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Sibanye-Stillwater CEO Richard Stewart has stepped into the top job at a time when the company is printing money in its gold and PGM operations. But success during the favourable times in the cycle is driven by what a mining company does through the cycle.

From cost control measures through to strategic commodity investments, there are many strategies that Sibanye-Stillwater uses to create long-term shareholder value. In this excellent discussion, Richard gives us deeper insights into the operating environment and how the group positions itself over time.

This podcast deals with topics like:

• The reality behind Sibanye’s surge in EBITDA
• How the gold and PGM portfolios are structured (and why it matters)
• Synergies from consolidation and the economics of contiguous mining assets
• The shift from deep-level to shallow gold operations and what it means for margins
• Cost management, AISC, and building resilience through the cycle
• Mechanisation strategy in the US and its impact on productivity and costs
• Section 45X credits and the geopolitics of critical minerals
• South Africa’s “green shoots” vs persistent structural challenges
• Sibanye’s lithium strategy and positioning in EV supply chains
• The growing importance of recycling as a stabiliser in volatile markets
• Oil price impacts: what matters, what doesn’t, and what to watch
• The one factor that keeps the CEO up at night (hint: it’s not commodity prices)

Sibanye-Stillwater believes strongly in the value of Ghost Mail in the South African investment ecosystem. They have sponsored this podcast for readers, but I was allowed to ask whatever I wanted to ask. Please do your own research and do not treat this podcast as an endorsement of Sibanye-Stillwater as an investment.

Full transcript:

The Finance Ghost: Welcome to this episode of the Ghost Stories podcast, after a bit of a break during what I’ve come to call “December-Lite” in South Africa, which is April and all its associated public holidays.

And what a way to get back into the swing of things, because we are here with Sibanye-Stillwater, fresh off an operating update for the quarter ended March, that reflects a 371% increase in group EBITDA. How’s that for a percentage? When times are good in mining, they are really, really good.

And you can go and dig into all of the details of that operating update on SENS, or of course you can read about it in Ghost Bites.

We’re not here to rehash the numbers today. Instead, we are going to be enhancing your understanding of this group by digging into the key concepts that drive the numbers.

And who better to do it with than the group CEO, Richard Stewart?

Richard, you’ve been in the role for a good few months now — actually, it’s almost a year, I think? And thank you for doing this with me and for bringing these additional insights into the group to the Ghost Mail audience.

Richard Stewart: Ghost, thank you very much. Good to be here. I’ve actually been in the role for six months, so it’s long enough to be settled in, but it’s gone very quickly, and it’s very exciting to be here. Thanks so much for the opportunity.

The Finance Ghost: Yeah. What a time to join. Is this something you do historically? You join at the best point in the cycle in all your prior roles? It’s amazing to see the numbers. [Laughs]. It’s incredible.

Richard Stewart: Yeah. I think with mining it clearly is one of those industries that’s very exposed to cycles. It obviously drives the bottom line. We are price takers in the short term.

It’s nice to be at a point in the cycle like this, where one of your concerns, which is profitability and making money, is made easier with where the prices are. But as always, I think it’s about making these businesses sustainable through cycles, and those focuses, those efforts, those concerns are always there. So that’s where the major effort is at the moment.

The Finance Ghost: Yeah, absolutely. Well, congrats nonetheless on such a cool set of numbers, and for acknowledging right up front that a lot of this is, of course, the external pricing factors. Your job is to make sure that this business, as you say, is sustainable through cycles. That’s how mining works.

But before we get into the details around Sibanye, I’m just keen to get a temperature gauge on how it’s looking from an on-the-ground perspective in South Africa, because there is obviously much more positive sentiment at the moment. Well, I say “obviously”, that’s certainly my perception – that seems to be the story.

That’s what I wanted to ask you. What feedback are you getting from global investors, from funders, from partners – about the Southern African exposure, specifically the South African exposure that Sibanye has? Obviously, the majority of listeners to this podcast will probably be South African, and it’s always good to see what your perception is on the ground.

Richard Stewart: I think there are probably multiple aspects to that question. I think we can look at it on an absolute basis and what we’re seeing happening in South Africa at the moment. And you can also look at it on a relative basis.

When we look at South Africa over the last couple of years, I would certainly say that there have been some real green shoots. Whether we consider that from an energy perspective, we’ve seen Eskom stabilise, we’ve seen our load shedding dropping. But then we’ve still got some challenges with the cost of power coming up.

We look at logistics and transport, which is another big one for business.

We’ve almost seen the arrest in the decline of that particular sector. It certainly seems to be turning around, and there are lots of green shoots, but a long way to go and a lot of capital that still needs to be invested.

If we look at crime and corruption, again, I think we’ve seen some positive steps in the right direction. We’ve seen South Africa coming off the Financial Action Task Force (FATF) grey list. That’s got a big positive for cost of capital and investors looking forward. But then I would dare say crime is probably one of the biggest concerns I have in terms of operating on the ground.

