unpacking the pgm supply conundrum 2018/s4 - jf.pdfmarket outlook •significant synergies with...

www.sibanyestillwater.com

Unpacking the PGM supply conundrum

Justin Froneman Chief Financial Officer: US Region

LBMA / LPPM Conference

29 October 2018

1


NOT FOR RELEASE, PRESENTATION, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.This presentation is for informational purposes only and does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United Statesor any other jurisdiction nor a solicitation of any vote of approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would beunlawful prior to registration or qualification under the securities laws of any such jurisdiction.The shares to be issued in connection with the offer for Lonmin plc (“Lonmin” and the “New Sibanye Shares”, respectively) have not been andwill not be registered under theUS Securities Act of 1933 (the “Securities Act”) and, accordingly, may not be offered or sold or otherwise transferred in or into the United States except pursuant to anexemption from the registration requirements of the Securities Act. The New Sibanye Shares are expected to be issued in reliance upon the exemption from the registrationrequirements of the Securities Act provided by Section 3(a)(10) thereof.This presentation is not a prospectus for purposes of Directive 2003/71/EC (and amendments thereto, including Directive 2010/73/EU, to the extent implemented in anyrelevant Member State) (the “Prospectus Directive”). In any EEA Member State that has implemented the Prospectus Directive, this presentation is only addressed to and isonly directed at qualified investors in that Member State within the meaning of the Prospectus Directive. This presentation is not directed to, or intended for distribution to oruse by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or usewould be contrary to law or regulation or which would require any registration or licensing within such jurisdiction.No statement in this presentation should be construed as a profit forecast.Forward looking statements

This presentation contains 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 Gold Limited’s trading as Sibanye-Stillwater’s (“Sibanye-Stillwater”) financial positions,business strategies, plans and objectives of management for future operations, are necessarily estimates reflecting the best judgment of the senior management anddirectors of Sibanye-Stillwater and Lonmin.All statements other than statements of historical facts included in this presentation may be forward-looking statements. Forward-looking statements also often use words suchas “will”, “forecast”, “potential”, “estimate”, “expect” and words of similar meaning. By their nature, forward-looking statements involve risk and uncertainty because theyrelate 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 notto place undue reliance on such statements.The important factors that could cause Sibanye-Stillwater’s and Lonmin’s actual results, performance or achievements to differ materially from those in the forward-lookingstatements include, among others, our future business prospects; financial positions; debt position and our ability to reduce debt leverage; business, political and socialconditions in the United Kingdom, South Africa, Zimbabwe and elsewhere; plans and objectives of management for future operations; our ability to service our bondInstruments (High Yield Bonds and Convertible Bonds); changes in assumptions underlying Sibanye-Stillwater’s and Lonmin’s estimation of their current mineral reserves andresources; the ability to achieve anticipated efficiencies and other cost savings in connection with past, ongoing and future acquisitions, as well as at existing operations; ourability to achieve steady state production at the Blitz project; the success of Sibanye-Stillwater’s and Lonmin’s business strategy; exploration and development activities; theability of Sibanye-Stillwater and Lonmin 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; theavailability, terms and deployment of capital or credit; changes in relevant government regulations, particularly environmental, tax, health and safety regulations and newlegislation affecting water, mining, mineral rights and business ownership, including any interpretations thereof which may be subject to dispute; the outcome andconsequence of any potential or pending litigation or regulatory proceedings or other environmental, health and safety issues; power disruptions, constraints and costincreases; supply chain shortages and increases in the price of production inputs; fluctuations in exchange rates, currency devaluations, inflation and other macro-economicmonetary policies; the occurrence of temporary stoppages of mines for safety incidents and unplanned maintenance; the ability to hire and retain senior management orsufficient 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 informalsettlements in the vicinity of some of Sibanye-Stillwater’s operations; and the impact of HIV, tuberculosis and other contagious diseases. These forward-looking statementsspeak only as of the date of this presentation. Sibanye-Stillwater and Lonmin expressly disclaim any obligation or undertaking to update or revise any forward-lookingstatement (except to the extent legally required).

