thank you, Richard.

Richard Stewart

Good afternoon, ladies and gentlemen, and thank you very much, Neal. I think as is always the case at Sibanye, we'll commence this part of the presentation with safety. I think as Neal has highlighted the year-on-year progress in terms of our safety from 2021 to 2022 as being very pleasing. Clearly, however, we are still on the journey, where our ultimate destination is about zero harm. And the first step in terms of -- and the first milestone in that journey is around eliminating fatalities sustainably from our operation.

I think it's pleasing that below the momentum from 2022 carried through into the first quarter of this year, but very disappointing that on the March 31 and into April, we experienced three fatal incidents across our operations. One at Burnstone, where we tragically lost four contracting colleagues and two at our Driefontein operations. The way we are addressing eliminating fatalities from our operations is through our Fatal Elimination Strategy. This strategy is a fundamental risk approach that really revolves around identifying the highest risks that can result in fatal incidents, and mitigating these risks through critical controls, critical life-saving behaviors and management routines.

I think what does give us a level of comfort is that when we look at the incidents we've experienced by fatal incidents as well as high potential incidents that we analyze. We have noted that all of those could have been avoided with the exception of Burnstone, had our critical controls, behaviors and management routines been effectively implemented all of the time. This does give us a level of comfort that we have developed the right tool box to eliminate these fatalities.

I think when I sit back and reflect on it, I see how our safety journey in the company over the last few years has developed from being safety as an operational focus to safety as a strategic essential across all aspects of our business to now having the tool box in place to mitigate risks. Clearly, our immediate focus is on ensuring that that gets embedded throughout the organization and truly delivers on our safety-first strategy.

I think what gives me comfort that we are making progress on that journey is looking at things like self-stoppages, where for the first time we have now seen the number of self-stoppages, in other words, our crews frontline supervisors making more safety related stoppages than what is made by safety departments or management. This, to me, is an indication that our teams are truly becoming empowered, enabled and engaged to exercise their right not to undertake any risky work and through that we will block the path to fatal incidents occurring on our operations.

I think another pleasing trend is the continued decline in our serious injury frequency rate, which often the incidence resulting serious injuries are the same incidents that could be more serious resulting in fatals, I'm seeing this constant decline on many of our operations today delivering the lowest serious injury frequency rate we've ever seen does tell us that we are on the right journey and our commitment to eliminating fatalities across our operations remains our absolute number one agenda.

Many of you will recall that I sat here in February of this year and indicated that if we saw a continued increase in the level of load curtailment that we saw during second half of 2022, and we did not respond to it in anyway, but the impact to load curtailment could be as high as 15% on our business, while I'm very relieved today to say that that has not transpired and it's not transpired for two reasons.

Firstly, our forecast of what load curtailment could have been based on the end of last year, the actual curtailment levels have been lower, albeit, we have still experienced more load curtailment this year than the whole of last year but it is lower than what we forecast, and that is largely down to three things. Firstly, Eskom's Energy Availability Factor, or EAF, has increased from 50% to 57% and have also expanded a lot more in terms of diesel to keep the likes on, both of those remained high risks and we continued to monitor them carefully.

I think a more pleasing and sustainable impact has been the response from the private sector and private individuals, where we have seen solar capacity more than double over the course of this year, and currently sits at about 4,4 gigawatt power across the grid relieving energy curtailment at least during certain times of the day.

Taking that lower curtailment forecast combined with what we've done internally, which is really being around the developments of the digital model that has allowed us to simulate and predict the optimal load curtailment response actions and really what that means is we can still deliver Eskom's requirement for curtailing our load, but doing it in a way that ensures the best possible financial outcome from our business perspective.

Utilizing this tool together with some of our competitive advantages such as having spare processing capacity, particularly at our PGM operations has allowed us to minimize the impact of load curtailment quite significantly, and during the first half of the year, we saw 2% impact as a result of load curtailment, which was significantly lower than it could have been and very pleasingly did not have any stockpile or at the end of the half, where we managed to treat all of that.

At our gold operations, due to additional redundancy, our load curtailment doesn't impact on production output, but does impact costs, and again pleasingly, those costs are significantly less with the implementation of our new load curtailment model. I think this model is a true testament not only to our key value of innovation in the company, but also as testament to the resiliency of our operating teams in the face of some real challenges.

As we move onto our PGM operations, I think fair to say that our PGM operations were steady and had a very solid performance again during the first half of the year. Compared to same period last year, we were marginally down 3% down on production and came up just under 800,000 ounces excluding third-party material, and that decline was largely planned as a result of the closure of the Simunye shaft at our Kroondal operations.

I think also pleasing has been our response to copper cable theft. Last year, you would recall, I indicated that cable theft infected the same impact on production up, which is what load curtailment did, but very pleasingly during the second quarter of this year, we saw for the first time in several quarters a decrease in terms of the impact of cable theft through the commitments of our protection services teams and operating teams coming up with innovative ways of working against the scourge that we are facing across the country.

In terms of cost management, PGM operations sustained an exemplary cost management coming in at just under ZAR20,000 before per 4Eoz and an all-in sustaining cost basis, and although that is 9% higher than the corresponding period last year. It does of course come with slightly lower production but considering that mining PPI over the same period was well above 15%, that performance saw us continued to move down in the industry cost curve, with these operations truly becoming highly competitive in terms of costs and margins that are produced.