So I definitely think we’ve seen some real green shoots and positive moves, but we’ve still got a long way to go. Overall, the GNU has been a critical part of moving forward, and part of why I say that is, to me, a lot of the success and green shoots we’ve seen are stakeholders working closely together, particularly the private sector and government, in terms of solving these problems.

And the more we can continue down that route, of being seen as partners and stakeholders to move forward, as opposed to almost necessary evils, I think we can do a lot more on that front.

I think there is a lot of positive, but a lot to be done.

Now, on a relative basis, that also gets interesting. The world has changed. With the geopolitical tensions, with what we refer to as multipolarity, it’s no longer a global village. The way the world and investors view risk is different.

You’re having to look at the world through a metals or mining focus. Critical minerals needed for defence or energy or technology today – have become a big strategic imperative for many governments and therefore many investors.

And that means they are looking towards different – and what were historically considered as riskier jurisdictions.

So, in that regard, on a relative basis, the rest of the world’s got riskier. South Africa has remained flat, and we’ve got a lot of what the world needs. So, on a relative basis, we’ve become more attractive as well. So I think it’s both absolute and relative.

In terms of boots on the ground, I would say, as I mentioned, crime actually is one of the most difficult things we’re dealing with, especially in mining. High commodity prices bring out illegal mining. And we aren’t seeing the rule of law on the ground being implemented to the extent it needs to be.

So that is still a real challenge, not only to our business, but of course to our employees, to the communities around us. So, if there was one that sort of stands out for me, it’s that.

And then the other one is service delivery. We still operate directly in communities. We are very integrated into those communities. We play a significant role in the sustainability of those communities. And the less that gets delivered by the institutions that are supposed to deliver it, the increased pressure that puts on the private sector and mining in particular.

So that remains a real challenge.

But overall, for us, South Africa is, as you mentioned, 80% of our business today. Of course, we’d like to see our business grow globally and that’s part of it, but it’s not to get out of South Africa. We are still comfortable investing here. That’s where we come from.

Ultimately, if we want to be successful anywhere in the world, we’ve first got to successful at home. That’s a motto we stand by. Making sure South Africa is a success – if we are successful here, that’s key to the way we think.

The Finance Ghost: It’s kind of funny to be able to move the conversation from “is there power?” through to stuff like “cost of power” – and it sounds ridiculous, but that’s progress.

Because if we were having this conversation a couple of years ago, we would have been talking about whether there is power at all, as opposed to how much it costs, for example.

And as you’ve highlighted, there’s still lots of things we need to do better as a country. And this is what directly drives the cost of capital. This is the relative risk point.

And I love that you’ve brought up the change in, as you say, it’s not really a global village anymore. I think that’s exactly right. We’ve seen these big isolationist policies out of the US now, and it changes the game.

South Africa is not badly positioned for this at all. I mean, I’m certainly not going anywhere. I love living here, and I think it’s in the best shape it’s been for a long time. But as you say, there’s lots that we need to get right.

And Southern Africa – South Africa specifically – is still the biggest part of your business, as you say.

That leads me then into the next thing I wanted to ask you, which is: as investors, when we read about Sibanye, we see these big buckets. It’s Southern African PGMs, it’s Southern African gold, and there are some eye-watering numbers there, these days in particular, both making a whole lot of money.

But I’m not sure that there’s a particularly broad understanding out there of what sits inside those buckets. So obviously investors read these headline numbers and then they’ll see mention made of specific mines, for example.

But perhaps you could just give us a lay of the land, specifically focusing on South Africa, of just how many different mining operations sit inside the gold bucket and the PGM bucket locally. What’s actually in there?

Richard Stewart: Ghost, that’s a great question. I think to answer it I’m actually going to go back a little bit in the history of the company, because it’s not just about how many mines we’ve got, but how we built the company over the years and how that all contributes.

We are, in mining terms, a relatively young company. We were formed in 2013, and we actually started off, for anybody who doesn’t know, as an unbundling from Gold Fields. So Gold Fields had three assets in South Africa which they wanted to divest of. Those were unbundled, and that became the start of Sibanye. That’s where we were born.

Those three mines are called Kloof, Beatrix and Driefontein, and they are what I would call classic South African deep-level gold mines. So, they employ a lot of people. They are deep level, they are generally quite high-cost relative to others around the world, but also quite high grade and long life. So that formed the core of our business.

To unpack what you’re saying, if we talk SA gold, over the years we’ve also invested quite significantly into a company called DRDGOLD. And for those who follow that, they’re separately listed; we’re a 51% shareholder. They actually mine surface operations, or tailings dams.

A big rationale of doing that transaction was, as a big historical mining company, we’ve got 40 to 50 years’ worth of tailings within our company. By combining the two entities, we’ve been able to take what was a historical environmental liability to us, merge it into DRDGOLD for real value, and they will continue mining that for many years to come.

