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Sibanye-Stillwater Operating and financial results





 

Sibanye Stillwater Limited (Sibanye-Stillwater or the Group) (JSE: SSW and NYSE: SBSW) is pleased to report operating results and condensed consolidated interim financial statements for the six months ended 30 June 2022.

SALIENT FEATURES FOR THE SIX MONTHS ENDED 30 JUNE 2022

Significant safety performance improvements with reducing injury and fatality rate trends

Profit of R12.3 billion (US$803 million)

Net cash position maintained with 0.16 x Net cash: adjusted EBITDA*

Interim dividend declared of 138 SA cps (32.46 US cents** per ADR) representing an annualised dividend yield of 7%

Inflation-related three-year wage settlement reached at the SA gold operations

Good cost control at SA PGM operations despite lower volume

Acquisition of a majority stake in the Keliber project progressing well with an anticipated ownership of more than 80%

Sandouville nickel refinery – integration well advanced

* Refer note 11.1 (footnote 5) of the condensed consolidated interim financial statements

** Based on the closing share price of R40.67 at 30 June 2022 and an exchange rate of R17.0034/US$ at 22 August 2022 from IRESS

STATEMENT BY NEAL FRONEMAN, CHIEF EXECUTIVE OFFICER OF SIBANYE-STILLWATER

The Group performance for the six-months ended 30 June 2022 (H1 2022) reflects the deterioration in the global economic and political environment during the first half of 2022, and a challenging period for the Group due to significant disruptions experienced at the SA gold and US PGM operations.

The safety improvement initiatives which commenced during H2 2021 were extended into H1 2022, with meaningful improvements on all safety indicators.  Tragically two fatal accidents were experienced early in the period; pleasingly however the group achieved a fatal free quarter in Q2 2022.

Production from the SA gold operations was 63% lower year-on-year, primarily due to industrial action which extended for more than three months, while the US PGM operations reported a 23% decline in 2E PGM production in H1 2022 compared with H1 2021, as a result of ongoing operational constraints and the temporary suspension of operations at the Stillwater mine following severe regional flooding that occurred in Montana from mid-June 2022.

4E PGM production from the SA PGM operations was 8% lower than for H1 2021, but remains well within guidance, with a continued cost management focus and higher by-product credits, resulting in AISC being maintained in line with inflation. This continued focus on cost management has resulted in the SA PGM operations migrating meaningfully down the industry cost curve since they were acquired.

Considering the significant operational disruptions during the period, and the deterioration in the macro-economic environment, the Group\-s financial performance for H1 2022 was notable. Group adjusted EBITDA of R22.6 billion (US$1.5 billion) for H1 2022 was only 19% lower than adjusted EBITDA of R28.1 billion (US$1.9 billion) for H2 2021, albeit 44% lower than adjusted EBITDA of R40.5 billion (US$2.8 billion) for the comparable period in 2021. H1 2021 was a record 6-month financial result for the Group by a substantial margin, driven by record PGM basket prices and strong operational performance by all the Group operating segments. 

Profit for the period of R12.3 billion (US$803 million) was 51% lower than record profit for H1 2021 of R25.3 billion (US$1.7 billion), but compares favourably with profit achieved for H2 2021 of R8.5 billion (US$544 million), when average precious metals prices were at similar levels.  This represents the third highest six-month period profit achieved since the Group\-s initial listing in 2013. Basic earnings per share and headline earnings per share of 426 SA cents (28 US cents) and 423 SA cents (27 US cents) were both approximately 49% lower year-on-year.

Normalised earnings of R11.2 billion (US$726 million) supported the declaration of an interim dividend by the Board of directors of R3.9 billion (US$230 million) (138 cents per share/US 32.46 cents** per ADR), which is at the upper end of the range of the Group dividend policy and equivalent to an annualised dividend yield of 7%.

The Group has maintained its strong financial position, with cash and cash equivalents of R27.2 billion (US$1.7 billion) only marginally lower than at the end of 2021 and exceeding borrowings (excluding non-recourse Burnstone debt) of R19.3 billion (US$1.2 billion), resulting in a R7.9 billion (US$487 million) net cash position and net cash: adjusted EBITDA of 0.2x at H1 2022.

With both the SA gold and US PGM operations resuming production from suspended operations during H2 2022, the outlook for the remainder of 2022 is significantly improved. The Group is financially sound, generating positive cash flow, with a robust balance sheet offering significant financial flexibility. We are well positioned both to endure the prevailing economic down-cycle, and also benefit from value opportunities which may eventuate.

SAFE PRODUCTION

Reflecting on H1 2022, we have made significant steps in our safety journey, with the improving trends in all safety indicators observed during H2 2021, continuing into H1 2022. While institutionalising the \”Rules of Life\” and other successful initiatives implemented in H2 2021 in order to maintain these positive trends is ongoing, a specific priority for 2022, is the elimination of fatal incidents, underpinned by the implementation of our Group wide Fatal Elimination Strategy.

This resulted in the Group achieving a fatality free quarter for Q2 2022, a notable milestone.  Despite this encouraging decline in fatal incidents, the loss of two colleagues during Q1 2022 is a stark reminder that continued implementation and monitoring of our safety controls and behaviours to mitigate risk and stop unsafe work must remain our foremost priority.

The health and safety of our employees is of fundamental importance for the Group, and as a leading international mining company responsible for the wellbeing and safety of more than 80,000 employees and contractors, we have committed to achieving world-class safety standards comparable to our international peers.

Following a relaxation in COVID-19 related restrictions by most countries and a significant decline in COVID-19 infections in our workforce, we have reviewed the overall risk at all our operations. Based on our risk assessment, including in excess of 90% vaccination rate in the majority of our operations, we are currently ensuring that our COVID-19 dedicated facilities are embedded into our Health Care operating practices. In line with our focus on becoming a pandemic resilient organisation, these learnings, including our vaccination strategy, are being incorporated into a newly developed “Pandemic Preparedness Response Plan” that will ensure we are able to respond rapidly to mitigate future risks associated with the COVID-19 or any other health related pandemics.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)

Marikana renewal

Following the acquisition of Lonmin in June 2019, Sibanye-Stillwater committed to a process of renewal at Marikana for the co-creation of a better future for all stakeholders at Marikana.

In 2020, the Marikana renewal process was launched to address the tragic Marikana legacy, rebuild trust between stakeholders and facilitate socio-economic redress. Guided by the themes of “Honour”, “Engage” and “Create”, the primary aim of the Marikana renewal process is the co-creation of a shared vision and the delivery of tangible socio-economic opportunities and value to the Marikana communities and the broader district, which will be sustainable long after mining has ceased. 

In August 2020 Sibanye-Stillwater hosted the first Marikana Commemoration lecture. These annual lectures mark and commemorate the anniversary of the Marikana tragedy and seek to encourage and stimulate thought leadership and critical discourse on the issues that face us as a society today, particularly in the mining industry and in our operating districts.