Adjusted EBITDA was down 44% largely as a result of a 22% lower basket price that was received and that came in at just under ZAR12 billion. What will provide some relief this year is that we made our final payment to Anglo American in terms of the Rustenburg earnout at the first half of this year with any free cash coming from Rustenburg now being for the benefit of those shareholders, including minority shareholders at Rustenburg. And finally, we are looking to conclude our Kroondal wage negotiations that agreement expired in June of this year and we are well progressed towards having that completed in the coming weeks.

I think what has been particularly pleasing over the last couple of months is the work that we've done on developing what a long life PGM life of mine profile could look like. I think many of you will recall when we acquired these operations in particular Marikana and to a lesser extent Rustenburg in order to maintain our production profile from with the plans that we acquired them with required significant capital investment at Marikana and it was about ZAR12 billion over four or five years, and this was clearly something that given the market conditions at the time, we did not want to tolerate, that meant, we developed our own plans that required significantly less capital investment. Kroondal likewise at a short life of mine up until 2026 at the time.

This did, however, leave to DSA a perception that these were short-lived assets and actually nothing could be further from the truth. These assets still have significant resources we have over the last few years been working through several projects completing feasibility studies and what we are showing in this profile is just some of those projects that have been completed, most of which are brownfield projects and therefore requiring relatively low capital intensity to develop. But what this profile shows and we certainly share more information with the market in the coming months, that is that we can comfortably sustain a business of well above 1.5 million ounces for well in excess of 10 years.

Then finally moving onto our gold operations, clearly compared to the comparative period of last year of significant turnaround with the first half of last year was impacted by the industrial action. At our gold operations, we produced about just over 416,000 ounces of gold during the first half of this year and as Neal mentioned, countercyclical where we saw a 22% decrease in our PGM basket, at gold we saw 22% increase in the gold price. Gold produced at an all-in sustaining cost of just over ZAR1 million per kilogram during the half.

Our gold has been a bit of a story of two tales, I think post the H1 closure, we have suffered two significant events. The first one was our fire at -- it was a fire at our Driefontein 5 Shaft that occurred on the 12th of July. This also impacted Driefontein 1 Shaft for a couple of weeks. But I am very pleased to say that we have started ramping up production again at 5 Shaft with crews going underground and that production ramping up again. We do forecast, however, that this could have an impact of about 900 kilograms relative to the original guidance given for the full year.

In addition to the fire, we have suffered significant levels of seismicity across several of our operations. Most notably, Driefontein 4 Shaft and Driefontein 8 Shaft, but also at Kloof 4 Shaft. At Kloof 4 Shaft in particular, the increase in seismicity has impacted our flexibility and essentially increased the footprint that we've needed to mine in order to sustain output, and that in turn has compounded cooling and ventilation constraints.

We also announced that on the 30th of July, we had a very unfortunate incident at Kloof 4 Shaft where the counterweight to our conveyor system got caught in the Shaft, unknown on what it was caught, however, that fell down the Shaft creating damage below 39 level to 46 level, and as a result, that has ceased production at that operation. We are currently still assessing the impact of this incident, combined with the seismicity and cooling and ventilation constraints, and for that reason, have included no further production from Kloof 4 for the balance of this year.

So, our gold operations are really a story of having a few Shafts which have had some real challenges regarding seismicity and the fire. However, the rest of our operations pleasingly are producing as expect -- as expected on the plan and generating good profits at current prices. Thanks very much.

And I'll now hand over to Charles.

Charles Carter

Thank you, Richard. Our first half results in the U.S. were unfortunately negatively impacted by the Stillwater Shaft incident which we fully communicated to the market at the time. In addition, as Neal has noted in his earlier comments, we are experiencing an ongoing skills shortage amongst miners and mechanics in particular. This is due to an exceptionally tight labor market in Montana with unemployment at around 2.4% and those with technical skills been spoiled for choice on new mining opportunities elsewhere in the U.S. as well as non-mining employment opportunities in Montana, such as construction and infrastructure build.

We are starting to get some success with new recruitment and retention strategies, and we are also focusing on longer-term initiatives such as in-house training of mechanics and miners to build a skills pipeline for the longer term. At the same time, as you are well aware, we've experienced sharply lower 2E PGM prices, which has reduced cash flows, but we still have been set on maintaining development spend so as to create greater flexibility in our ore bodies at both Stillwater and East Boulder over the medium term. As we lift volumes through the remainder of the year, we will see lower unit prices, while we are also reviewing all aspects of our spend so as to better position the business for potential lower prices going forward.

As Grant will cover shortly, 3E recycling volumes have also been sharply reduced through the prior six months in keeping with an industry-wide recycling slowdown in North America. The six months saw mined 2E production of 205,513 ounces. This 11% lower production was attributable to the Stillwater Shaft incident which saw an 8-week stoppage, which largely impacted the West mine, while East Boulder continued to experience skill shortages and some continuing difficult ground conditions that reduced production as against plan. An all-in sustaining cost of $1,737 of 2E ounce which was 27% higher due to lower production and higher development costs is now being turned around through the remainder of the year.

In July and through August, we have seen higher volumes at Stillwater in particular and we are working hard to get East Boulder back on plan. So we are expecting a second half that tracks back to plan with a better production and cost profile at both operations. You will also see that these results have started to estimate a production cost credit that flows from the Inflation Reduction Act that has been legislated, although we are still awaiting detailed clarifications from the IRS amongst other regulators on its specific treatment for our business, though we have been conservative in its application until such time as we have firm guidance from the regulators.