And then over the years we’ve also added on some shallow projects onto that. People will hear us referring to our Burnstone project, for example, or some projects we have in the Free State.

The core of the company was started on the three deep-level gold mines – Kloof, Beatrix and Driefontein – and subsequently we’ve added on these shallower assets.

So, from a gold perspective, and almost a strategic perspective, if I could call it that, what we have today is our gold business is predominantly the three deep-level gold mines. But over time we will look to transition into more of a shallow business.

That’s the gold portfolio.

We then moved into PGMs in about 2015, 2016, and we very intentionally looked to acquire PGM operations that were contiguous to each other, next to each other. And the reason for that is we could see a business model whereby putting different operations together, you can realise synergies – cost synergies from a management perspective, but also real operational synergy.

One of the things with mining is we often get constrained by the edges of mine boundaries. But if you can get rid of those mine boundaries, you can mine much more ground, much more efficiently. By buying different operations and putting them together, we were able to extract those.

If we talk about our SA PGM bucket, that actually historically consists of three companies. It was the Rustenburg operations that we acquired from Anglo Platinum – today Valterra, then Anglo Platinum. It was a company called Aquarius, who owned what we call the Kroondal operations, and they also had a 50% ownership in a mine in Zimbabwe. And then we bought the old Lonmin operations, which today we call Marikana.

Our SA PGM business, if we could call it that, is essentially historically three companies. We still refer to it as the three mines being Rustenburg, Kroondal and Marikana. But essentially that comprises almost 15 or 16 individual operating mines or shafts. It’s probably about half a dozen concentrators.

Importantly, what we also have is smelters and refineries. So, by putting those three together, we not only created a business of real scale, but it’s also a full mine-to-market business in that we mine and refine our own metal all the way through to market, and therefore have a sales component to it as well.

So, when we talk SA PGMs, that’s what we’re referring to – those consolidated historical three businesses. Which are one of the biggest PGM producers in the world, one of the biggest chrome producers in the world. So, it is a significant business all the way from mining to market.

And then gold is the historical three assets plus some new shallow projects.

And then internationally, just to sort of round out the portfolio at a very high level, we’ve got the US PGM operations – also underground, two mines – we’ve got a significant recycling business, three different operations there, and then lithium in Finland.

The Finance Ghost: It’s a fascinating backstory, right? A lot of deal-making, particularly by your predecessor, to cobble this thing together.

I guess, Richard, that leads to the cheeky question, which is: can we expect more of this kind of deal-making in years to come under your leadership at the group, or is the focus at the moment to make sure that, while the going is good with these commodity prices, you will be making sure you make as much money as humanly possible? [Laughs]. Shore up that balance sheet and prepare it for this next part of the cycle?

Richard Stewart: Your last statement there was actually probably the key one, in terms of shoring up the balance sheet and understanding cycles. Let me step back and say our strategy is very much around creating value.

What we need to look at as a mining company – of course you’re mining finite assets, so you always have to grow. And the ways to grow there are: you either start new mines, and that’s the whole exploration sort of game – identifying new ore bodies, creating new mines, building new mines.

That’s an example of what we’ve recently done in Finland with Keliber. That was a completely greenfields operation.

You can expand your existing operations, the so-called Brownfields projects, or of course you can do M&A and acquire.

We are open to looking at all three of those as part of what adds the most value to the business in the long term.

But our current strategy in the short term (and let me say that’s where our focus is: the strategy we shared with the market earlier this year) – and where we see our best value in the short term today – is more within the portfolio we have right now.

And what I mean by that is the organic investment, or the brownfields projects we can invest in, specifically in South Africa, is by far the best returns we can get. And the reason for that is we’ve got significant resources, we understand the risk, we’ve already got the human capital, it’s part of the existing infrastructure.

So, we’ve got the people, and of course we’ve got the infrastructure existing – whether that is the overhead infrastructure, the technical infrastructure, processing – so we don’t have to go and buy new mines. It’s very low risk; it’s off existing infrastructure. These are some of the lowest capital intensity projects in the PGM business. They’re shallow, they’re positive for our cost profile.

So, without a doubt that’s where we see the best investment value for us in the short term.

The other part of the strategy that’s critical, though, is making sure we run our current operations as effectively as we can. And simply put, that is maximising our margins out of our existing operations, and that is to address our balance sheet.

Our balance sheet at the moment – we did stretch that for a lot of the historical mergers and acquisitions (M&A) you referred to. We’re in a good position from a leverage perspective with the earnings we’ve got today. I’m sleeping well, I’m not concerned about it.

But mining is cyclical, and what you do want is the ability to be able to move in those down-cycle times. That’s where the real opportunities present themselves.

Our strategy is very much focused on maximising our current operations to maximise margins and de-gear the business even further, get that leverage down.

And then the second portion is: where do we see the best investment today? Well, that’s largely in our own operations.