In 2020 the keynote address was delivered by Adv Thuli Madonsela, who shared a Message of Renewal, Healing and Hope. For the second commemoration lecture held in August 2021, Dr Mamphela Ramphele delivered a message of Honour through Healing. The third lecture in August 2022 commemorated the 10th anniversary of the Marikana massacre. Professor Adam Habib discussed the Social Compact and the Importance of Rebuilding. On 16 August 2022, the entire South African mining industry came together, pausing for a moment of silence and reflection in honour of those who died in 2012 – a solemn occasion marking our collective commitment.

We continue to make progress on the commitments made to the widows and families of the deceased. Not least, this includes the completion and delivery of 16 houses to the widows and families of the deceased of which eight houses have been completed and handed over with the remaining eight houses scheduled for handover by the end of 2022.

We also continue to fund and in other ways support the education of the children impacted by the tragedy, many of whom are now young adults, through the Sixteen-Eight Memorial Trust. The Trust currently supports 139 beneficiaries, ranging in age from 9 to 41 years old. To date, the Trust has contributed R64.5 million in all to beneficiaries, averaging close on R460,000 per beneficiary since its inception. Six beneficiaries began their tertiary studies in 2022, bringing the total number studying at tertiary level to 25 (excluding post-graduates). One of the Trust�s first tertiary-level beneficiaries, Mandla Yawa, recently graduated with a PhD in Agriculture and Animal Science from Fort Hare University. He initially joined Sibanye-Stillwater as an intern in September 2020 and in December 2021 was appointed as a Social Responsibility Supervisor, overseeing several of the projects falling under the Marikana Renewal and the social and labour plans.

Associated with the Marikana Renewal is the Letsema engagement process, a programme of engagement with a broad range of stakeholders in the region facilitated independently by a social facilitation organisation, ReimagineSA. The Letsema process uses South Africa\-s rich cultural heritage to collectively find solutions to common problems. In a multi-stakeholder initiative, the families, elected representatives, traditional leaders, NGOs, and communities have been brought into the process as part of the healing required to rebuild trust. Sibanye-Stillwater has a long-term vision for the Marikana region and has significant investments underway to create opportunities that change lives through investment, employment, and supporting local community development.

This year, a series of multi-stakeholder dialogues, or Pitsos, were launched as part of the Letsema process, to encourage information sharing relating to the realities faced by stakeholders. The first Pitso was held in May 2022 and attended by 94 family members of the deceased, as well as government officials, and NGOs. This Pitso encouraged engagements relating to the healing journey thus far and a dialogue dealing with memorialisation. Discussions occurred in the context of six focus areas identified as critical by the families: Justice, Memorial, Livelihoods, Education, Health, and Housing. These dialogues have the aim of fostering accountability and shared responsibility among stakeholders. Subsequent to these engagements, the families have established a task force to conceive and build a memorial site at the Koppie in Marikana.

The Marikana Renewal Programme supported by the Letsema process is a truly unique private sector initiative in terms of its inclusivity. Its aim is to come to terms with and learn from tragedy, while actively building on the seeds of hope and reconciliation.  This is not a journey that we have travelled alone. We are very pleased to have received an overwhelmingly constructive response from those affected by the tragedy, and those in the district who live under its shadow. We are also pleased that, to mark the 10th anniversary, the South African government recognised Sibanye-Stillwater\-s work and expressly acknowledged its responsibilities. The government\-s statement can be read at: Government commemorates the Marikana tragedy.

The history of mining abounds with practices that damaged the fabric of society in the interests of a few. But we believe that we have learned since that era that mining must be conducted in a way that builds social and economic capital for all stakeholders. And by doing this in both a socially and environmentally responsible way companies, and especially mining companies, have the capacity to drive change, to achieve social justice and create enduring value.

We remain committed to honour, engage and create in collaboration with other stakeholders to ensure a positive future and legacy for Marikana and its people collectively. Significant detail on the Marikana Renewal can be found at: https://www.marikanarenewal.co.za.

Wage negotiations

SA gold wage negotiations

On 9 March 2022 AMCU and the NUM (the Unions) gave notice that their members would be embarking on industrial action. This followed engagement with union representatives over a ten-month period including facilitation by the Commission for Conciliation, Mediation and Arbitration (CCMA) during which the Unions stuck rigidly to their demands for annual increases significantly above inflation. A decision was taken to implement a concurrent lockout of all employees on strike, partly in the interests of the safety of employees as well as to safeguard company infrastructure and assets. After more than three months of industrial action, an agreement was finally reached with the unions on 13 June 2022, following successful intervention by the CCMA at the behest of Sibanye-Stillwater.

The final wage agreement provides for inflation-linked annual increases (an average increase of 6.3% pa), which caters for the current elevated inflationary environment, and is fair to employees and  protects the interests of other stakeholders. Importantly, improvements in several ancillary terms which are of significant strategic advantage were negotiated, including a wage averaging agreement that has been subject to dispute for several years.

Despite the significant disruption of this protracted industrial action, the firm position taken was a necessary investment in protecting the future of our gold operations. The above inflation increases demanded by the unions would have significantly impacted on the sustainability of the operations, with adverse consequences for all stakeholders, including employees, in the long term.

Pleasingly, the levels of violence and intimidation which characterised previous industrial action were significantly reduced, which can be largely attributed to the lockout effected by management at the start of the strike as well as reduced rivalry between the Unions. The proactive implementation of strike plans and management of fixed costs to contain the financial cost and preserve value, further mitigated the impact.

The return to work after the industrial action and safe resumption of operations is progressing according to plan with normalised production rates expected during October 2022 and the outlook for the remainder of the year significantly improved.

SA PGM wage negotiations

Initial engagement with representative unions at our Rustenburg and Marikana PGM operations commenced in early August, following pre-engagement sessions which included information sharing by economists and industry experts to establish a shared understanding of the prevailing operating and macro-economic environment. Multi-year agreements reached between the same representative unions and industry peers have already been achieved without disruptions.

Our positioning will continue to be based on inflation-related increases that accommodate the cost pressures facing our employees and ensure fair pay, while protecting the sustainability of the business for a lower PGM pricing environment than has been prevalent during the last two years. We are hopeful that the experience at the gold operations has set the scene for a smooth negotiation on reasonable terms.

OPERATING OVERVIEW (for more detail refer to the Group Safety and Operating Review)

SA PGM operations

The SA PGM operations\- operating result for H1 2022 was below the levels reported during H1 2021 due to various operational challenges including seismicity, mining through the Hex River fault at the Bathopele mine and power constraints associated with load curtailment and copper cable theft.  4E PGM production including PoC of 849,152 4Eoz for H1 2022, was 9% lower than for H1 2021. Excluding PoC, 4E PGM production of 823,806 4Eoz, was 8% lower.