Before handing over to Grant Stuart to talk to recycling, let me just acknowledge Wayne Robinson's retirement and note that I am excited by the addition of Kevin Robinson to our Americas team. Neal has reflected on the leadership changes, but let me add that Kevin brings a wealth of geological and mining experience to his new role. And he has hit the ground running as we work hard to return these operations to plan through the remainder of the year. Thank you.

Grant Stuart

Thanks, Charles. The Recycling segment continues to face headwinds. The global collections networks contraction exacerbated by the declining 3E PGM basket price, increasing interest rates and lingering recession worries, threatens to impact recycle volumes even into the first half of 2024. Amidst these challenges, however, there is some optimism driven by positive sentiment in the automotive market. The top 15 automotive sales countries have experienced a 12% year-on-year increase to June 2023, a promising leading indicator for Recycling volumes suggesting that the market may have bottomed out.

Reflecting on these headwinds, average volumes of spent auto catalysts faded, our U.S. PGM recycling operations were down 55% when compared to the first half of 2022. Adjusted EBITDA decreased by 49% year-on-year to $20 million or ZAR371 million, a margin of 5%. The decrease was due to a 6% decrease in the 3E PGM basket price to $2,735 per 3E ounce and 3E PGM ounces sold declining by 58% for the same period to 153,446 3E ounces. Despite the headwinds, we continue to view the recycle space as critical to augment the increasing demand for green metals in support of the energy transition and the world's net zero ambition.

Over to you, Mika.

Mika Seitovirta

Thanks, Grant. Hi, everyone, and greetings from the region, Europe, and from Helsinki. I'm going to go briefly through the key milestones and the key messages from H1 2023 with you. The strategy as we call it, battery metals or green metal strategy, for Europe, was approved last year in May. Since then, we have started to deliver on this strategy. And now I can tell you that our European leadership team is almost complete and we can 100% concentrate on the delivery of this strategy.

If we start from Keliber, which is the lithium hydroxide project in Finland, in Kokkola, and in Kaustinen. So, the key milestone obviously is that we started the construction of the refinery this year in March. And we can say that we are very much on track with our timetable and with our budget in building up that refinery. We also think that we can in the very near future start building and we target for that still this year, also the concentrate, meaning that everything actually for the ramp-up of the refinery is ready for 2025 this year and for the concentrate, a bit more than a year after.

We start with the external feed and then later on with our own ore as the concentrator is ready-built. We can also conclude that we are very much in plan when increasing our headcount. We get good manpower here. We are about 60 right now, with the target that by the end of the year we are going to be closer to 100 persons. It means also that we are attractive employer and I think not only Sibanye Stillwater, but also the industry we are representing here with battery metals is something which is very attractive for most of the skilled people in the region.

We have also fully funded the project in the sense that EUR250 million of equity is secured, and we are currently organizing the debt facilities for the rest of the total CapEx being EUR588 million. And it's that fully permitted means also that despite of the appeals, we have the opportunity to build and move forward and to operate.

Let's move from Keliber to France, Sandouville. Sandouville is our Nickel refinery which was acquired 2022, a little bit more than a year ago. The H1 for Sandouville refinery has been very challenging. We have lost a lot of production days equivalent -- equal in actually to 50 days during the H1 and that is partly a legacy from last year where we lost due to technical problems, a lot of sales capacity. We have been able to build up that sale capacity. So, we are almost fully having those capacities in use after H1.

However, it was not only the technical problems with the capacities, it was also inflation that impacted the production a lot and cost and it was also the situation in Europe where we got big challenges with raw material supplies because of the war. We also had general strikes in France impacting the production levels. That's why we actually ended up to a level, which was 23% lower than last year.

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

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

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

Thank you very much for this, and over to you, Robert.

Robert Van Niekerk

Thank you very much, Mika, and good afternoon, everybody, and good morning, everybody. My name is Robert Van Niekerk, and I'm responsible for the New Century zinc tailings retreatment operations in Australia. Sibanye Stillwater acquired 100% of the Century operations effective 1 March 2023. Now, New Century is an Australian tailings management and economic rehabilitation operation, which essentially undermines (ph) 8.5 million tonnes of zinc tailings on an annual basis, and it pumps approximately 250,000 tonnes of concentrator for a distance of 300km to the Karumba port. The acquisition of the New Century resources complements very well our investment in DRDGOLD.

Since acquiring the organization, we've reorganized it significantly. We've de-listed the entity. We've reconfigured the Board of Directors and we've put a more appropriate management structure in place as well. I'm sure you all know by now that we've had a challenging first half of 2023 because of regional flooding coupled with lower zinc prices. And to put the flooding event in perspective, in the first nine days of March, the mine experienced heavier rainfall than what the region has ever experienced for an entire year before. The operations were brought to a close on the 3rd of March. The team did exceptionally well and restarted the operations up by the 27th of March, and the operations resumed steady-state production again by the 20th of April.

Safe to say though, during that period, we sacrificed more than 11,000 tonnes of zinc production. Since we've owned the operations or since we've acquired the operations, we have sold 27,000 tonnes of zinc and we produced the zinc at an all-in sustaining cost of $2,418 a tonne. Together with the tailings operation, we also got an option to purchase or to acquire Mt Lyell mine, which is a copper-gold mine on care and maintenance in Tasmania for which our technical team are busy completing a feasibility study now to re-explore and open on those operations.

