Operating Update – Sibanye Stillwater

SALIENT FEATURES FOR THE QUARTER ENDED 31 MARCH 2020

• Record breaking safety performance by SA gold operations
• Record quarterly adjusted EBITDA³ of R11,132 million (US$724 million)
• Leverage reduced by 40% with Net debt:adjusted EBITDA reducing to 0.75x
• Another solid performance from SA PGM operations – successful integration of Marikana operation continues
• US PGM operations back at planned production rates and have maintained output during COVID-19 pandemic
• Steady performance from SA gold operations
• SA operations ramping up as planned following partial easing of COVID-19 restrictions in April 2020

OVERVIEW FOR THE QUARTER ENDED 31 MARCH 2020 COMPARED TO QUARTER ENDED 31 MARCH 2019

The Group had a strong start to the year, with the operating and financial performance for Q1 2020, materially better than for the comparable period in 2019.

The US PGM operations reported an 8% increase in mined 2E PGM production relative to Q1 2019, reflecting the return to planned production rates at the East Boulder and Stillwater mines, despite the difficult ground conditions which continued to impact the Blitz project into Q1 2020.

The solid performance from the SA PGM operations continued, with 4E PGM production increasing by 59% year-on-year, driven by the successful integration of the Marikana operation following the acquisition of Lonmin Plc in June 2019.

Gold production from the SA gold operations also increased by 66% as production normalised compared with Q1 2019, which was impacted by the five-month AMCU strike.

Precious metals prices remained buoyant during Q1 2020, with palladium and rhodium prices reaching record levels, before falling in late March 2020 as rising concerns about the economic impact of the COVID-19 pandemic led to a general collapse in most global markets, including precious metals. For the US PGM operations, the 2E PGM basket price averaged US$2,053/2Eoz for Q1 2020, 57% higher than for Q1 2019. Further depreciation of the rand provided an additional revenue boost for the SA operations, with the average 4E PGM basket price of R33,192/4Eoz for Q1 2020, 94% higher year-on-year and the average rand gold price received 35% higher at R795,323kg.

Group adjusted EBITDA for Q1 2020 was materially higher than Q1 2019, increasing by R10,324 million (US$666 million) to R11,132 million (US$724 million), which alongside a reduction in net debt, resulted in net debt:adjusted EBITDA (ND:adjusted EBITDA) decreasing to 0.75x at quarter end, from 1.25x at the end of December 2019.

The Group is in a solid financial position, with leverage now comfortably below our 1x target and sufficient liquidity, despite the temporary suspension of production at our SA operations in April 2020 in accordance with South African COVID-19 lockdown regulations.

Given reduced dollar net debt, available liquidity, including DRDGOLD increased to R18,315 million (US$1,026 million) at 31 March 2020, consisting of R16,357 million (US$916 million) cash on hand, R214 million (US$12 million) committed undrawn facilities and R1,744 million (US$98 million) of available uncommitted overnight facilities. Available rand RCF facilities were drawn down ahead of the COVID-19 lockdown in South Africa as a precautionary measure. The US PGM operations continued to operate during Q2 2020 to date, and following amendments to the SA COVID-19 lockdown restrictions, the SA operations are rebuilding to an initial 50% capacity. The Group has optimised working capital and increased liquidity and balance sheet flexibility to ensure an appropriately robust financial position. The primary priority remains to lower the Group’s net debt position further.

Following the market collapse in late March 2020 after an initial liquidity sell off, precious metals prices recovered quickly. Basket prices remain elevated compared to the same time in 2019 with further depreciation of the rand continuing to benefit revenues for the SA operations. The 2E PGM basket price has averaged approximately US$1,820/2Eoz for Q2 2020 to date, with the rand 4E PGM basket price averaging approximately R33,950/4Eoz and the rand gold price averaging just over R1,000,000/kg to date, which if sustained, will be positive for earnings and cash flow as the operational build up continues.

The future impact of COVID-19 remains uncertain and as such guidance will be provided once we have greater certainty about the operating outlook. For more information about our actions, announcements and response to COVID-19, please refer to https://www.sibanyestillwater.com/news-investors/happenings/responding-to-covid-19/.

SAFE PRODUCTION

The intense focus on safe production at our operations and the implementation of medium- and long-term safety initiatives, which are underpinned by the Zero Harm Strategic Framework, continues.

The SA gold operations achieved an unprecedented 11.5 million fatality free shifts on 6 May 2020, with over 620 days without any fatalities. An overall improvement of 13% in terms of the Total Injury frequency rate (TIFR) compared with Q1 2019, is also encouraging. 

The US PGM operations’ safety performance also continued to improve with the Total Reportable Injury Frequency Rate (TRIFR) for Q1 2020, 25% lower than for the comparable period in 2019.