Costs were once again well managed with AISC (excluding PoC) of R18,160/4Eoz (US$1,179/4Eoz), benefiting from higher by-product credits, only 7% higher year-on-year despite 8% lower production. AISC including PoC of R18,804/4Eoz (US$1,221/4Eoz), was only 2% higher than for H1 2021, due to lower volumes of concentrate purchased.

The average 4E PGM basket price of R43,379/4Eoz (US$2,817/4Eoz) was 19% lower than for H1 2021. As a result of the lower average 4E basket price and lower production, adjusted EBITDA of R21.2 billion (US$1.4 billion) for H1 2022 was 33% lower than the record adjusted EBITDA of R31.3 billion (US$2.2 billion) for H1 2021, but was the second highest adjusted EBITDA achieved from the SA PGM operations and marginally higher than for H2 2021.

This solid financial contribution from the SA PGM operations more than offset the losses at the SA gold operations and was largely responsible for the positive cash flow recorded for the period, despite the operational challenges at the other operations. The deferred acquisition payment of 35% of cash flow from the Rustenburg operations to Anglo Platinum, will conclude during Q4 2022, further enhancing cash flow from the SA PGM operations.

US PGM operations

Mined 2E PGM production from the US PGM operations of 230,039 2Eoz for H1 2022 was 23% lower year-on-year due to ongoing operating constraints and the temporary cessation of operations at the Stillwater mine resulting from the flooding event on 12 and 13 June 2022 which restricted access to the Stillwater mine. AISC of US$1,366/2Eoz (R21,036/2Eoz) was 40% higher than for the comparable period in 2021 primarily due to reduced production, the reclassification of Stillwater East development from growth capital (Included in AIC) to sustaining capital (ore reserve development (ORD), included in AISC), continued inflationary pressures on stores, and premiums on contractor costs.

In addition to these factors, a 15% decrease in the average 2E PGM basket price to US$1,935/2Eoz (R29,799/2Eoz) resulted in adjusted EBITDA declining by 40% to US$261 million (R4.0 billion) for H1 2022.

Optimisation review

On 11 August 2022, a detailed overview of the repositioned US PGM operational plan was presented to the market by management. This strategic revision of the US PGM operations and expansion plans was prompted by various operational constraints together with changing macro environment and changing palladium market conditions.

The US PGM operations have delivered on the initial strategic intent and repaid the acquisition cost, hence repositioning the operations for greater flexibility and optimal long-term value, was deemed prudent. The revised plan envisages a production build-up to over 700,000 2Eoz by 2027 and AISC being maintained at below US$1,000/2Eoz (in 2022 real terms). Detail on the repositioning is available at: US PGM operations – repositioning for the changing market environment.

US PGM recycling operation

The US PGM recycling operation fed an average of 22.9 tonnes of spent autocatalyst per day for H1 2022, 7% lower than for H1 2021 mainly due to ongoing global logistical constraints as well as reduced vehicle scrapping rates. During H1 2022, 4,235 tonnes of recycle material was received and 4,136 tonnes fed with recycle inventory increasing by approximately 100 tonnes.

Adjusted EBITDA from PGM recycling decreased by 22% year-on-year to US$39 million (R598 million) at a margin of 4%.  The decrease was mainly due to an 8% decrease in the 3E PGM basket price received by the recycling operations to US$2,906/3Eoz (R44,752/3Eoz) and 14% lower 3Eoz sales.

SA gold operations

Operating activities across all managed SA gold operations (excluding DRDGOLD) ceased from 9 March 2022 due to industrial action until agreement was reached with the Unions and the lock-out was lifted on 13 June 2022. Underground production resumed from 28 June 2022 following medical screening, training and acclimatisation of returning employees, before being reintroduced in a phased manner in order to ensure safe resumption of underground mining activities. Surface mining operations were also curtailed during the industrial action with only Ezulwini plant processing material on a toll basis. It is expected that the surface operations will be fully operational by the end of August 2022, with the underground operations will ramping up to full production during October 2022.

Production was also impacted by the suspension of mining operations at Beatrix prior to the industrial action due to the self-imposed safety stoppage that continued from the previous year and also the suspension of milling operations at the Beatrix operation from 28 December 2021 to allow precautionary reinforcement and buttressing work to the tailings storage facilities (TSF). While this was completed by the end of May 2022, due to the industrial action mining was not feasible limiting the previously anticipated establishment of a stockpile.

As a result of the above factors, adjusted EBITDA (including DRDGOLD) declined from R2.4 billion (US$162 million) for H1 2021 to a negative R3.1 billion (negative US$202 million) for H1 2022, with DRDGOLD contributing R840 million (US$54 million).

Sandouville Nickel refinery

The acquisition of the Sandouville nickel refinery in Le Havre, France was concluded on 4 February 2022. Sandouville produced 3,499 tonnes of nickel metal, 1,066 tonnes of nickel salts and 113 tonnes of cobalt chloride at an average nickel equivalent sustaining cost of R460,397/tNi (US$29,896/tNi). Integration of the Sandouville refinery is progressing in line with expectations with a 10% increase in volumes produced year-on-year resulting from efficiency improvements and good recoveries. Recent increases in electricity and gas prices have reduced gross operating margin and will be a risk to costs depending on the direction of future European energy and gas supplies. The focus is on continuity and stability of production by de-bottlenecking the plant to increase throughput to nameplate capacity of ~12kt of Ni metal, ~4kt of Ni salts and ~600t of CoCl2 by 2026.

H1 2022 adjusted EBITDA was US$4 million (R60 million).

MARKET OVERVIEW

PGMs

The outlook for global auto production for H2 2022 appears more constructive, primarily due to resilience in the sector in China and an expected easing of supply chain constraints towards year-end.  Improving inflation numbers from the US following a series of interest rate hikes during H1 2022 has resulted in some market optimism and an improvement in PGM prices since mid-year. Global macro-economic and political risks remain elevated however, with the probability of further disruption and an extended economic recession remaining high.

Global light duty vehicle (LDV) sales for H1 2022 declined by 8.5% year-on-year to 38.5 million units due to ongoing production constraints including continued semiconductor chip shortages, COVID-19 lockdowns in China and the war in Ukraine.  PGM markets have been affected by the deteriorating global economic outlook and rising inflation.

Chinese LDV sales fell by 2.3% year-on-year to 11.9 million units with over 1 million passenger car sales estimated to have been lost between March and May due to regional lockdowns and quarantine measures imposed, although sales have improved since May 2022. The Chinese government recently halved the purchase duty for internal combustion engines and hybrid cars (with engine displacement of less than or equal to 2L and priced below CNY300,000 or approximately $45,000). This policy is expected to further incentivise LDV sales during H2 2022.