Disclaimer 2

Disclaimer


Understanding our PGM strategy

3


Individual PGMs should not be looked at in isolation 4

The PGMs are produced as a basket

0%

20%

40%

60%

80%

100%

SouthAfrica

Russia NorthAmerica

Zimbabwe Other Global

Global prill split

Pt Pd Rh

5

-4

1

62

44

83

82

10

22

2

2

28

29

19

15

100

100

-20% 0% 20% 40% 60% 80% 100%

Overall PGMs

Platinum

Palladium

Rhodium

Ruthenium

Irdium

Investment Autocatalysts Jewellery IndustrialPlatinum Palladium Rhodium

Breakdown of demand by metal use (2017)

Sources include: Johnson Matthey, SFA Oxford, WPIC, company information


• Capital underinvestment by South African PGM producers (c.70% of global primary platinum supply) since global financial crisis– Insufficient to replace current production levels

• Without incentive-driven price growth, new supply coming on-stream seems unlikely or delayed– SA primary production expected to decline by 13% by 2025 (-1.5% CAGR)– SA platinum production peaked in 2006 at 5.3moz versus 3.9moz forecast in 2025E

• No new production expected from the Western Limb without a real basket price escalation exceeding 20-25% – The Western Limb currently represents more than 70% of South African supply

0

1000

2000

3000

4000

5000

6000

7000

2007

A20

08A20

09A20

10A20

11A20

12A20

13A20

14A20

15A20

16A20

17A20

18E20

19E20

20E20

21E20

22E20

23E20

24E20

25E

Oun

ces (

000)

Primary platinum supply

South Africa Russian Sales North America Zimbabwe Other

Supply declines driven by low basket prices 5

Platinum – primary supply

Sources: SBG Securities and Johnson Matthey, SFA Oxford, company estimates

South African capital expenditure


0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2007

A20

08A

2009

A20

10A

2011

A20

12A

2013

A20

14A

2015

A20

16A

2017

A20

18E

2019

E20

20E

2021

E20

22E

2023

E20

24E

2025

E

Oun

ces (

000)

Primary palladium supply

South Africa Russian Sales North America Zimbabwe Other

• Supply expected to remain broadly flat over forecast period on the back of a decline in South African production

– Primary palladium production increasing by 0.5% CAGR, with total production increasing at 2.0% CAGR

• Russian and North American supply expected to remain relatively stable

Palladium supply constant, driven primarily by regions where basket prices are not platinum dependent 6

Palladium – primary supply

Source: Johnson Matthey, SFA Oxford, WPIC, company estimates


A supply source driven by factors other than PGM prices 7

PGM recycling – secondary supply

0

200

400

600

800

1 000

1 200

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

2010A 2012A 2014A 2016A 2018E 2020E 2022E 2024E

US$/

oz

Oun

ces (

000)

Palladium

Europe Japan North America

China Rest of World US$/oz (rhs)

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

0

200

400

600

800

1 000

1 200

1 400

1 600

2010A 2012A 2014A 2016A 2018E 2020E 2022E 2024E

US$/

oz

Oun

ces (

000)

Platinum

Europe Japan North America

China Rest of World US$ / oz (rhs)

• Recycling is not the silver bullet!

− Recycling of autocats largely driven by steel prices and not the US$ PGM basket

• Technical issues and loadings beginning to impact recycling throughput and

forecast growth rates

Source: Johnson Matthey, SFA Oxford, WPIC, company estimates


200

300

400

500

600

700

800

900

1 000

1 100

1 200

-3 000

-2 000

-1 000

0

1 000

2 000

3 000

2007A 2009A 2011A 2013A 2015A 2017A 2019E 2021E 2023E 2025E

US$

/oz

Koz

Surplus / Deficit (koz) Ex-ETF market balance

Pall Price (US $ / oz) (rhs)

• We are structurally bullish with palladium

set for sustained record deficits

– Palladium excess inventories already

closing in on normalised levels

– Gasoline expected to maintain a

majority market share through to 2025

– Relatively flat long term producer supply

CAGR lags a net-demand CAGR of 3.0%

– Long-term substitution is anticipated to

provide more balance to the overall

PGM basket

o excess Palladium inventories forecast to

reduce to nil at current rates by 2021E

o Substitution will become a necessity to

stabilise and balance markets and price

differentials

Palladium outperformance set to continue

Palladium: The most precious of the PGMs?

8

Source: Internal demand and supply model based on WPIC information, broker consensus and other sources

Palladium balance

Excess inventory stocks

-600

-400

-200

0

200

400

600

800

1 000

1992A 1996A 2000A 2004A 2008A 2012A 2016A 2020E 2024E

Da

ys o

f exc

ess

inve

nto

ry

Platinum Palladium Rhodium


• Despite current aversion to diesel ICE and EV penetration, platinum’s fundamentals remain constructive

– Limited primary and secondary supply growth anticipated globally– Significant producer underinvestment in growth and sustaining capital since the GFC

to result in long term South Africa primary producer supply instability– Demand remains well supported, even in diesel markets– Potential substitution away from Pd to Pt likely to introduce more market balance