Would M&A be part of the future? Listen, I think it would. It’s something we’re good at, it’s something we’ve done successfully in the past. But I would also say so would building new projects, especially when you’re looking at critical minerals – a lot of that will be new as well. So, I think it’s more a value question than a set formula we’ll be following.

The Finance Ghost: Makes a world of sense from start to finish. And of course, the one cool thing with M&A in the space, as you’ve raised there, is the synergies can be real when these mines are contiguous (that’s the official word – next to each other, essentially). And that makes sense. Physically, you can see why that makes sense.

You don’t need to imagine too much fancy footwork on a PowerPoint presentation to justify those synergies. It’s just logical – and that helps the M&A story.

I guess on the ongoing management of the business for value, as you say, something I picked up in the operating update – and you mentioned it in the gold story now as well – is how historically it’s very much underground operations. There’s a move towards more shallow operations.

I understand that the margins are better, I guess because you are just getting the gold closer to the surface. I mean, I’m not a mining guy, but that feels logical to me. So I guess I wanted to confirm that.

And also, just a broader question, which I was going to ask you later but I think now is perhaps the time, which is just around the all-in sustaining costs (AISC) – that metric that investors need to always look at.

Some of the things you can do to just manage costs and I don’t mean like energy spikes (I want to ask you about that separately, the oil price) – I mean a longer-term view on how you manage costs here. How you actually keep those margins as high as possible, the life of mine.

So just talk to us a bit about that, and as I say, the margins on the shallow side in the gold business, and how that will change.

Richard Stewart: Just to put some numbers to this – it wasn’t directly your question, but I will come to that in a second. So just to talk the synergies, as an example: when we put those three businesses together in the PGM industry, we were able to (within 18 months) take out R2 billion worth a year just in overhead operating costs. That’s the kind of number. Now put that over a 10-year period – that’s significant.

And in fact, a lot of those businesses, at low prices, were struggling to sustain themselves at the time. But just with those synergies, that’s what kept them afloat.

What we’re doing now, by dropping the mine boundaries and investing in the new resources, is this adds 20 years onto these lives. Now, outside of the economic benefit, of course, to shareholders, the impact (of extending the lives of these operations by 20 years) to employees, to governments, to communities, etc., is huge.

So that’s the real benefit that comes from realising these synergies. So just to put a bit of meat on the bones there – but I agree with you 100%.

On the gold side, if I unpack that a little bit: of our three historical operations – and there’s still a lot of value to come from those, I must be clear – but two of them have got lives of less than five years, and those operations are currently running at costs in the region of $2,500 to $3,000 an ounce.

And the reason for that is, these are deep-level operations that today are probably mining at a fraction of what the original design capacity was. But we are still needing to cover the costs for all the deep-level infrastructure. Whether you are cooling operations for one stope or ten stopes, you’re still cooling operations [Laughs].

So, they have a very high fixed cost component to them.

And our third operation has got about 10 years; that’s running at also sort of low $2,000 per ounce numbers. So, at current gold prices, they have great margins, they’re doing exceptionally well.

But of course, what is your long-term view? And if we look through-cycle back to means, there’s a bit of risk there.

The surface businesses, of course, have a much lower fixed cost. So those tend to be sub-$2,000 per ounce. So, you’re looking at anywhere between a $500 and $1,000 per ounce difference in that total margin.

And when we refer to an all-in sustaining cost, that is effectively a cost number we use; that is all costs outside of growth. So, if you’re putting extra money in for growth, then of course that’s different. But anything to sustain the current operations is what we refer to as an all-in sustaining cost number.

So, it’s a pretty good number to look at for an overall all-in margin that can be generated.

But those are the sort of differences we’re looking at. So dropping from a $2,500 to a $3,000 per ounce conventional deep-level business, down to a $2,000 per ounce shallower but higher-margin business.

And those businesses, for us, as I mentioned, because we’ve got 40 years of tailings, these are operations with long life.

So, over the next five to ten years, we’ll see the total underground portion and the deep-level portion coming off, while the surface portion, we’ll be investing in – and that comes up. So that’s that transition we talk about, from a higher-cost to a lower-cost, higher-margin aspect.

And we’d like to see our gold business grow, so we would like to see more gold in the portfolio. But now is not a time to be looking at gold acquisitions or markets, given where the current price is.

The Finance Ghost: Yeah, absolutely. In mining you want to buy when no one wants the stuff, right? That’s the trick. And everyone wants gold at the moment, no doubt about it.

Perhaps then just sticking with some of the cost stuff and moving on to the Stillwater side over in the US. A lot of people, I’m also often guilty of it, I just shorten the name to Sibanye. But of course, it is Sibanye-Stillwater.

The side of the business that had to deal with all that flooding a few years ago – where the jokes unfortunately did write themselves for me. I’m glad that things are looking better on that side, swung into profits now in the latest period, which is lovely.

And there I noticed that there’s a mechanisation project. So I guess this talks to costs again, but I imagine that is at least partially because the US is just a structurally more expensive labour market than South Africa. Is that the right take on why that type of work is happening there, or are there other reasons for mechanisation projects in that business specifically?