US LDV sales fell 18.2% year-on-year to 6.8 million units in H1 2022 as low inventories, rising inflation and interest rates drove LDV prices to record levels, with the average transaction price reaching a record high of approximately $47,000 in May 2022. Inventories averaged about 1 million units during H1 2022.  Light vehicle registrations in Western Europe were down 15.5% year-on-year to approximately 5.8 million units in H1 2022.  Major European markets all experienced double-digit contractions, with the overall passenger vehicle market falling by 16.3% in France, 11.0% in Germany, 22.7% in Italy, 10.7% in Spain and 11.9% in the United Kingdom.

Global LDV production forecasts have been downgraded since the end of 2021 with the latest global LDV production forecast by LMC Automotive consultants further reduced to 79.5 million units in 2022. 

Despite initial market concerns about the possible impact of the war in Ukraine, sanctions imposed (primarily the LPPM removing Russian producers from its Good Delivery list earlier this year and sanctions being imposed by the UK government on Vladimir Potanin, the CEO and a significant shareholder in Norilsk Nickel) have resulted in relatively limited impact on global PGM supply. The availability of supply of capital equipment and critical parts into Russia may however constrain production and future growth plans in the near to medium term. 

PGM supply from North America was affected by the regional flooding in Montana in mid-June reducing production from the region by approximately 60k 2Eoz for 2022.

PGM supply from South Africa is also anticipated to be lower in 2022 compared to the previous year due to the impact of prolonged power disruptions at Eskom, the state electricity utility and processing issues flagged by peers. Although many of the SA PGM producers have concluded wage negotiations, any social disruption or industrial action could further impact supply. 

Secondary supply from autocatalyst recycling remains constrained in the medium term as auto sales remain weak, resulting in higher used car prices and extending average vehicle retention periods.  Global logistical and supply chain disruptions, with higher logistics costs and lower PGM prices impacting collector cost structures are also expected to impact. Recycling volumes are expected to decline by approximately 10% for 2022 compared with 2021.

Battery metals

Battery electric vehicle (BEV) sales growth continued to significantly outperform overall light-duty vehicle (LDV) sales growth, with global BEV sales for H1 2022 up 75% year-on-year in contrast to total LDV sales which declined 8.5% during H1 2021. Consequently, BEV penetration increased to almost 9% of the total LDV market in the first half of 2022.

China remains the largest EV market, representing almost two thirds of global BEV sales for H1 2022, despite the economic impact of the country\-s zero-COVID-19 policy. Expanded fiscal incentives supported 100% growth in BEV sales year-on-year for H1 2022. Incentives were extended to some gasoline vehicles, but total LDV sales fell 2% over the same period. BEV sales in Europe and North America also grew significantly in contrast to declining total LDV sales.

Efforts to regionalise battery supply chains continued in Europe and North America, with the Inflation Reduction Act (IRA), signed in to law in the United States on 16 August 2022. The IRA incentivises North American battery and BEV production by introducing qualification criteria for federal tax credits (40% of battery metals sourced in the US or from countries with Free Trade Agreements (FTA) from 2024 increasing to 80% from 2027). In the short-term, this could negatively impact regional BEV sales as the majority of BEVs on the market would no longer qualify for the federal tax credit due to the minimal sourcing of battery raw materials from North America or FTA countries with free trade agreements with the US. However, longer term benefits to US based battery metal producers are expected, with the Rhyolite Ridge project well positioned to capitalise.

Another interesting development is the increasing investment by OEMs in mines to secure battery metals amid emerging shortages, with BMW, BYD and Ford the most recent examples of OEMs investing upstream, and some going as far as to pre-pay to secure offtake of lithium.

BUSINESS AND MARKET DEVELOPMENT

The disruptive impact of the COVID-19 pandemic and subsequent political and economic events have exposed the risks associated with the prior increasing reliance on a global logistics and supply chain model. The Group previously identified the probability of greater regionalisation of supply chains and a more nationalistic approach to foreign affairs and trade. As such, the Group\-s green metals strategy has prioritised growth in or close to, North America and Europe, in order to establish a preferential position supplying critical metals to the growing battery ecosystems in these regions.

The recent signing into law of the IRA in the United States, as mentioned above, serves as  further support of our Green Metals strategy , which management believes is likely to bring long term value benefits to Sibanye-Stillwater and stakeholders.

Sibanye-Stillwater\-s focus remains on growth in these ecosystems. However, the significant increase in battery metal prices since early 2021, has required a more cautious approach to M&A growth. Management believes that a strategy focussed on specific acquisition opportunities make sense both strategically and from a value perspective, such as the increased stake in Keliber outlined below and the expected acquisition of 50% in the Rhyolite Ridge project once all conditions precedent have been met, including, but not limited to, permits and debt financing having been secured.

Increased shareholding in Keliber

On 30 June 2022, the Group announced its intention to exercise its pre-emptive right to increase its shareholding in Keliber to 50% plus one share. A simultaneous voluntary cash offer was made to minority shareholders of Keliber, other than the Finnish Minerals Group, which if fully accepted, will increase our shareholding in Keliber to over 80%.

The Finnish Minerals Group, a Finnish State-owned holding and development company which manages the stateâ€?s mining industry shareholdings, is the second largest shareholder in Keliber behind Sibanye-Stillwater with a current approximately 20% shareholding.  The Finnish Minerals Group is expected to remain as a cornerstone shareholder and future strategic partner for the business, potentially maintaining its current level of shareholding through an equalization transaction during a potential project equity capital raise.

Approximately EUR176 million has been invested by Sibanye-Stillwater to acquire a majority shareholding in Keliber, with an additional maximum consideration of EUR196 million required should all minorities accept the voluntary offer.

Keliber is aiming to be the first fully integrated lithium producer in Europe supplying approximately 15,000 tonnes of lithium hydroxide monohydrate per annum into the developing European battery industry. A recent definitive feasibility study and a 31% increase in ore reserves has confirmed the quality and inherent value of the Keliber project with the fundamental outlook for the lithium market improving significantly since Sibanye-Stillwater acquired its initial stake in Q1 2021.

R&D, innovation and market development

The Group continued to invest in innovative market development opportunities with strategic partners:

Heraeus Precious Metals

In August 2022, Sibanye-Stillwater and Heraeus Precious Metals entered into a partnership to develop and commercialise novel electrolyser catalysts for the production of green hydrogen. The partnership enables collaboration on research and development of novel electrocatalysts containing platinum group metals with high activity and stability for Proton Exchange Membrane (PEM) electrolysers used in the production of green hydrogen. The project will be equally funded by Sibanye-Stillwater and Heraeus over a three-year period during which both companies will cooperate on communication and marketing of the novel catalyst.