I think now, I'll hand over to Charl. Thank you very much.

Charl Keyter

Thank you, Robert. Good morning and good afternoon to all participants. Turning to the financial results and starting off with the now familiar capital allocation framework. We continued to deliver on capital allocation using the framework as our North Star. On project capital expenditure, spending on both Burnstone and K4 were in line with plan. The Keliber lithium project was approved in November 2022, and spending for the half year was EUR65 million against a fully funded plan for 2023 of EUR230 million.

Our cash position at ZAR22 billion is still in a very healthy position. We continue with our dividend policy of returning between 25% and 35% of normalized earnings and returned ZAR1.5 billion in dividends for half one 2023. As reported by Neal, gearing at 0.01 times is extremely low despite our ongoing investments in battery metals and strategically, we will continue to optimize throughout the cycle.

During this period, we further bolstered our liquidity by refinancing and upsizing our U.S. dollar revolving credit facility from $600 million to $1 billion with a three-year maturity plus two optional one-year extensions, or effectively a five-year facility. Taking into account our cash position and our committed and uncommitted credit facilities, available liquidity is approximately ZAR48 billion or roughly half a year of operational expenditure.

If we now move to the financial results for half one 2023, revenue was down 14% to ZAR60 billion and this was driven by lower production from the PGM operations, and a 15% and 22% drop in the 2E and 4E basket price at the U.S. PGM and SA PGM operations respectively. Recycling receipts remained under pressure and volumes were down 58% for this period. The good news was that gold output following the strike in 2022 improved by 109% and the rand gold price was up 22%.

Cost of sales at ZAR45 billion was down 4% year-on-year. This was due to lower volumes, but also due to very good variable cost control. Royalties and taxes for the six months was ZAR3.4 billion, approximately half for the same period in 2022, due to lower overall profitability. Profit for the period was ZAR7.8 billion and as reported resulted in a dividend of ZAR1.5 billion for half one, 2023.

If we investigate the balance sheet, it is clear that we remain in a very robust position with very low gearing. This is not only evident in absolute terms, but also by analyzing standard balance sheet ratios. The foundation of our strong balance sheet remains our diligent and disciplined capital allocation. Additionally, timeous debt repositioning and an upsized U.S. dollar revolving credit facility provides us with significant financial flexibility.

As a final message, the financial health of the business is very good. Gearing remains very low and shared value creation continues through a 35% dividend payout ratio.

I will now hand you back to Neal, to conclude. Thank you, Neal.

Neal Froneman

Thank you, Charl. And I will conclude and I'm going to be very brief, starting with some adjustments to guidance. So, next Slide, please. There are three areas where we've had to revise guidance. In terms of U.S.f recycling, the market continues to remain depressed and it would be inappropriate to assume it's going to change. The South African gold operations have been impacted quite severely by the Shaft incident at Kloof 4 and there have been adjustments made to take account of that. And we've also had to adjust the -- the EU battery metals output at Sandouville. So, you can compare that to previous, let's say, guidance, and you will see the differences.

In terms of concluding in a little bit more detail, I want to make the following points. I think we've clearly showed the ongoing benefits from commodity and geographical diversion -- diversification I should say since 2016. We are positioning ourselves and have been for some time for a lower price environment. We've got a resilient financial position and a ZAR22 billion or a $1.12 billion cash buffer should we -- should we ever need it. We are assessing all our operations to optimize for longer-term sustainability and constantly optimizing to improve performance. We are driving and being a catalyst for change in the challenging South African environment and I think the trends are -- are improving, still some way to go.

Critical metals, as I explained towards the end of my section, is a niche market and we're well positioned in it at niche for us as a player, and that could enable medium to long-term value creation. We are definitely in the right metals and we are in the right global ecosystems, and as I pointed out, we've made these entries at the right time. We will continue to look for value accretive opportunities to increase our global portfolio, but in a downturn like this, we will be very prudent, but certainly there will be very significant opportunities.

So, with that, I'd like to just advertise our Battery Metals Day on the 27th of September, 2023. Please save the date. These have been particularly successful using SFA and alluding to what our thinking is from a Company point of view, I think provides a lot of good strategic insight.

And then finally just to say, let me conclude this formal presentation by asking if there are any questions. So, James, over to you.

Question-and-Answer Session

A - James Wellsted

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

Neal Froneman

Thanks, James. I think I'm going to ask Rich to deal with the details. But just to say that it's been my experience over many years that you've got to take a long-term view. You've got to through cycles. It's important not to make knee-jerk reactions. For instance, projects are committed to in the longer term. They've got their own capital base and economic returns. So, you don't go and start -- you don't really start and stop projects. Of course, you can, if you really get into a very tight situation. So, we're mindful of all those things, but we don't see it as a major constraint in terms of the phase we're entering into. I would also say that mine closure costs are not prohibitive. If necessary, we will do it. But Rich, your specific view on -- on the South African PGM aspect of that question?

Richard Stewart

Yes. Thanks very much, Neal. I think -- and maybe just to pick up I guess specifically on the project side, obviously the major project we're currently developing is K4 at Marikana. Worth remembering that that's a project that's got a 50-year life and certainly one of the higher margin projects that we've got when we forecast going forward. So, certainly that's very much a through-the-cycle investment and that wouldn't change.