Richard Stewart: So, Ghost, it’s a combination of things. The first thing you’ve got to look at with any mining method is how do you most effectively and efficiently extract the ore body that you have.

In South Africa, we have got quite unique ore bodies that we call tabular ore bodies. So, they’re very flat, they’re quite thin or narrow, and they extend for several kilometres. That’s both our gold and our PGM operations.

And those are actually quite difficult to mechanise. Hence the reason we still have very labour-intensive operations in South Africa. Which, frankly for South Africa is a good thing. We need the jobs – we are very pro that – so that’s good.

Whereas the ore body we are mining in the US is far more vertical and therefore lends itself to mechanisation.

So that’s the first point. You do need a technical environment, and that environment does lend itself to it.

But what we are doing now – and you’re 100% correct – the labour factor in the US is definitely a significant factor. So, labour costs are high. In Montana, I speak under correction, but the last unemployment figures I got were less than 3%. So, there’s very high demand for skills.

And of course, mining is one of those industries where we are still needing to attract skills into it, compared to many others.

So, labour costs are definitely a factor. And therefore, one of the things you want to drive at a mine in the US is how many ounces per person can you extract most effectively [Laughs].

And essentially what our strategy there looks at, without going into all of the technical detail, is we historically looked at saying: how do you mine according to the highest grade, which means you mine the lowest volume but for the most metal? And that was the theory on how we built our mining method.

What we’ve recognised now, what this new strategy adopts, is to say: we’re actually quite happy to dilute our mining grade a little bit. So, we’ll mine a little bit more (tonnes) for the same amount of metal but do it a lot more effectively and a lot cheaper.

So, by going to higher mechanisation, we effectively end up mining more per person – possibly a little bit more rock that comes out for the same amount of metal – but a lot more effectively.

And the net result of all of that is, with the same amount of people, we believe we can get 40% more metal at 20% less unit costs.

So that’s how all the maths comes together, to say actually diluting it a bit, but diluting it and getting mining per tonne a lot cheaper, actually benefits the per-ounce metal number more effectively.

So that is what the US is about. It’s about looking at the ore body we’ve got, and through this process we’ll get 40% more metal for 20% less cost, with the same amount of people effectively.

And why that is so important to us in the US, Ghost – if I could just unpack strategically for a second – is US operations today are mining at a total cost of about $1,300 per ounce.

Now when we look at the PGM basket price that they’re exposed to, we think a low point in the cycle, if you look through it sustainably, it will be very difficult to sustain a low point below $1,000.

So, we very specifically looked at it to say: if we can get our costs down to $1,000, then this operation will survive any low cycles.

But what’s beautiful about the Stillwater operations is they’ve got 40 years, officially, of life – and double that in stuff we haven’t yet even explored. So, this is a potential hundred-year mine that’s still to come.

So, our strategy is about saying: let’s make absolutely sure that we’re resilient to whatever the market throws at us. And then that will give us huge optionality during the upcycles.

And that, to your opening comments up front [laughs] – mining companies make money when cycles go up, and our job is really to make sure we survive when they go down. And that’s precisely what the strategy is all about.

The Finance Ghost: It looks easy at the top of the cycle. But a lot of stuff has to happen to make it look easy at the top of the cycle. I wish I understood more about the geological side sometimes when I read mining updates, but that was very cool – the different shape of the ore bodies and everything else. Thank you. I enjoyed that.

Something that I also want to touch on, that is relevant to your US business, is the Section 45X credits. And that comes through a lot in your financials, essentially, and in the narrative.

I think let’s just spend a couple of minutes on what that is, so that when investors actually see that, they understand what they’re reading about.

Richard Stewart: Ghost, perfect. And again, I’m going to answer that in two parts, because there’s a numbers piece to this which I’m sure many investors are interested in. But there’s a far more strategic piece to this as well.

Let me maybe give you the easy answer on the numbers. So, simply put, what Section 45X is: it’s an instrument that’s been introduced to support mining of critical metals in the US.

Very basically, what it is, is we get back a 10% tax credit on our total costs. So essentially it takes 10% off our cost base. Initially, that’s designed to be a cash back to us, so it’s actually cash that we get back.

It evolves into more of a tax credit moving forward, but actually a tax credit that’s tradable. So, to look at it in very simple terms, whatever our costs are, we get a 10% credit off those costs through 45X. That’s what it is.

How it works is it will run out, at the moment, into the early 2030s. I can get the exact date (it’s certainly disclosed in our numbers) and then it starts getting tapered down over a period of, I think, three years to about 2035 or so. [Editor’s note: s45X credits apply from 2023 to 2034, with 25% annual step-down commencing from 2031]

So, it’s an instrument that’s not evergreen, but it’s been put in place for a period of time specifically to help benefit operations targeting critical minerals. That is what it is from a numbers perspective.