EnHywhere

During May 2022, the Group invested €1.6 million into a tranched €5 million convertible bond in EnHywhere, a French start-up that has developed a novel hydrogen refuelling technology for small footprints to serve all vehicles (e.g. light duty vehicles, commercial fleets, trucks, buses). EnHywhere\-s hydrogen refuelling technology comprises a compact, autonomous hydrogen generation and refuelling station which produces its own green hydrogen using a PGM-containing PEM electrolyser. It has a low voltage grid connection and uses standard domestic water supply to produce up to 80kg/day of hydrogen. The technology also benefits from ease of implementation, as there are minimal permitting requirements for individual station roll-outs, saving time and cost. On 5 July 2022, the Group made a second tranche investment of €2.6 million into the convertible bond.

OPERATING GUIDANCE1

As previously announced on 11 August 2022, forecast mined 2E PGM production from the US PGM operations for 2022 was revised to between 445,000 2Eoz and 460,000 2Eoz, with AISC of between US$1,380/2Eoz and US$1,425/2Eoz due to the impact of the regional flood and the repositioning of the operations following the optimisation planning carried out during H1 2022. Capital expenditure is forecast to be between US$275 million and US$285 million (including US$70 million of project capital).

The US Recycling operations are forecast to feed between 700,000 and 730,000 3Eoz. Capital expenditure is forecast at approximately

US$3 million.

Forecast 4E PGM production from the SA PGM operations2 for 2022 remains at between 1,750,000 4Eoz and 1,850,000 4Eoz with AISC between R18,500/4Eoz and R19,200/4Eoz (US$1,233/4Eoz and US$1,280/4Eoz). Capital expenditure is forecast at R4.8 billion (US$320 million) including R950 million (US$63 million) for the K4 project during 2022.

Guidance for gold production from the managed SA gold operations (excluding DRDGOLD) for 2022 was suspended due to the industrial action. Guidance has been revised to between 14,000kg (450,000oz) and 14,500kg (466,000oz) with AISC between R1,390,000/kg (US$2,880/oz) and R1,470,000/kg (US$3,060/oz). Capital expenditure is forecast at R3.9billion (US$260 million), including R1.1 billion (US$73 million) on the Burnstone Project and R270 million (US$18 million) on the Kloof 4 deepening project.

1  The dollar cost conversions for 2022 are based on an average exchange rate of R15.00/US$.

2  SA PGM guidance includes third party PoC

NEAL FRONEMAN

CHIEF EXECUTIVE OFFICER

SIBANYE-STILLWATER GROUP SAFETY AND OPERATING REVIEW

SAFETY

Group safety trends continued to improve during H1 2022, following interventions in mid-2021. The Group fatal injury frequency rate (FIFR) (per million hours worked) improved by 70% from 0.1 in H1 2021 to 0.03 in H1 2022. The serious injury frequency rate (SIFR) decreased from 4.39 to 3.16, a 28% improvement, the lost day injury frequency rate (LDIFR) improved by 34% from 7.23 to 4.77, and  the total recordable injury frequency rate (TRIFR) was 32% lower year-on-year declining from 8.43 to 5.71. These are sizeable improvements driven through intense management focus, and our challenge going forward is to secure further improvement and make safety excellence sustainable across all our operations.

The Safe production strategy has become our pathway to excellence and several leading indicators have been developed around interventions from the strategy. In particular, the Group\-s focus is on addressing high potential incidents and our Fatal Elimination Strategy. As part of this journey, roll-out of the Life-saving Commitment booklet commenced during the first half of 2022. The purpose of this booklet is to provide an overview of the Fatal Risk Critical Controls, Critical Life-saving Behaviours and Critical Management Routines. These are key to becoming a fatal-free workplace organisation on our journey to zero harm. The Accident Investigation Committee, where leaders collectively present and assess some of the significant incidents (injuries or incidents with the potential for loss of life), continues to enhance the understanding of accident causation to root cause level and places ownership at all levels in the organisation.

There has been a notable reduction in fatalities year-on-year, with two fatalities during H1 2022 compared with eight for H1 2021. Both fatalities occurred during Q1 2022, with the Group recording a fatal free quarter during Q2 2022.

The US PGM operations safety performance for H1 2022 improved considerably, with reportable injuries reducing from 33 to 20 injuries year-on-year. For H1 2022, the US PGM operations reported a 39% improvement in Total Recordable Injury Frequency Rate (TRIFR) from 14.4 in H1 2021 to 8.9 in H1 2022.

Similarly the SA PGM operations also reported an improved safety performance for H1 2022 with the TRIFR improving by 33% year-on-year to 5.83. Sadly, one fatality occurred during Q1 2022. Mr Mashudu Mphaphuli, who worked as a train driver assistant at Rustenburg Central service railway operations, passed away on 15 March 2022 following serious injuries sustained in a surface railway accident on 14 February 2022.

The SA PGM mining operations achieved 4 million fatality free shifts on 21 June 2022 with the fatal free performance continued unbroken into H2.

Despite lower production at the SA gold operations in H1 2022 due to industrial action, there was also an improved safety performance for H1 2022 with the TRIFR improving by 37% to 4.86. Unfortunately the SA gold operations had an underground rail-bound equipment related fatality at the Driefontein operation during the first quarter of H1 2022. On 19 January 2022, Mr. Thabile Cele, a locomotive driver sustained serious injuries in a rail accident and succumbed from his injuries.

Both incidents have been thoroughly investigated together with the relevant stakeholders to prevent the reoccurrence of similar incidents. The Board and management extend their sincere condolences to the family, friends, and colleagues of our departed colleagues. The appropriate support and care is being provided to the families of the deceased.

The Sandouville Refinery is now integrated into the Group\-s safety reporting processes, recording 15.95 for its TRIFR and a LDIFR of 11.96, although definitions are yet to be standardised to allow for meaningful comparison. As these rates are currently higher than the Group average of 5.71 and 4.77 respectively, additional focus is being directed to the contractor staff, with three of four injuries originating from sub-contractors.

OPERATING REVIEW

US PGM operations

Mined 2E PGM production from the US PGM operations of 230,039 2Eoz for H1 2022 was 23% lower year-on-year due to ongoing operational constraints and the temporary cessation of operations at the Stillwater mine resulting from the significant flooding event on 12 and 13 June 2022 which restricted access to the Stillwater mine. 

Production from the Stillwater mine of 143,420 2E for H1 2022, was 19% lower, due to operating constraints and the impact of the flood which reduced production by approximately 15,000 2Eoz. Production from Stillwater West was constrained prior to the flood by reduced mining flexibility associated with revised operating procedures following the Mine Safety and Health Administration (MSHA) orders on the main 35- production and tramming level. The focus at Stillwater West is on additional development to re-establish two mining fronts beyond the Depression zone in the west and the Stillwater fault in the east which will increase the developed state to 12 months by 2024 providing greater mining flexibility. Production from Stillwater East has been impacted by challenging ground conditions which require greater than expected use of an engineered (cemented) backfill support solution. Mining areas requiring cemented backfill have been suspended until the anticipated completion of a permanent backfill plant within the next 3 years.