I think in terms of what shafts are currently operating above the spot price, listen, I'd rather not go into absolute specifics on that. Clearly, there is a process that we are looking at there, but what I would say is that for many of those shafts and I guess also the question to would we cut production, in many of those instances, these are shafts that can really be rightsized in terms of focusing on higher margin and really getting the size versus the output versus the overhead cost structure right, to improve those margins. So, it's less about will they remain open or closed, but more about structuring them appropriately, which would have an impact on production, in line with I think what the market would require, but more about how we optimize those shafts rather than open or close.

I think when it comes to closure, clearly, that's often more driven by reserves rather than just price. And I think with pricing, you have to look through the cycle. As we know with any shaft, there are very high barriers to entry, but also high barriers to exit. So, of course, that's managing it. When shafts come to end of their life and the reserves are gone, that is clearly when they would ultimately be closed. At present, we do have some shafts that were due to close in 2019 that we've been able to operate for a further four years. And over the next three years -- three, four years, we do have a few shafts particularly at Kroondal that have also been scheduled to close. So -- and that's due to reserves coming to an end of life rather than a price decision.

James Wellsted

This question on the U.S. PGM business, what palladium long-term price do we use and how should we think about potential impairments at the U.S., if the prices continue decreasing?

Neal Froneman

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

Charles Carter

Thanks, Neil. Firstly, our reserves are done at 12.52 yarns and what we'd be doing right now is spot prices in and around 1,200 to 1,300 is think about our business at breakeven on current spot prices. So the plan that's going in next year is doing a lot of trade-offs right now on how to make that work. I don't want to preempt where we came out on that because we've got good work on the go and we're still trying to track to our longer-term intent which we conveyed in our best last year, which is by 2027 to be up and around 700,000 ounces at around $1,000 an ounce. So we've got to get back on that track and we've had a difficult first half, but we are confident about the second half.

And then when we think about the trade-offs with lower spot prices to current plan, we're well below our planned prices right now on spot. We've got a number of levers, we're obviously favoring development on an ongoing basis because to get to the 700,000, you've got to invest in these ore bodies, you've got to create the mining flexibility, primary and secondary development very critical, that's coming in at a sizable costs. So one of the levers that we will look at in the ongoing plan reviews is how to think about contractors on development, which some of them quite specialist roles but quite expensive. So that's one lever we can pull on how to favor our own people, but it's got a buildup profile that's slightly different to using contractors, but we do have that sort of lever.

And then we've got a lot of cost tributes on the go right now. So obviously in a plan, you would look at your gross capital and how to phase that with lower pricing, but right now, we're looking at all spends across the business to pull back where we can. So our intent is to be making money in lower price environments like we're currently experiencing. The first half, we -- in the second quarter of the first half that was tough because it takes time to sort of turn the machine to a lower price environment than what we had planned. But I think we're in good shape on that. So, I don't know, if that answers the question, but let me pause there. Thank you.

James Wellsted

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

Richard Stewart

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

In terms of the short-term or how we are positioning ourselves for it. As I said, I think you can see that we are taking a proactive approach, and to some extent, I guess it will be kin to Noah's rule try not to forecast the short-term where to build the ark, and that is what we're doing with our operations at the moment. But as you saw from the life of mine profile that we put out, I think we have several opportunities to be able to turn projects on quickly should that cycle turn.

And I do think, as we've mentioned, that there is downside risk to the BEV penetration rates. I also think, as Neal highlighted, that there are some real downside risks to primary supply. And I think when we put that together in the medium-term, we've got quite a different outlook. In the short-term, a lot of what we've been seeing in the PGM market has still been destocking and volatility associated with return demand post-COVID, longer-term contracts that autos companies have maintained. So I think we're still seeing a lot of volatility that needs to wash out in the market over the coming few months. Neal, not sure if there's anything you'd like to add to that.

Neal Froneman

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

James Wellsted

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

Charl Keyter

Happy with that? Thank you, James. And the evolving picture is effectively that we'll maintain our net debt to EBITDA position at a marginal net debt position. As expenditure on the projects increase, there might be some movement where the net debt to EBITDA slightly moves up, but nothing to lose sleep over. I mean, we've enjoyed a very, very sunny summer in terms of our net cash position.

And clearly, we've tapped into a small net debt position now, but I think the long-term fundamentals for us is still our own internal target or our own internal comfort level, not necessarily a target because it's not something we aim for. But the comfort level sets at around one times net debt to EBITDA and that's a number we've always quoted and we've stuck to that number, and said that, we feel comfortable that that's a number that we can manage throughout the cycle.

James Wellsted

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

Charl Keyter

James, I'll pick up that one. So I think in short, yes, the government's effectively paying for 10% of our qualifying production cost Inflation Reduction Act was enacted in August 2022, and that did introduce several new tax credits to encourage production and sale of critical minerals of which platinum and palladium are two.

In the Inflation Reduction Act was the 45x advance manufacturing production credit and that includes a credit, as we've said, equal to 10% of the qualifying production cost. Now guidance on this is still not firm and we're awaiting final guidance, but effectively government will be returning 10%. So they will be paying back 10% of our qualifying production costs. So this is not alone, and this will be in force for a period of 10 years. So if you think about this more as a grant, then that's the way to think about the advance production credit.