• Platinum likely to remain in marginal surplus for the remainder of this decade, thereafter reverting to increasing deficits as primary production from SA contracts

Despite declining diesel market share and EV concerns, we remain fundamentally bullish

Platinum: Supply driven deficits on the horizon

9


Platinum balance

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

-1 000

-800

-600

-400

-200

0

200

400

600

800

1 000

2007A 2009A 2011A 2013A 2015A 2017A 2019E 2021E 2023E 2025E

US$/

oz

Oun

ces (

000)

Surplus / (Deficit) Ex-ETF market balance Pt Price (US $ / oz) (rhs)


• Rhodium has outperformed the other primary PGMs YTD on the back of renewed market interest and demand stability

– Rhodium has largely been in fundamental balance for most of this decade– Material deficits anticipated post 2020, driven by loadings stability and reduced

primary production from SA• Rhodium remains critical to reaching real world driving NoX emissions thresholds

– Upside potential to rhodium loadings in autocats in an effort to reduce NoX• Rhodium needs to be carefully managed - OEMs have long memories and are

loathe to see a repeat of Rhodium’s historic price volatility• Rhodium’s remains critical to the SA PGM basket (4E) and instilling price

sustainability

Rhodium set for significant deficits post 2020

Rhodium: The forgotten PGM

10


0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

-300

-200

-100

0

100

200

300

2007A 2010A 2013A 2016A 2019E 2022E 2025E

Surplus / (Deficit) (koz) Rhodium price (US$/oz) (rhs)

Rhodium balance

Forming a unique, globally-diversified

PGM business

Delivering on our PGM strategy

11


• Analysis of PGM industry fundamentals confirmed robust outlook• SA PGM industry financially distressed due to low platinum prices since the GFC,

labour disruptions and escalating costs (labour, utilities) • Depressed sector valuations • Opportunity to build a significant PGM business at a low point in the price cycle• SA PGM mining operationally similar to gold mining• Stillwater acquisition provided exposure to a tier 1 asset in the portfolio and provides

the company a unique PGM geographical and PGM commodity mix• Opportunity to leverage Sibanye-Stillwater’s regional operating model and hard-

rock, tabular, labour-intensive mining competency to realise value

Four step strategy envisaged 12

PGM strategic rationale


Executing clearly communicated four step strategy to create a unique PGM business 13

Implementing a value accretive PGM strategy

AQUARIUS• First entry into the SA PGM sector – April 2016• Lean, well run company• Operational performance has increased to further record levels

since acquisition

RUSTENBURG• Effective November 2016• Smart transaction structure aligned with expectations of platinum

market outlook• Significant synergies with Aquarius and gold central services• Realised synergies of ~R1bn in 14 months, well ahead of previous

target of R800m over a 3-4 year period

STILLWATER• Tier one, US PGM producer acquired in May 2017• High-grade, low-cost assets with Blitz, a world-class growth project• Provides geographic, commodity and currency diversification • 78% palladium content provides upside to robust palladium market

LONMIN• Attractive acquisition price at low point in platinum price cycle• Significant potential synergies exist with our SA PGM assets• Aligns with Sibanye-Stillwater’s mine-to-market strategy in SA and adds

commercially attractive smelting and refining • Sizeable resources provide long-term optionality


Acquiring sizeable resources at historically low prices 14

SA PGM acquisitions

Source: Various companies’ disclosuresNote: Bubble size represents PGM Resources

Historic SA PGM transactions


• Lonmin’s mining plan revised after detailed due diligence• Planning for current economic and market conditions

– ‘lower for longer’ plan• Conservative plan not contingent upon project capital expenditure thereby

ensuring affordability• First generation shafts to be put on care and maintenance as per Lonmin plan• Flexibility to delay project capital investment

– optionality to significantly extend operating life in a higher PGM price environment

Affordable mining plan with optionality 15

Revised Lonmin operational plan1

1 Source: Lonmin’s company information and due diligence performed by Sibanye-Stillwater

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

2018 2021 2024 2027 2030 2033 2036

4E o

unce

s

Revised plan - adjusted 4E PGM ounces in concentrate

0500

1 0001 5002 0002 5003 0003 5004 000

2018 2021 2024 2027 2030 2033 2036

R m

illion

Revised capital by category compared to Lonmin plan (real terms)

Saffy RowlandK3 E3 4B K4

NewmanW1 E1 E2 Hossy BTT

Lonmin LoM 4E PGM ounces in concentrate

Concentrator capex Smelter and refinery capexMining capex

Other capex New furnace capex Total LoM Capex


World class, low cost US PGM mines with the SA PGM operations well placed on the cost curve 16