The almost slightly deeper question, and what’s been so critical about that, is if looking at the history of 45X. And this came about through us actually directly engaging with the US government through various departments. Essentially the discussion we were having with them was to say Stillwater is a very strategic asset to North America.

And the reason is, if you look at platinum group metal mining, it all comes out of South Africa, Zimbabwe and Russia. The only asset of any significance is Stillwater in the US, and therefore, strategically it’s important.

But the costs of mining there are much higher than any of those other jurisdictions. As we’ve just been unpacking, labour costs, environmental costs, social costs – they’re much higher.

And our argument was to say, if this is a strategic asset, we can’t ask our shareholders to foot that bill alone and try and compete against other assets in different jurisdictions that have a much lower cost structure. How can you assist? And this was one of the things that came out of that.

Going back to the discussion we were having earlier about a multipolar world, this is very much because in mining companies – what we’ve been saying – is, as a mining company, you’re currently competing in many parts of the world with, say, Eastern or Chinese capital. And their capital structures are very different. Their operating costs are very different.

How do we make ourselves competitive against these different supply chains?

And with the geopolitical tensions, with the multipolarity, we are seeing some governments recognising that ensuring that they have multiple sources of supply – not just completely dependent on China – is increasingly important. That has become a huge international, global strategy.

And this is one of the instruments that the US government, in particular, has employed to assist with that.

Now we’re discussing others with the US and EU. We’re discussing various mechanisms with the EU as it relates to our lithium project. But I think we’re going to see a lot more of this going forward.

And we need to. If we want to develop supply chains for Western markets, or just supply chains generally that are not dependent on one particular supplier – there are going to need to be these types of incentives and mechanisms to help ultimately balance the market.

And that 45X is one of those.

So, I think it’s a real indicator of the intention of the US government to develop those supply chains. And I dare say we’re going to see more of it developing elsewhere in the world, and we are playing an active role in trying to see them be developed.

The Finance Ghost: Yeah. So you went on about the early 2030s on those credits. Copilot tells me it’s a phased moving out of those credits, basically from 2030 to 2033. So that’s why there’s no specific date – it basically phases out over a few years. Very interesting, and something that will become relevant for sure in years to come.

I think let’s use that as our cue to move past gold and PGMs, which is obviously still the foundation of the business, and that’s why we’ve spent the majority of our time together on it. But there’s a lot more to Sibanye than just the gold and PGMs.

You recently held a capital markets day where you focused on the businesses beyond that space, which I think sends an important message to the markets – that this stuff does matter to your group.

And a feature of this latest operating update as well, is just the broad-based nature of the contributions to EBITDA. It’s no longer just, “gold and PGMs make all the money” and everything else is kind of like that weird person in the family, we don’t talk about them.

It’s not that – there are some good numbers down there. Obviously, the lithium side is still loss-making because it’s in development phase, and we can talk about that. But it’s good to see some earnings coming through and becoming bigger and bigger from the rest of the business.

So perhaps just to set the scene there, maybe you can just give us the quick helicopter view, just to remind people – life beyond PGMs and gold – and what is inside Sibanye, without going into massive detail on each one.

What will people find if they want to go digging in that capital markets day presentation?

Richard Stewart: Perfect, Ghost. And I think, so definitely, as you say, gold, PGMs, precious metals remain the underpin to the business, and will for a foreseeable period of time. The other big one is – let me start off with that – lithium in Finland, the Keliber project.

A quick step back on strategically how we got there: when we got into PGMs, we studied the markets, and of course the big driver of PGMs is automobiles.

This was back in 2015. We recognised that electrification of vehicles was something that was going to come. And admittedly, the only other person in the world at the time making this noise was Tesla – was Elon Musk. It was still before it had really taken off.

And we still believe that that’s a structural change that’s going to come. Many people try and make it as a trade-off between Internal Combustion Engine (ICE) versus Electric Vehicles (EV). We don’t quite see it that way. It’s more that all technologies are going to be needed and evolve with time.

But we saw the opportunity to expose ourselves to what was a very clear trend, by being able to provide our customers with the metals they needed for electrification, and therefore specifically the batteries. The real opportunity to be part of a growth cycle, or growth metal.

And the other part of it that we recognised was that if we wanted to be competitive, trying to provide Western supply chains would be where we could have a competitive advantage, given how established already Eastern and Chinese supply chains were.

So that was how we ended up with lithium.

And why Finland, or why Europe? Well, that is a big Western automobile supply chain, and we wanted to supply into it. So that’s what we’ve got there.

What’s unique about it is, we’ve got a mine, we’ve got a concentrator, and we have a lithium refinery.

Now to put that into perspective, less than 30% of global lithium refining capacity sits outside of China. This is the only mine-to-market project in Europe, and one of the very few refineries that sits outside China in Europe.

It’s a very unique project in being able to go from mining all the way to final product. Most of that supply chain relies on going through China at some point.

For us, it’s a very strategic project in that regard. And as people are trying to diversify their supply sources, I think it’s one that’s going to become valuable.