Regrettably, the SA PGM operations experienced four fatalities during the quarter, compared with two fatalities for the same period in 2019. On 7 February 2020, Mr. Khulile Nashwa, a Winch Operator at the Rowland mine, Marikana operation, was travelling in the haulage when a loco derailed and struck him. He was 49 years old and is survived by his wife and seven dependents. On 17 January 2020, Mr. Joao Abilio Silindane, a Rock Drill Operator at Bambanani mine, Kroondal operation, was fatally injured in a gravity-induced fall of ground incident. He was 56 years of age and is survived by his wife and two dependents. On 20 March 2020, Mr. Emanoel Kaphe, a Rock Drill Operator at Thembelani mine, Rustenburg operation, was fatally injured in a gravity-induced fall of ground incident. He was 48 years of age and is survived by his wife and two dependents. The fourth incident occurred on 24 March 2020, Mr. Rossofino Manhavele, a Conveyor belt operator at Siphumelele mine, Rustenburg operation, was found unresponsive lying in a prone position at the bottom of the stairway next to the reef conveyor belt tail pulley on surface. Mr Manhavele succumbed to his injuries on 30 March 2020 whilst still in Millpark hospital. He was 46 years of age and is survived by his wife and three dependents. The Board and management of Sibanye-Stillwater extend their sincere condolences to the family and friends of these employees.

A principal focus at the operations continues to be on identifying and, rectifying safety hazards and verifying that adequate close out has been achieved. In addition, ongoing monitoring of outlying working places in terms of risk score and/or compliance, remains a key area of focus. The Critical Control Management journey stemming from detailed risk analysis process that we embarked on in H2 2019 is also maintaining steady progress and is being addressed within the various discipline focus areas, as well as the overall organisational health and safety strategy.

The safe start-up and subsequent production build-up, following the national lockdown in South Africa as a result of the COVID-19 pandemic, will be a critical focus during the second quarter.

OPERATING REVIEW

US PGM operations

Mined 2E PGM production for Q1 2020 of 141,585 2Eoz was 8% higher than for Q1 2019. Production from the Stillwater Mine (including Blitz) was 83,445 oz for Q1 2020, 3% higher than Q1 2019, while East Boulder (EB) delivered 58,140 oz, 17% higher than Q1 2019. Tonnes milled for Q1 2020 totalled 347,528 tonnes, 8% higher than the comparable quarter in 2019. PGM sales in March 2020 were affected by a delay in refined metal released, resulting in sales for Q1 2020 of 91,975 2Eoz. This refined production was subsequently released and sold during April 2020.

All-in sustaining cost (AISC) of US$894/ 2Eoz for Q1 2020, was 7% higher than for the comparable period in 2019, largely due to lower production from Blitz and higher royalties and taxes as a result of an inflated realized PGM basket price (contributing US$37/ 2Eoz to the variance).

The recycling operation fed an average of 28 tonnes of catalyst per day in Q1 2020, 9% higher than Q1 2019. High recycling feed rates continued to increase with increased recycling receipts, as tonnes of catalyst received were 33 tonnes per day for Q1 2020, 60% higher than Q1 2019. Given significant receipts towards the end of the quarter and ahead of COVID-19 related restrictions, recycle inventory approximated 815 tonnes. This has reduced to more normalised levels (200 – 300 tonnes).

Adjusted EBITDA of US$134 million (R2,059 million) at an improved adjusted EBITDA margin of 30% compares favourably to adjusted EBITDA of US$104.6 million (R1,466 million) for Q1 2019, despite sales being lower than production for Q1 2020.

The threat of COVID-19 was managed in a proactive manner through the roll out of response plans and actions, as well as the suspension of non-essential growth capital at Blitz. Despite these measures, a meaningful increase in mined 2E PGM production from the US PGM operations is still forecast for 2020. Given the previously mentioned suspension of non-essential activities at Blitz, capital expenditure is expected to reduce to between US$200 million and US$220 million for the year, approximately US$60 million less than previously guided. Approximately 60% of this anticipated spend is growth capital in nature, including expenditure on the Fill the Mill (FTM) project.

SA PGM operations

The SA PGM operations continued to perform strongly, with 4E PGM production of 418,072 4Eoz for Q1 2020, 59% higher than the comparable period in 2019. Higher AISC of R16,745/4Eoz (US$1,089/4Eoz) year-on-year, reflect the change to toll processing at Rustenburg, higher royalties and the inclusion of production from the Marikana operation with a higher average AISC, which was absent in Q1 2019. 4E PGM sold of 522,843 4Eoz was 25% higher than 4E PGM production for Q1 2020, due to the sale of additional ounces ahead of the COVID-19 lockdown.