Production from the East Boulder mine of 86,618 2Eoz, was 29% lower than H1 2021 as a result of higher geological and geotechnical complexity as mining migrates to the West. This is compounded by a shortage of critical miner skills and ongoing supply chain challenges, affecting operational productivity. The focus at East Boulder is on increasing miner training and attraction and retention of skills in these critical areas. The developed state at East Boulder will be maintained at the current 18 month level.

Total development of 12,534 meters was 15% lower than H1 2021 with the focus being on primary development which increased 9% year-on-year offsetting secondary development which declined by 23% year-on-year as a result of the challenges highlighted. Total project development at 1,010 meters was 76% lower than H1 2021 following the decision to curtail additional development pending the completion of the cemented backfill solution.

AISC of US$1,366/2Eoz (R21,036/4Eoz) was 40% higher than for the comparable period in 2021 primarily due to reduced production, continued inflationary pressures on stores, premiums on contractor costs, and the change in classification of Stillwater East development from growth capital to sustaining capital (ORD). As a result of this change in classification and the focus on primary development, ORD increased from US$40 million (R582 million) for H1 2021 to US$83 million (R1.3 billion) for H1 2022, with ORD contributing US$360/2Eoz (R5,551/2Eoz) to AISC or US$226/2Eoz (R3,600/2Eoz) higher year-on-year. Royalties and insurance added US$196/2Eoz (R3,018/2Eoz) to the AISC in H1 2022 compared to the US$203/2Eoz (R2,954/2Eoz) in H1 2021.

Adjusted EBITDA from the US PGM underground operations of US$261 million (R4.0 billion) for H1 2022 decreased by 40% from US$437 million (R6.4 billion) for H1 2021 due to a 15% decline in the average 2E PGM basket price for H1 2022 to US$1,935/2Eoz (R29,799/2Eoz), higher costs and 12% lower 2Eoz sales year-on-year.

Capital expenditure declined by 10% year-on-year in H1 2022 to US$142 million (R2.2 billion) with the majority of this spend (76% or US$107 million) attributed to ORD and sustaining capital. Project capital declined by 59% year-on-year to US$34 million (R530 million) as a result of reduced spending on the Stillwater East project. The results of the new operational plan and the above mentioned change in classification to ORD confirmed that the rate of development of Stillwater East would be curtailed in the light of the significant development costs arising from the premiums on contractor costs and the decision to postpone development of several stoping blocks until the completion of the cemented backfill plant. Consequently the completion of the 56 level holing to the Benbow decline later this year and the completion of the upgraded concentrator will be the only remaining growth capex left in the short term.

US PGM recycling operation

The recycling operation fed an average of 22.9 tonnes of spent autocatalyst per day for H1 2022, 7% lower than for H1 2021 mainly due to ongoing logistical constraints globally and adjustments to the blend ratio of high grade recycle feed following the reduction in volumes of mined concentrate post the flood event. During H1 2022, 4,235 tonnes of recycle material was received and 4,136 tonnes fed.

Adjusted EBITDA from PGM recycling decreased by 22% year-on-year to US$39 million (R598 million) at a margin of 4%.  The decrease was mainly due to an 8% decrease in 3E PGM recycle basket price to US$2,906/3Eoz (R44,752/3Eoz) and 14% lower 3Eoz sales.

SA PGM operations

Production from the SA PGM operations for H1 2022 was impacted by various operational challenges, including a slow start-up after the New Year, self-imposed safety stoppages, seismicity at the Siphumelele shaft, mining through the Hex River Fault at the Bathopele mine which affected -productivity, and power disruptions due to Eskom load curtailment and copper cable theft. 4E PGM production of 849,152 4Eoz for H1 2022, was 9% lower than for H1 2021 including PoC. Excluding PoC, 4E PGM production of 823,806 4Eoz, was 8% lower year-on-year. Surface production (excluding PoC) in H1 2022 increased by 6% year-on-year partially offsetting underground production which was 9% lower at 751,717 4Eoz. Concentrate purchases from third parties reduced by 27% in H1 2022 compared to H1 2021 due to the expiry of two contracts at the end of 2021.

Costs were once again well managed with AISC (excluding PoC) of R18,160/4Eoz (US$1,179/4Eoz) benefiting from higher by-product credits, only 7% higher year-on-year despite 8% lower production.  H1 2022 AISC including PoC of R18,804/4Eoz (US$1,221/4Eoz), was only 2% higher than H1 2021 due to lower volumes of concentrate purchased.

Capital expenditure for H1 2022 increased by 52% year-on-year to R2.2 billion (US$140 million) compared to H1 2021, including R405 million (US$26 million) spent on project capital versus only R6 million (US$0.4 million) in H1 2021 with spending on the Marikana K4 project only commencing in Q2  2021. Significant progress was made in H1 2022 with catch up on both ORD and sustaining capital post the COVID-19 era at SA PGM\-s with ORD also increasing as a result of Marikana K4 ramping up off-reef development.

The average 4E PGM basket price for H1 2022 of R43,379/4Eoz (US$2,817/4Eoz) was 19% lower than for H1 2021. Adjusted EBITDA from the SA PGM operations of R21.2 billion (US$1.4 billion) for H1 2022 was 33% lower than the record adjusted EBITDA of R31.3 billion (US$2.2 billion) for H1 2021, due to the combined impact of lower production and the lower average 4E PGM basket prices. This was nevertheless higher than the preceding H2 2021 and the second highest adjusted EBITDA achieved from the SA PGM operations.

PGM production from the Rustenburg operation was 7% lower for H1 2022 at 304,872 4Eoz compared to H1 2021, with surface production 4% higher and underground production 8% lower as a result of the slow start-up, safety stoppages and cable theft. Bathopele production output was negatively impacted by mining through the Hex River fault as well as fleet and mining equipment availability. Siphumelele was impacted by seismicity which lowered output. Costs were well controlled with AISC/4Eoz only 5% higher year-on-year at R19,054/4Eoz (US$1,237/4Eoz) despite lower production and above inflationary cost increases on imported spares, steel related products, ammonia- based products, fuel and oil.  Rustenburg AISC for H1 2022 benefited from by-product credits which were 34% higher, and 49% lower royalties which was partially offset by a 31% increase in sustaining capital relative to H1 2021.

PGM production from the Kroondal operation of 101,315 4Eoz was 11% lower than for H1 2021 largely due to the gradual ramp-down at Simunye shaft (forecast for shutdown towards Q4 2022) and geologically challenging ground at Bambanani and Kwezi shafts, which also negatively impacted the 4E built-up head grade. A two shift cycle was implemented at Bambanani during Q2 2022 to improve face time for crews and improve output. AISC of R14,874/4Eoz (US$966/4Eoz) was 23% higher than for H1 2021 due to lower production and additional expenditure on underground support to cater for the eastern shafts mining through a shear zone together with above inflation price increases on steel, ammonia, and fuel products. H1 2022 AISC benefited from higher by-product credits, which increased by 8% which offset an 11% increase in sustaining capital.