And as you quite rightly mentioned, we finished that build in the first quarter of this year and we are now busy starting the project up. So, mining has commenced. We’ll start with the concentrating later in the year.

So that’s what we’ve got there, and we look to start seeing first cash flows coming from that during the second half of this year.

And then the other part of the business that’s material is the recycling. This is also one which, I guess, is a little bit different for a mining company to have taken such a big step in recycling. We got our first taste of it through our Stillwater acquisition, but we’ve grown it substantially since then.

We are significant recyclers of PGMs. We are significant recyclers of precious metals, as well as some base metals. And we’re doing quite a lot of work on some other niche products.

But the reason why this is such an important aspect for us strategically, is that we do fully believe that looking forward 10–15 years, focusing just on traditional mining, I think you’re going to be missing out. It’s going to be about metal supply. And one of the most responsible ways to supply metals remains recycling – you should use what you’ve got above ground.

And for us, as opposed to seeing that as a threat to our business, we actually want to incorporate it as part of the business and part of how we supply metal.

So, mining will be a component – you’re always going to need primary mining – but to have that recycling as part of the business for us has been a real strategic imperative. And today I think we see the benefits of it in two ways.

Number one, as you quite rightly pointed out, it’s contributing close to 10% of our earnings now. That’s a nice diversification, because it’s more of a fixed-margin business. Unlike mining, where you’ve got fixed costs and therefore floating margins, this over here is much more of a fixed-margin business.

And then strategically, again, in the supply chains we’re operating in, it’s a neat way for governments to be able to get access metals they might not own in resources on the ground within their specific regions. And we can offer them those technical skills to be able to look at the recycling.

So that’s become a really, really valuable and strategic part of our business, which I dare say will see growth.

The Finance Ghost: Yeah, that’s interesting. I’m so glad I asked that question, because again, I learned some stuff there, and I have no doubt that the listeners did as well.

So very much the future-focused part of the group then. And I think what differentiates Sibanye, certainly at the moment, from many of the other names in big mining, if I can call it that, is everyone seems to be chasing copper at the moment. Whereas you are doing things a little bit differently.

Which for me – and again, this is maybe not the most informed mining view, I definitely don’t claim to be an expert in this space – but when it feels like everyone is chasing the same asset, it always feels to me like the chances are very good that people are overpaying. Or maybe not doing the right deals, or whatever the case may be.

Whereas you’re doing other stuff. And it starts with decisions made a decade ago: to your point, around stuff like lithium, and understanding what happens in PGMs, then how do you position yourself for that down the line with electric vehicles, etc.

I tend to agree with you – I don’t think it’s ICE versus EV. I think it’s a little bit of both. I think hybrid is proving that.

And I would also say that companies that ignore the future – I mean, that’s what’s happened to the European automobile industry, right? They kind of ignored the threat from China, and here we are.

So, kudos to Sibanye for not ignoring these trends and these threats. I think it doesn’t help to put your head in the sand like an ostrich, that’s for sure.

One thing I just want to confirm, which was interesting there. So on the recycling side, when you talk about fixed margin – so it’s a less cyclical business – basically, if the prices of metals go down, then you’re bringing the stuff in for less than you would have before, and you’re getting it out and locking in that margin.

Is that kind of what you’re saying about the economics of that business? Because if that’s true, that’s a pretty interesting addition to the Sibanye suite.

When commodity prices are very high, it looks amazing, like it does now, but in a downswing, that recycling business becomes even more important, right?

Richard Stewart: That’s exactly what it is. And listen, it is a little bit more complex than that [laughs].

If we take, for example, PGM recycling, there’s a very distinct value chain to that. And certainly, a lot of catalytic collectors, as we call them, do that as a business. And therefore, when prices are high, they do collect a little bit more, and you see that sort of playing out in the market.

And then the other part to this – which is recycling – we’ve got some really big blue-chip companies who we recycle for. We don’t always disclose that because it is very strategic. But these are people who rely on our credibility, our responsible sourcing, and our ability to return metal to them, who are almost price-agnostic.

That’s part of their industrial chain, and we are part of getting some of that metal back and putting it back into their value chain for them, where those margins are consistent.

So, you’re absolutely correct. This is something where you look at much more of a fixed margin compared to mining. Of course, when prices are higher, the absolute amount on a fixed margin is more, but you don’t get that variability that you get with mining.

So, in high-price times it tends to form a slightly smaller component, but in lower-price times it can be a really nice cushion to the business for a form of stability and earnings.

Your basic premise is 100% correct. Yes.

The Finance Ghost: Okay, fantastic. I think let’s move on then. Some of the really near-term stuff as we start to bring this to a close.

And specifically, the oil price spike – this has certainly thrust electric vehicles back into the limelight, that’s for sure. But I think more importantly it must be having quite an impact on your production costs.

A lot of the updates that I read from the mining sector, the industrial sector: quite correctly, companies are talking about the impact of fuel on their mining costs. This is front of mind for all South Africans.