Moving down the PGM cost curve

Source: Nedbank research*Prices at 14 October 2018: Platinum: US$840/oz; Palladium: US$1,070/oz; Rhodium: US$2,500/oz and Exchange rate of R/US$14.40

Sibanye-Stillwater’s PGM operations/JVs

Sylv

ani

a D

ump

s (SL

P)

Boul

der

(SW

C)

Pla

tinum

Mile

(SG

L)

Stillw

ate

r (SW

C)

Two

Rive

rs (A

RM/IM

P)

Mog

ala

kwen

a (A

MS)

Rust

enb

urg

(SG

L)

Kroo

nda

l (SG

L/A

MS)

BRPM

(RBP

)

Zim

pla

ts (I

MP)

Booy

send

al (

NH

M)

Mim

osa

(IM

P/SG

L)

Unio

n (S

IY)

Ma

rula

(IM

P)

Mot

otol

o (G

LEN

/AM

S)

Am

and

elb

ult (

AM

S)

Mod

ikw

a (A

RM/A

MS)

Ma

rika

na (L

MI)

Zond

erei

nde

(NH

M)

Pand

ora

(LM

I)Un

ki (A

MS)

Imp

ala

Min

e (IM

P)

-

250

500

750

1 000

1 250

1 500

1 750

2 000

-

250

500

750

1 000

1 250

1 500

1 750

2 000499 999 1 499 1 999 2 499 2 999 3 499 3 999 4 499 4 999 5 499 5 999 6 499 6 999 7 499 7 999 8 499

Ca

sh C

ost a

nd B

ask

et P

rice

(US$

/oz)

Cumulative Annual Production (4E Koz)

Global PGM Cash Cost+Capex Curve (CY18E - At Spot)

Spot PGM Basket Price Received


5,0

4,5

4.3

3,4

2,5

2,5

2,4

3.8

2,2

2,0

Newmont

Barrick

Sibanye Stillwater

Anglogold

Goldcorp

Kinross

Newcrest

Polyus

Freeport-McMoRan

Gold Fields

2018E gold and gold equivalents

production (Moz)

1, 2

Source: Company filings, Wood MackenzieNotes:1. Sibanye –Stillwater gold equivalents included completed on a 4E PGM basis2. Gold equivalent ounces calculated as PGM basket price in the period (USD1,007/oz) / average gold price (USD1,286/oz) in the period multiplied by PGM

production (4E) and using the Sibanye – Stillwater H1 2018 prill split3. Sibanye – Stillwater annualised production estimates, calculated on a mine-to-market basis

17

0,1

0,3

0,2

0,7

1,6

1,7

2,1

Glencore

Northam

RBPlats

Norilsk

Impala

Amplats

Sibanye-Stil lwater(post LMI)

2018E platinum production (Moz)

0,04

0,1

0,3

1.0

1.3

1,5

2,7

Glencore

Northam

North AmericanPalladium

Impala

Sibanye-Stil lwater(post-transaction)

Amplats

Norilsk

2018E palladium production (Moz)

Sibanye-Stillwater global PGM ranking Sibanye-Stillwater global gold ranking

Lonmin’s contribution to Sibanye-Stillwater

Positioned globally as a leading precious metals producer

Becoming a leading precious metals company

3

3

Sibanye – Stillwater gold equivalentsSibanye – Stillwater gold production


Reserve grade and scale is world-class 18

International PGM Reserve comparison

Source: SFA Oxford, company reports

3,1

5,5

4,7

3,63,8 3,8

2,0

4,3

3,0

2,3

1,1

2,42,7

0,0

1,0

2,0

3,0

4,0

5,0

6,0

0

20

40

60

80

100

120

140

160

180

Ang

lo

No

rnic

kel

Sib

any

e-

Stillw

ate

r

Impa

la

No

rtha

m

Lonm

in

Sed

ibe

lo

RBP

Va

le

ARM

Tha

risa

Gle

ncor

e

NA

P

Company attributable PGM reserves (4E Moz)Contained PGMs, LHS

Reserve grade (g/t 4E, RHS)


Conclusion

19


• Built sizeable, diversified PGM business at low point in cycle• Realisation of synergies in SA and growth in US positions Group perfectly for

higher price environment and for sustainability through cycle lows• Closure of Lonmin acquisition will complete SA PGM strategy – logical

value opportunity• Fundamental PGM outlook positive – under various scenarios, deficits

for platinum and palladium likely• Current market value doesn't reflect fundamental value

A unique value proposition 20

Conclusion


21

A unique value proposition

Leading GLOBALPGM recycler

A leading precious metal company

Largestproducer of South African gold

Top 3GLOBAL PRODUCER of platinum and palladium

Stillwater –only sizeable primary producer of Palladium

The PURPOSEof our mining is to IMPROVE LIVES

Delivery of superior value to all stakeholders drives strategy

Operational excellence and innovative growth to create sustainability

Gold mine life >15 yearsPGM mine life > 30 years

Proudly South African while competing on a global stage

Copper

Source: Company information


Questions?