4E PGM production from Rustenburg was 10% lower than Q1 2019 at 154,568 oz, due to a section 54 stoppage arising from the Thembelani fatal accident and COVID-19 related production losses due to the operations being placed on care and maintenance on 27 March 2020. Higher AISC of R18,255/4Eoz (US$1,187/4Eoz) was mainly as a result of lower production and higher royalties. The significant increase (99%) in the average 4E PGM basket price from R16,582/4Eoz (US$1,184/4Eoz) to R32,958/4Eoz (US$2,143/4Eoz), resulted in royalties increasing significantly, by R1,848/4Eoz (US$120/4Eoz) compared with Q1 2019.  

4E PGM production from Kroondal of 53,458 4Eoz was 8% lower year-on-year, mainly due to the COVID-19 lockdown during the last week of March 2020 impacting 4,649 4Eoz.  AISC of R12,619/4Eoz (US$820/4Eoz), was 16% higher than the comparable period in 2019 primarily due to lower production and higher royalties.

The integration of the Marikana operation has proceeded smoothly. The Marikana operation produced 171,997 4Eoz and processed 8,068 4Eoz under existing purchase of concentrate arrangements in Q1 2020. The COVID-19 lockdown resulted in approximately 14,650 4Eoz lost production for the quarter. AISC of R17,128/4Eoz (US$1,114/4Eoz) was 2% lower than for Q4 2019, demonstrating the cost benefits of synergies already realised.

Chrome revenue for Q1 2020 of R324 million was higher than the Q1 2019 chrome revenue of R304 million, despite the average chrome price declining by 23% from US$167/tonne in Q1 2019 to US$128/tonne in Q1 2020, due to the inclusion of the Marikana chrome tonnes.

Mimosa continued to perform steadily, reporting attributable 4E PGM production of 28,777 4Eoz with AISC of US$826/4Eoz.

The inclusion of revenue from the Rustenburg operation (deferred in Q1 2019 due to the change from purchase of concentrate to toll treatment arrangement) and the Marikana operation (acquired in June 2019), together with the 94% higher average 4E PGM basket price resulted in adjusted EBITDA increasing significantly to R8,043 million (US$523 million) from R880 million (US$63 million) in Q1 2019. This was also notably higher than the R3,823 million (US$260 million) adjusted EBITDA from Q4 2019, with the adjusted EBITDA margin increasing from 39% for Q4 2019 to 51% for Q1 2020. Despite the pullback in PGM prices, as a result of ongoing depreciation of the rand, the average basket price for Q2 2020 to date, has remained above R30,000/4Eoz.

The SA PGM operations have begun a phased build-up of production in line with the amended regulations in terms of the COVID-19 disaster management act. The initial phase involved the resumption of surface production and limited underground mining to supplement surface material, with the subsequent build up to 50% likely to be achieved during May 2020. Following a review of non-essential capital expenditure, forecast capital expenditure for the year has been reduced by approximately R900 million to R2,200 million. Approximately 60% of the capital reduction is related to ore reserve development which was deferred while the operations were on care and maintenance and 40% on project and other capital.

Anglo Platinum Force Majeure

On 6 March 2020, Anglo American Platinum (Anglo Platinum) announced the temporary shutdown of its converter plants and issued shut down notices pursuant to a Force Majeure event.

On 5 May 2020, Anglo American Platinum announced that it had completed the repair of its converter plant Phase B unit and that it expected to be fully operational from 12 May 2020, following which, force majeure to suppliers of concentrate will be lifted.

As a result of the completion of repairs to the Anglo Platinum converter plant, from 12 May 2020, Sibanye-Stillwater will resume delivery of concentrate from the Rustenburg, Kroondal and Platinum Mile operations to Anglo Platinum for processing as per the original agreements.  The payment terms related to purchase of concentrate agreements and delivery terms of metals relating to tolling agreements, shall resume as per normal for all concentrates delivered from 12 May 2020.  In addition, Sibanye-Stillwater has agreed a delivery schedule with Anglo Platinum relating to tolled metals that should have been processed and delivered during the shutdown period. Delivery of these outstanding metal credits that were locked up as a result of the Anglo converter plant failure, are expected to commence during May 2020 with the majority of outstanding metal credits expected to be delivered by the end of July 2020.