Kevin Robertson

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

Charles Carter

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

James Wellsted

Thanks, Charl, and that obviously aligns with the positioning ourselves in favorable ecosystems and the DOE loan that we spoke about as well at Rhyolite Ridge so that comes together quite nicely. A question probably for Richard, what drove the decrease in gold AISC given that production was lower this half than December '22 second half of '22?

Richard Stewart

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

James Wellsted

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

Neal Froneman

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

And you heard me speaking earlier about the importance of partnerships as opposed to buying assets from shareholders and the old adage of the pleasure's mine and the baby's yours is something we've experienced where you do that. We like to invest or earn in two projects by investing in the actual project itself form into the assets. Richard, do you want to add anything to that? You are close to the process, you're actually running it?

Richard Stewart

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

James Wellsted

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

Richard Stewart

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

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

James Wellsted

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

Neal Froneman

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

In terms of global recycling, it's a business we really like, Autocat Recycling is only one part of this business, it's the part we know, and that's the part that we're going to expand, should the feasibility study in Europe turn up to create the right value. Recycling strategically, as I've mentioned, is a very important part of being a responsible miner and acknowledging the stewardship of these critical metals, that's part of the solution, if you can't get enough from primary supply, certainly, that's our responsibility as an industry to recycle what we can to add to the supply side.

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

Grant Stuart

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

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

Neal Froneman

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

Operator

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

Adrian Hammond

Yes. Thanks for the detailed presentation. Just curious a bit more about the lithium prospects. Certainly, the price outlook for lithium looks very prospective, but could you give us some idea when Sibanye-Stillwater will produce and then cost to highlight and sort of EBITDA efforts that generates that's up? And then for Charl, just curious do you consider what you think about the balance sheet going forward spots carrying will rise, and given the level been so high good year and can change very quickly. So I was just wondering that where the [indiscernible] are at please? Thanks.

Neal Froneman

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

Mika Seitovirta

Thanks, Neal, and hello, Adrian. Maybe just to start with some comments about the general market, as you have heard already couple of times so we are not as positive as the most positive outlooks are stating about electric vehicle volumes, and the reason being that there is just not enough metals. And this outlook is going to give a little bit different growth than in most of the forecast. However, the growth is still significant. Right now, we are having 40% growth in the EV penetration in different markets.

Lithium is obviously a key for the current technologies, and we believe that lithium is also key metal in the future technologies. We see a very strong position for lithium and nickel, there will be other technologies as well. However, they are going to be very complementary in this situation where we need to go down with the CO2 and we need to help this transition to the electric vehicles.

Keliber is the project in Europe, as you know, and Keliber is aiming to a 15,000 tonnes production ramping up '25. Now this is only a small part of the production and supply that could be used by European customers in the future. So there is a lot of more demand in lithium hydroxide than what we can produce, but at the same time, I can say that we can grow in lithium as well. So we are doing a lot of exploration, and first, we need to get Keliber right which we will do, and then we can grow in this space and there is a lot of good room for that and coming synergies as well.

Concerning the numbers, we have good EBITDA levels there and obviously, everything is depending on the price. If we look at the current forecast towards 2030, so the consensus is everything between 40,000 and 20,000, we believe that it's going to be 30,000 plus the price of lithium, and in our own model, we have been using flat 26,000, so we have been very conservative in this one. And in all the cases, we can clearly produce EBITDA in absolute terms clearly more than ZAR200 million in the future as a yearly when we have full production in the current class.

Neal Froneman

And Mika, just to confirm, that's EUR200 million or $200 million EBITDA. And Adrian, Charl is probably best placed to pick up the second part of your question.

Charl Keyter

Yes. Thank you, Neal. And. Hi, Adrian. Yes, Adrian, obviously, if we just continue to manage the business as is and just take into account the effects of spot prices, then clearly that will have an impact on our gearing. However, this is a position that's not unfamiliar to ourselves, and clearly as we move forward, we will reevaluate what our triggers and our levers are, that we can pull to preserve that balance sheet flexibility.

But as we've said, we've got significant liquidity, Adrian, at this year probably sitting at around half a year of operating expenditure, but not a position that we'll just sit on our hands. We will actively manage it. You would know that as a mining business, there are different levels of cost being production-critical, and then as you move further from the shaft head, there are costs that we can start addressing. So, we will actively start managing that, but also not to the detriment of the operations. So, it's more watching brief and careful planning going forward.

Neal Froneman

Thanks. Are there further questions from the phone lines?

Operator

Yes. There are, sir. The next question comes from Raj Ray of BMO Capital Markets.

Raj Ray

Thank you, operator. Good afternoon, Neal and team. My first question is, looking at your portfolio, Neal, I mean there's a PGM which accounted for close to 84% of your Group EBITDA. I mean that part of your portfolio is really working well. The remaining part of the portfolio seems to have an out -- like outsized impact on your shippers' performances going by happening today. I mean how do you address that?

I mean you had highlighted steady state costs for the U.S. PGM and SA Gold operations, you are still far off from there. I do understand some of those external factors including Keliber shortage, not only in the U.S., I mean one of your peers in the gold operations, Goldfield, put it -- highlighted the skill shortage at South Deep. I mean, what's the timeline -- or sort of timeline you have in terms of, let's say, reducing your cost and can you even go back to the cost that you had highlighted 12 months or 18 months ago for these operations?