The question here is pretty simple. Number one, what impact does this oil price spike have on your business? And two, to what extent can you mitigate it? Have you got hedges in place? What can you actually do to bring that impact down?

Richard Stewart: For us the mitigation is actually a little bit tricky, and I need to unpack why that is. So, in fact, the direct impact to us is quite low. And I say that because we are a largely conventional mining operation. As the bulk for us, diesel as a direct cost is actually relatively low. We don’t have huge trucks that we’re moving around open pits and things like that. We are conventional, labour-intensive operations.

It’s a small portion of our total cost. The notion for us of hedging oil prices or diesel prices or something like that doesn’t have a significant impact on our business. So, unlike many of our big global international peers, that impact is actually quite small.

Of course, the bigger impact is the overall effect. So how does it impact goods, logistics, transport of goods, etc.? That hits us across multiple areas in the supply chain, but it’s more difficult to pinpoint or deal with. It’s an overall inflation problem, I guess, that everybody suffers. So that, we feel.

For us, the bigger question mark around it – and if I had to say, it’s an indirect hit – but the one we watch more closely is… let me just say firstly, I don’t think that this is going to be a big uplift for battery electric vehicles versus ICE vehicles. Everybody’s talking about it like that, but I think that’s a knee-jerk theoretical response.

The amount of time it takes for these supply chains to adapt – I don’t see that as a big risk now. If it happened for another 10 years, that’s a different discussion. But for what we’re seeing, no.

The Finance Ghost: I tend to agree, for what it’s worth. Absolutely.

Richard Stewart: I think the bigger impact that we would see is, if this continues long enough to result in a material impact to global growth (so let’s say we start seeing global recessions) that impact people’s buying ability for goods — and one of those goods is automobiles and cars. So that affects the demand for our key products.

So that, for us, is probably the single biggest factor I’m certainly watching carefully: how we see this playing out over a two- or three-year period on global economics and growth, more so than the short-term impact, which is actually relatively small.

The Finance Ghost: Yeah, that makes perfect sense. The world does not do well with oil above $100 a barrel, that’s for sure. So hopefully it goes back down. It usually does. May that happen again.

Last question, Richard – and this has been such a great conversation. Thank you.

What is keeping you up at night? If you could pinpoint one risk that you really focus on – it’s always a very tough question, because there are a lot of things that you would be worried about, obviously, in the role that you’re in and the huge responsibility it is.

But if there was one thing keeping you up at night, what would that be?

Richard Stewart: Let me not call it a risk, but let me call it the one thing that keeps me up at night, or always occupies my attention – and it’s actually safety.

And let me maybe just unpack why I say that. I mean clearly, as a mining business, safety is something that’s always critical to us. And the obvious thing is that’s the right thing to do for our employees. We want our employees to be able to go home safe, unharmed, every day. So that’s sort of the obvious reason.

The slightly less obvious reason for me is that safety is almost an indicator or a reflection of a broader culture within a company – how the company works, how it thinks, how effective it is.

So much of what drives a safe operation is also what drives an efficient operation. So much of how you treat and work with your employees and your communities around you is who you are as people, and how you engage with them is what makes an operation safe.

And I extend safety here beyond just your normal thinking of mine safety, but into our communities – into a lot of the crime that we’re facing at the moment. That’s our people being safe, feeling safe, coming to work and being able to work a day and go home again, and feel safe in their home environment.

So, I really think it’s a core aspect for me, just because it drives so much of the fundamental business and who we are as a business within the communities in which we operate.

So that’s the underpin to all the value we can create, economically and socially.

I’d have to say, if there’s a second thing, it’s delivering on our strategy – our short-term strategy right now. Because that will underpin the value that we’ve promised our stakeholders: the uplift to our shareholders, our communities, our employees. Delivering on our strategy in the next two years is critical.

So those are the two things that are within our control, that I spend a lot of time focusing on. And if I was going to say losing sleep over: it’s those.

The Finance Ghost: Absolutely. Richard, thank you. This has been such a cool discussion. It’s our first one as a Ghost Stories podcast. I hope it won’t be our last.

I suspect that you plan to do this for many years, and so do I, so hopefully there will be more to come.

Congratulations on a great update. And I think the big takeout today is for investors to hopefully understand the level of thinking that goes into the through-the-cycle nature of mining.

One beautiful quarter or year – yes, it’s often a reality around commodity prices and what those have done – but it’s the years prior that led to that point that made it look easy at the top of the cycle. That’s the stuff that matters.

So, Richard, thank you, and good luck for this period. I hope you make as much money as humanly possible as a South African, because that’s where this money is flowing to. And I look forward to doing another one of these with you at some point in the future.

Richard Stewart: Ghost, thank you very much. Real privilege to be here today. Thanks to your listeners, and certainly I look forward to a lot more of these discussions. Thank you so much for the opportunity. Real pleasure. Thank you.