SA gold operations

Gold production of 7,405kg (238,076oz) for Q1 2020 was 66% higher than for the comparative period in 2019, which was severely impacted by the five-month AMCU strike that ended in April 2019. AISC of R741,858/kg (US$1,500/oz) was also significantly improved compared with AISC of R914,590/kg (US$2,030/oz) for Q1 2019. Gold production (excluding DRDGOLD), increased by 82% year-on-year, from 3,326kg (106,948oz) to 6,059kg (194,801oz). Production was impacted by the seasonal factors (the return to work and production build up after the December holidays) and operational disruptions caused by ESKOM power outages and the COVID related lockdown which impacted production for the last week of March 2020. The Kloof operation was also affected by a fire at Kloof 3 shaft, as well as seismicity that affected the Driefontein operation and limited access to higher grade production areas.

The return to more normalised production levels after the five months strike in H1 2019, coupled with the 35% increase in the average gold price to R795,323/kg (US$1,608/oz) resulted in a R2,737 million (US$188 million) turnaround in adjusted EBITDA, from a loss of R1,611 million (US$115 million) for Q1 2019 to R1,126 million (US$73 million) for Q1 2020 at an adjusted EBITDA margin of 19%. The rand gold price for Q2 2020 to date has averaged approximately R1,000,000/kg (US$1,680/oz), 26% higher than the average price for Q1 2020. This has positive implications for earnings and cash flow from the SA gold operations as production continues to ramp up in accordance with the amended COVID-19 regulations issued in terms of the Disaster Management Act.

As with the SA PGM operations, the build up to 50% is likely to be achieved during May. Capital expenditure for 2020 has been revised downwards by R840 million to R2,500 million, with approximately 71% of the capital reduction related to ore reserve development which was deferred while the operations were on care and maintenance, 10% on growth projects (Burnstone) and 19% on other capital projects.

Neal Froneman

Chief Executive Officer

FORWARD-LOOKING STATEMENT

The information in this document may contain forward-looking statements within the meaning of the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements, including, among others, those relating to Sibanye Stillwater Limited’s (“Sibanye-Stillwater” or the “Group”) financial positions, business strategies, plans and objectives of management for future operations, are necessarily estimates reflecting the best judgment of the senior management and directors of Sibanye-Stillwater.

All statements other than statements of historical facts included in this document may be forward-looking statements. Forward-looking statements also often use words such as “will”, “forecast”, “potential”, “estimate”, “expect”, “plan”, “anticipate” and words of similar meaning. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances and should be considered in light of various important factors, including those set forth in this disclaimer. Readers are cautioned not to place undue reliance on such statements.

The important factors that could cause Sibanye-Stillwater’s actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, our future business prospects; financial positions; debt position and our ability to reduce debt leverage; business, political and social conditions in the United States, South Africa, Zimbabwe and elsewhere; plans and objectives of management for future operations; our ability to obtain the benefits of any streaming arrangements or pipeline financing; our ability to service our bond instruments; changes in assumptions underlying Sibanye-Stillwater’s estimation of their current mineral reserves and resources; the ability to achieve anticipated efficiencies and other cost savings in connection with past, ongoing and future acquisitions, as well as at existing operations; our ability to achieve steady state production at the Blitz project; the success of Sibanye-Stillwater’s business strategy; exploration and development activities; the ability of Sibanye-Stillwater to comply with requirements that they operate in a sustainable manner; changes in the market price of gold, PGMs and/or uranium; the occurrence of hazards associated with underground and surface gold, PGMs and uranium mining; the occurrence of labour disruptions and industrial action; the availability, terms and deployment of capital or credit; changes in relevant government regulations, particularly environmental, tax, health and safety regulations and new legislation affecting water, mining, mineral rights and business ownership, including any interpretations thereof which may be subject to dispute; the outcome and consequence of any potential or pending litigation or regulatory proceedings or other environmental, health and safety issues; power disruptions, constraints and cost increases; supply chain shortages and increases in the price of production inputs; fluctuations in exchange rates, currency devaluations, inflation and other macro-economic monetary policies; the occurrence of temporary stoppages of mines for safety incidents and unplanned maintenance; the ability to hire and retain senior management or sufficient technically skilled employees, as well as their ability to achieve sufficient representation of historically disadvantaged South Africans in management positions; failure of information technology and communications systems; the adequacy of insurance coverage; any social unrest, sickness or natural or man-made disaster at informal settlements in the vicinity of some of Sibanye-Stillwater’s operations; and the impact of HIV, tuberculosis and the spread of other contagious diseases, such as coronavirus (“COVID-19”). Further details of potential risks and uncertainties affecting Sibanye-Stillwater are described in Sibanye-Stillwater’s filings with the Johannesburg Stock Exchange and the United States Securities and Exchange Commission, including the Integrated Annual Report 2019 and the Annual Report on Form 20-F for the fiscal year ended 31 December 2019.

These forward-looking statements speak only as of the date of the content. Sibanye-Stillwater expressly disclaims any obligation or undertaking to update or revise any forward-looking statement (except to the extent legally required).