And the second part is, at what point, specifically for the gold operations, do you look at other strategic options? I understand you -- you see that as a kind of a cyclical part of your portfolio. But if it doesn't perform as you expect, what are the strategic options are you willing to consider? So, that's one, first of my question. I understand there is multiple parts to it. The other, I'll ask on your green metals portfolio after this.

Neal Froneman

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

Let me talk about some of the time frame, so you would see -- we've looked at many strategic copper options where our gold business and the one that we are proposing that is in the best interest of shareholders is based on the graph that I showed right at the beginning of my section. We assured that the majority of our gold business is actually very profitable, and with some minor restructuring or minor optimization, I think we can deliver a very different, let's say, value proposition, and we can do that, and Richard is working on it probably within about six to nine months, nine months on the very outside, six months I think is doable. And that's not just, let me call it, the marginal sort of changes you think about maybe cutting out our non-profitable production, it's a complete change in philosophy in terms of how we run that business because you've got to address the overheads and we've got some ideas there, and Richard is working on that.

In the U.S., we are absolutely convinced of our ability to turn the Stillwater operations back into a profit despite the skills shortages. I want to point out, you mentioned skill shortages at South Deep and how it might be impacting them? We use very different skills within our gold business, so that's not a constraint in South Africa, but it's a very significant constraint in the U.S., and but is changing, that's changing for two reasons. The one is, I think high interest rates of biting I think some of our initiatives around retention and attraction are starting to kick in quite nicely.

And as soon as we get the volumes back up at Stillwater, the unit cost will come down, and as you know, we've got a plan to get those well below $1,000 announced. The shaft incident in this period put us back probably six months, even though it was not -- it didn't take six months to fix the accident, but you will not see the improvements that we're seeing on a monthly basis. And I would say, we're only going to get back to plan, our original plan, in the last quarter of this year. And we will show you that when we present our results next time. So, the U.S. will get back to that.

In the longer-term, you started hearing some numbers from lithium coming out of Europe within a few years, but in the longer-term, the aim is to get our revenue mix into something more like a third from PGMs, a third from battery metals, and a third from gold. And of course the more we can geographically diversify that, the more our multiples will increase. So, Raj, happy to talk more detail offline, but in essence, strategically, we recognized the problem that you've highlighted and, of course, I shared with you some of the thinking and the solutions we are actually implementing as we speak.

James Wellsted

Further questions from the line?

Raj Ray

[indiscernible] portfolio. One is just a clarification on the appeals at Keliber, also the understanding that while the future outstanding, you cannot stop the mining or the growth development of the concentrator. Can you comment on that? And the second question is on Mopani, do you have a sense on how long does government's process is going to take before they announce who the winning bidder is going to be? And then again, assuming Sibanye is the winning party, are you looking to partner with somebody on that project or are you going to or are you looking to go ahead with it by yourself?

Neal Froneman

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

So although, we're a western-facing company, I do think we can involve eastern companies as partners, and to some extent, that goes a long way to resolving a conflict that the Zambian government are probably dealing with because they also have relationships with the east and the west. So yes, we do have a partner and we think we've put in a very good offer, it's probably not the best offer, but as Richard said, our ability to -- and our track record of handling these difficult socioeconomic type of situations stands us in very good stead.

In terms of the timing, I think we are pretty close probably in the next, I would say, two to three weeks of having an outcome. Now, when I say an outcome that would be an outcome of then negotiating, let's call it, the stability side of an arrangement with the government. To date, it's really been a focus on the actual assets. We haven't had the stability discussions that are absolutely necessary to provide us with the appropriate comfort and the right commercial environment to conclude the transaction. I think we found the process good, fair and our relationships with the government and ZTCMO are very good. So Raj, that's about all I can say on Mopani for now.

Probably one thing I should say, because I don't want to create an overhang on our stock. I tried to allude to the type of transaction structures that we consider when we do transactions of this nature is that we prefer working with partners and we prefer working with partners and we prefer earning in. So, please don't factor into your thinking a large capital outlay upfront. These assets require significant capital investment, but it's going to come over a good number of years. So, please keep that in mind as well. Mika, do you want to just comment on the permitting and the fact that we can continue construction even with the small permit dispute.

Mika Seitovirta

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

James Wellsted

Are any further more?

Operator

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

Chris Nicholson

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

And then the second question is, just New Century, $28 million EBITDA negative in the first half, and over $600 million in -- ZAR600 million in free cash flow, sorry. Clearly, we had some one-off incidences. So, could you just give us a bit of guidance on kind of the, what the glide path this year to kind of free cash flow breakeven or profitability or if you can't really give that, I mean, just what kind of a zinc price do you require for that business to be able to stand alone? Thank you.

Neal Froneman

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

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

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

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

Charl Keyter

Yes. Thanks, Neal, and I think you've summed it up. I mean, obviously, equity is not a currency for us at this moment and we have factored in the Rhyolite ridge payments and Chris, just to remember that, I mean from when we receive the permitting, that $500 million will obviously be phased in roughly over a two-year period. So, it's not necessarily a bullet payment, so it can be funded from a combination of depending on commodity prices and where they play out, but it can be a combination funded through earnings and then vanilla debt. Thanks, Neal.

Neal Froneman

Thanks, Charl. Rob?