Production from the Marikana operation was impacted by a slow start-up after the New Year, safety stoppages and cable theft, with production (including PoC) of 360,609 4Eoz for H1 2022, 11% lower than for H1 2021. PGM production from third party PoC sources declined by 27% year-on year to 25,346 4Eoz due the expiry of two offtake contracts during Q4 2021. Production for H1 2022 excluding PoC declined by 9% to 335,263 4Eoz with surface production of 12,930 4Eoz only 2% lower and underground production declining by 10% year-on-year to 322,333 4Eoz. AISC (excluding PoC) for H1 2022 of R18,949/4Eoz (US$1,230/4Eoz), was only 7% higher year-on-year despite lower output and higher inflationary costs, particularly steel, ammonia and fuel related products. AISC for H1 2022 including PoC declined by 3% year-on-year to R20,307/4Eoz (US$1,319/4Eoz) with PoC purchase costs declining by 46% to R1.1 billion (US$0.1billion). Marikana AISC for H1 2022 benefited from 27% lower royalties and a 25% increase in by-product credits which was partially offset by sustaining capital increase of 23% relative to H1 2021

Attributable PGM production from Mimosa for H1 2022 of 57,554 4Eoz was 5% lower than for H1 2021, with the focus continuing to be optimising the reagent suite and cell settings across the flotation circuit. Mimosa maintained a steady performance in H1 2022 with AISC increasing 7% to US$976/4Eoz (R15,029/4Eoz) due to lower production, and sustaining capital increasing by 47%, partially offsetting the increase in by-product credits.

PGM production from Platinum Mile of 24,802 4Eoz was 14% higher compared to H1 2021 due to additional feed tonnes coupled with a 16% increase in the build-up head grade and steady recoveries. This resulted in AISC declining by 9% to R9,878/4Eoz (US$641/4Eoz).

H1 2022 chrome sales of 1,326kt were 36% higher than for H1 2021 (977kt). Chrome revenue of R1.8 billion (US$117 million) for H1 2022 was considerably higher than H1 2021 (R1.0 billion; US$71 million), due to higher production from the Marikana operation as a result of improved recoveries from the plants processing underground ore, higher surface plant head grade and a further inventory release. Rustenburg and Kroondal both maintained steady production. The chrome price received increased by 51% from $157/tonne in H1 2021 to $237/tonne in H1 2022.

The K4 project

The project is on schedule. K4 hoisted its first ore during H1 2022. Project capital guidance is R950 million in 2022 with R420 million spent in H1 2022.

SA gold operations

The SA gold operations were significantly disrupted in H1 2022 due to the industrial action and related lock-out, and comparison of operational statistics with H1 2021 is not meaningful.  Gold production (excluding DRDGOLD) for H1 2022 decreased by 77% to 3,128kg (100,568 oz) for H1 2022 compared to H1 2021.  

Operating activities across all managed SA gold operations ceased from 9 March 2022 due to industrial action until the lock-out was lifted on 13 June. With employees returning after the lifting of the lock-out, there was no underground production until 28 June 2022 with medical screening, training and acclimatisation having to be completed before work crews were introduced back underground in a phased manner in order that comprehensive underground safety checks could be done in order to ensure safe resumption of underground activities. Surface mining operations were also curtailed during the industrial action with only Ezulwini processing material delivered on a toll basis. It is expected that underground operations will ramp up to full production by November, with surface operations by end August 2022.

The Beatrix TSF, where deposition was suspended for precautionary reinforcement and buttressing work from 28 December 2021, was completed by the end of May 2022, with all milling operations suspended during this period.  Mining operations had already been suspended for a self-imposed safety stoppage in Q4 2021 that continued until soon before the commencement of the industrial action.

In spite of a 10% increase in the average gold price received to R922,851/kg (US$ 1,864/oz) in H1 2022, lower production resulted in adjusted EBITDA (including DRDGOLD) declining from R2.4 billion (US$162 million)in H1 2021 to negative R3.1 billion (US$202 million) in H1 2022. Adjusted EBITDA (excluding DRDGOLD) was negative R3.9 billion (US$256 million).

Gold production from DRDGOLD increased by 3% in H1 2022 to 2,834kg (91,115oz) with tonnes milled declining by 7% offset by yield increasing by 11%. Inflationary cost pressures resulted in operating cost/tonne milled increasing by 26% to R135/tonne (US$9/tonne) as a result of above-inflation increases in the costs of key consumables, diesel, steel and cyanide. This resulted in AISC increasing by 22% to 808,360/kg (US$1,633/oz) with sustaining capital increasing by 122% to R410 million (US$27 million) with additional spending on new pump stations and piping at ERGO. The average rand gold price received by DRDGOLD in H1 2022 increased by 10% year-on-year to R928,091/kg (US$1,874/oz) and, despite the higher AISC, adjusted EBITDA increased by 23% to R840 million (US$54 million).

The Burnstone project

Progress on the project was adversely affected during H1 2022 by the industrial action and project capital guidance for 2022 has been reduced. Capital development subsequently commenced with progress hampered by labour and skills shortages in the region. Project capital guidance is R1.1 billion (US$73 million) in 2022 with R329 million (US$21 million)  spent in H1 2022.

Sandouville

The acquisition of the Sandouville nickel refinery in Le Havre, France was concluded on 4 February 2022. Since acquisition, Sandouville produced 3,499 tonnes of nickel metal, 1,066 tonnes of nickel salts and 113 tonnes of cobalt chloride at a nickel equivalent sustaining cost of R460,397/tNi (US$29,896/tNi). Integration of the Sandouville refinery is progressing in line with expectations with a 10% increase in volumes produced year-on-year resulting from good recoveries and efficiency improvements. Recent increases in electricity and gas prices have reduced gross operating margin and will be a risk to costs depending on the direction of future European energy and gas supplies. The focus is on continuity and stability of production by de-bottlenecking the plant to increase throughput to nameplate capacity of c.12kt of Ni metal, c.4kt of Ni salts and c.600t of CoCl2 by 2026. In parallel with the current plant, Sibanye-Stillwater is conducting feasibility studies on three processes:

Producing battery grade nickel sulphate with the intention of producing 44,000 tonnes per year in 2 stages

PGM autocatalysts recycling using European feedstocks

Battery metals recycling

Further announcements will be made on these developments when the studies have been concluded.

H1 2022 adjusted EBITDA was US$4million (R60 million). US$2 million (R29 million) was spent on sustaining capital and $11 million (R174 million) on growth capital. 