22


Appendix

23


Realisation of synergies will ensure operational viability 24

Material synergies with Lonmin operations

Notes:1. For further information in relation to expected synergies, please refer to page 17 and pages 58 to 60 of the offer announcement, dated 14 December 2017,

available at https//sibanyestillwarer.com/investors/transactions/lonmin/documents2. For overhead synergies, total savings anticipated when fully implemented in FY21; varies per toll agreement production throughput for processing synergies with

average calculated between 2021 and 20323. Synergies which are unquantifiable at this point in time

• Overhead costs (R730m annually by 2021)– corporate office rationalisation (closing

London office and delisting)– regional shared services

– operational (mining) services – once-off R80m cost required to achieve

these synergies

• Processing synergies– differential cost benefits of R780m by 2021

and an average of approximately R550 annually from 2021

– Capex of approximately R1bn required for purchase of a new furnace

Quantified synergies 2 Incremental synergy potential 3

• Ability to mine through existing mine boundaries

• Optimal use of surface infrastructure• Optimising mining mix• Prioritisation of projects and new

growth capital• Capital reorganisation in line with new

consolidated regional plan

Pre-tax synergies of approx. R1.5bn annually by 20211


Steady transaction closure progress 25

Indicative milestones to closing Lonmin deal

Announcement of transaction – 14 December 2017

Lonmin shareholder approval and court meeting

Competition commission submissions – SA and UK authorities

SA Reserve Bank approval obtained – May 2018

Court approval of the scheme

Sibanye-Stillwater shareholder approval

þþþ

UK competition commission approval received

SA Competition Tribunal ruling expected

þ

Circulars expected to be released to shareholders


Fifth Avenue, New York in 1900 versus 1913

Source: Pinterest

26

Change is inevitable

Change is inevitable, industry positioning, understanding and development is key


• The market remains conflicted regarding the PGM outlook– Proactive marketing continues to sway the public’s perception and opinion regarding

diesel, ICE and BEVs– Inherent belief that PGM supply will always be available to meet demand

• Limited recognition of the role of hybrids and fuel cells EV penetration– Not all EV’s are equal!

• The internal combustion engine (ICE) remains key to the autos outlook– Diesel is crucial to meeting long term global CO2 emissions

Sources include: Company forecasts

27

The market will remain disrupted

Not all EV’s are equal, with hybrid technology forecast to be a mainstay technology

Light passenger vehicles by engine type(m units)

Light passenger vehicles by technology type(m units)

0

40

80

120

2016

A

2017

A

2018

E

2019

E

2020

E

2021

E

2022

E

2023

E

2024

E

Veh

icle

s

Gasoline Diesel Hybrid Electric Fuel Cell

0

40

80

120

2016

A

2017

A

2018

E

2019

E

2020

E

2021

E

2022

E

2023

E

2024

E

Veh

icle

s

Gasoline Gasoline - hybrid Gasoline - electricDiesel Diesel - hybrid BEVFuel Cell


• The outlook for battery electric vehicle (BEVs) is over hyped – The assumptions underpinning EV penetration are likely to be refined as the challenges

associated with a BEV roll-out strategy become clearer– A “group think” view is developing underpinned by strong marketing campaigns

• The spread of BEV forecasts is wide, on both the up and downside– Outlier BEV penetration estimates range from 2% to 11% by 2025E– Consensus BEV penetration estimates range from 4% to 6% by 2025E, mirroring our

current model estimates

Sources include: Johnson Matthey, company forecasts

28

The outlook for BEVs is euphoric

Our BEV forecasts are well within current market forecast ranges

Outlier broker BEV penetration range(% of global car park)

0%

2%

4%

6%

8%

10%

12%

14%

2017A 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E

Outliers

Consensus

0

20

40

2016A 2017A 2018E 2019E 2020E 2021E 2022E 2023E 2024E

Veh

icle

s (m

uni

ts)

Light vehicles, new technologies

Gasoline - hybrid Diesel - hybrid Gasoline - electric

Diesel - electric BEV Fuel Cell

unpacking the pgm supply conundrum 2018/s4 - jf.pdfmarket outlook •significant synergies with...

Documents