Robert Van Niekerk

Thank you, Neal, and hello, Chris. The Century operations have come out of a particularly difficult period of the month, also absolutely they have little bit of cash. Going forward, are seen possibly to actually stop and we've run our numbers at future consensus price and just as a matter of interest, that's about $1.30 per pound, and that's [Technical Difficulty]

Neal Froneman

Is that just Rob that we've lost?

Robert Van Niekerk

Hello, Neal, are you still there?

Neal Froneman

Yes. We're still here. James, are we still online?

James Wellsted

Yes. We are online. We can hear Rob.

Robert Van Niekerk

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

Neal Froneman

Thanks, Rob.

James Wellsted

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

Operator

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

Cameron Needham

Thanks very much for the presentation. Just two quick questions from me. Firstly on Sandouville. Just on the back of the cut to production guidance and some of the issues that you've outlined in your presentation, are you still confident in delivering the anticipated improvement of asset performance longer term? And what are some of these headwinds that change the picture?

And then just secondly, is the amount of management time that asset turnaround is demanding, is it kind of proportionate to the amount of capital and potential returns you see from the asset that it could generate? Thanks very much.

Neal Froneman

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

Mika Seitovirta

Thank you, Neal. And thanks for the question. As we mentioned earlier, we have a completely new management team now in place and actually, they have started to work at the very end of March this year on different options for Sandouville, and as we call optimization of the plant. And that means that the work will be done later this year and we will also come with a comprehensive plan how and what are we actually doing in order to radically improve the performance of the plant.

Today, we are working with options through modeling. We are going through the mass balance sheet, we are doing very professional and careful work, which we are taking seriously. So, today we are not in a position to give you an understanding of the long-term returns. But later on this year, we will tell you how and what we are going to do.

Cameron Needham

Thanks. Thanks, Mika.

Neal Froneman

Thank you. And the last caller?

Operator

Thank you. The next question comes from Leroy Mnguni of HSBC. Please go ahead.

Leroy Mnguni

Hi. Good afternoon, guys. So, I've got a few questions. The first one is, if PGM prices do not recover from these levels, how long would it take in your quest to turn around your Stillwater's operation to reach sort of a free cash flow breakeven level?

And then my second question is, I'm just mindful of that slide you presented around this time last year with the restructuring of Stillwater, you gave that sort of balanced outlook for palladium, and I'm just curious as to whether if you could go back in time and face the decision of funding the tri-metallic catalyst, if you would still fund it or how you would maybe change your approach given what it's done to the palladium market? I think I'll stop there in the interest of time.

Neal Froneman

Okay. Thanks. Thanks, Leroy. And Charles, if you can just prepare yourself for the -- how long it will take, assuming the PGM price recovery to get to a breakeven price. But Leroy, on the tri-metal catalyst, we had a situation where the -- the demand across the basket was unsustainable. So, there is absolutely no doubt in my mind that we would have still pushed for the tri-metal catalyst, the -- the substitution of palladium with platinum. Obviously, the price differential today is less of an incentive for that to happen, but I also want to say that I don't believe that has really been the driver of the decreasing palladium price.

And Richard, perhaps you want to just come in on that, but really, we really do approach the business on with sustainability and that's the fundamental in terms of whatever we do. But Rich, your views on palladium price, I don't believe it's driven by the tri-metal substitution, that's probably had very little impact, before you come in Charles.

Richard Stewart

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

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

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

Neal Froneman

Thanks, Richard. Charles?

Charles Carter

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

And I think Neal gave you a very clear sense that every cost element is under review, so we are not just working on the mining tradeoffs and the development tradeoffs and the capital tradeoffs, we are working on all the levers to be pulled across the Montana set-up to reduce our cost profile and -- and to make cash as we have historically done. So, I'm encouraged by what I'm seeing for the remainder of this year. And given the skills shortage, this is not a scenario where you cut labor in the hourly paid, our hourly paid being miners, mechanics, geologists, etc. This is where you pull very different levers and some of those we are still building, so our whole procurement strategy has big levers that will -- that will unlock value longer term.

But right now we're moving from decentralized mine-based procurement to centralized regional procurement. Good work on the go and that goes for the HR strategies, it goes to all the support strategies across the two operations. These have historically been fairly decentralized. That has its merits, but actually what we need in depressed prices is bigger levers that you can pull with confidence over and above simply how you mine and develop and how you spend capital. So, that's where the big focus is and it's good work on the go, and it's for long-term sustainable performance of these assets, it's not just knee-jerk quarter-to-quarter depending on prices.

So, short answer to your question is, we look to make money through the remainder of this year. Obviously, if there's further price downside, we have to then have a different mindset to the one we currently have, which is hard to favor and protect development and reduce mining costs and reduce overhead costs. Nothing is off the table on cost reduction if we have more dramatic scenarios. But I think from this presentation, you should also be mindful, this is a team that believes mainly, possibly there is price upside on what we're experiencing right now into pricing, but we can't bank that until we see it. So, we have to be prepared for downside. But I think this is a peculiar market, lot of destocking, lot of trading dynamics short-term and my job is to make money and build a sustainable long-term business that does justice to a world-class ore body, as well as build the region in the right way. So, that's my focus. Thank you.

James Wellsted

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

Neal Froneman

No, just to -- it's been a long session. So, thank you for your patience and we appreciate your time and we look forward to delivering an improved result at year-end. So, thank you and have a good and safe day.