FINANCIAL REVIEW OF THE SIBANYE-STILLWATER GROUP

For the six months ended 30 June 2022 (H1 2022) compared with the six months ended 30 June 2021 (H1 2021)

The reporting currency for the Group is SA rand (rand) and the functional currency of the US PGM operations is US dollar. Direct comparability of the Group results between the two periods is distorted as the results of the US PGM operations are translated to rand at the average exchange rate, which for H1 2022 was R15.40/US$ or 6% weaker than for H1 2021 (R14.55/US$). The functional currency of the Battery Metals operations, comprising of Sandouville Refinery and Keliber, is the Euro and the results of Sandouville Refinery were translated to rand at the average exchange rate, which for H1 2022 was €16.70/ZAR (average exchange rate for the period from 4 February 2022, the effective date of the acquisition). Keliber is a project in development phase and development expenses are capitalised in accordance with the Groupâ€?s accounting policies to property, plant and equipment.

Group financial performance

Group revenue for H1 2022 decreased by 22% to R70,379 million (US$4,570 million) mainly due to lower sales volumes at all operations (excluding Platinum Mile) and a lower average basket price received by the PGM operations following the pullback in precious metal prices during Q2 2022. Group cost of sales, before amortisation and depreciation decreased by 2% to R47,025 million (US$3,054 million) mainly due to the lower production volumes which was partially offset by above inflation cost increases at the SA PGM operations and higher underground support costs at the US PGM underground operations. The decrease in Revenue caused Group adjusted EBITDA for H1 2022 to decrease by 44% or R17,988 million (US$1,322 million) to R22,561 million (US$1,465 million). The 6% weaker rand relative to the US dollar, partially offset the effect of the lower average basket price at the PGM operations. Group amortisation and depreciation decreased by 15% to R3,224 million (US$209 million) following lower production volumes, partially offset by higher amortisation and depreciation at the US PGM underground operations where higher progressive capital expenditure from prior periods contributed to the higher amortisation and depreciation.

The revenue, cost of sales, before amortisation and depreciation, net other cash costs, adjusted EBITDA and amortisation and depreciation are set out in the table below: please see attached

Revenue

Revenue from the SA PGM operations decreased by 20% to R38,259 million (US$2,485 million) due to a 19% lower average 4E basket price of R43,379/4Eoz (US$2,817/4Eoz) and a 9% or 79,415 4Eoz decrease in PGMs sold, which include a 27% decrease in the sale of third-party purchase of concentrate (PoC) ounces. The decrease in 4Eoz sold was the consequence of lower production volumes.

At the US PGM underground operations revenue decreased by 24% to US$507 million (R7,812 million), due to a 12% decrease in mined ounces sold and a 15% decrease in the average 2E basket price to US$1,935 partially offset by the 6% weaker rand. The rand average 2E basket price decreased by 10% to R29,799/2Eoz, combined with the lower sales volumes resulted in a 20% decrease in rand revenue to R7,812 million. Revenue from the US PGM recycling operation decreased by 21% from US$1,334 million (R19,414 million) to US$1,060 million (R16,318 million) due to an 8% lower average realised basket price of US$2,906/3Eoz and a 14% decrease in recycled ounces sold. The 6% weaker rand translated into a 16% decrease in recycling revenue to R16,318 million.

Revenue from the managed SA gold operations decreased by 69% to R3,361 million (US$218 million) mainly due to the wage-related strike which lasted for approximately three months and resulted in gold sold volumes declining by 72% or 9,493kg during H1 2022, partially offset by a 10% higher rand gold price of R918,808/kg (US$1,856/oz). Revenue from DRDGOLD increased by 14% to R2,620 million (US$170 million) due to a 10% higher rand gold price received of R928,091/kg (US$1,874/oz) and 3% higher sales volumes.

The Sandouville Refinery sold 3,599 tonnes of Nickel metal and 984 tonnes of Nickel salts at a nickel equivalent basket price of R474,144/tNi (US$30,789/tNi), generating revenue of R2,173 million (US$141 million) since acquisition.

Cost of sales, before amortisation and depreciation

Cost of sales, before amortisation and depreciation at the SA PGM operations increased by 8% to R16,781 million (US$1,090 million) mainly due to above inflation cost increases on imported spares, steel related and ammonia-based products, fuel and oil. Mined underground 4E PGM production decreased by 9% to 694,163 4Eoz due to lower development and stoping following safety stoppages.  These safety stoppages were imposed by management due to poor ground conditions at the Hex River fault at Rustenburg. The adverse ground conditions caused by the Shear zone at Kroondal negatively affected productivity and head grades. The production at both the Rustenburg and Marikana operations was negatively impacted by a slower than expected post-Christmas start-up and is increasingly affected by instances of copper theft. Surface production volumes excluding third-party PoC were 6% higher at 72,089 4Eoz. Third-party PoC at the Marikana smelting and refining operations decreased by 27% to 25,346 4Eoz due to a contract that ended on 31 December 2021. PoC material is purchased at a higher cost, than own mined ore, due to the direct correlation to the basket price of PGMâ€?s.

Cost of sales, before amortisation and depreciation at the US PGM underground operations increased by 8% to US$249 million (R3,840 million) due to higher stoping and unplanned maintenance costs. Sales volumes decreased by 12% to 238,200 2Eoz with production volumes decreasing by 23% to 230,039 2Eoz, mainly due to the impact of constrained rail safety operating procedures coupled with the flooding event at the Stillwater Mine on 13 June 2022. Cost of sales, before amortisation and depreciation at the US PGM recycling operation decreased, in line with revenue, by 20% from US$1,284 million (R18,681 million) to US$1,021 million (R15,720 million) due to a lower average basket price resulting in decreased purchasing costs of spent autocatalysts, coupled with a 14% decrease in ounces sold due to lower purchased volumes (industry wide slowdown in receipt rates of spent autocatalysts).

Cost of sales, before amortisation and depreciation at the managed SA gold operations decreased by 25% to R6,717 million (US$436 million) mainly due to the impact of the strike which resulted in lower labour, non-essential contractor, consumables and electricity costs. The strike resulted in the production for H1 2022 decreasing by 77% or 10,271kg. Cost of sales, before amortisation and depreciation from DRDGOLD increased by 15% to R1,842 million (US$120 million) due to an increase of 3% (95kg) in gold sold and substantial increases in the cost of key consumables, diesel, steel and cyanide.

The Sandouville Refinery produced 3,499 tonnes of Nickel metal and 1,066 tonnes of Nickel salts since acquisition, at a nickel equivalent sustaining cost R460,397/tNi (US$29,896/tNi), contributing R2,125 million (US$138 million) to cost of sales.

Adjusted EBITDA

Adjusted EBITDA includes other cash costs, care and maintenance costs; lease payments; strike costs and corporate social investment costs (refer note 11.1 of the condensed consolidated interim financial statements for





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