PLATINUM DIVISION Update. Jean Nel CEO: Platinum Division Justin Froneman SVP Finance: Platinum Division

Transcription

1 PLATINUM DIVISION Update Jean Nel CEO: Platinum Division Justin Froneman SVP Finance: Platinum Division 28 July 2016

2 Disclaimer The information in this presentation may include forward-looking statements, which are based on current expectations and projections about future events. These statements may include, without limitation, any statements preceded by, followed by or including words such as target, expect, may, anticipate, estimate, will, and other words and terms of similar meaning or the negative thereof. These forward-looking statements, as well as those included in any other material discussed at the meeting, are subject to risks, uncertainties and assumptions, including, among other things, the development of Sibanye s business, general economic conditions and actions of regulators. In light of these risks, uncertainties and assumptions, the events in the forward-looking statements may not occur. No representation or warranty is made that any forward-looking statement will come to pass and no reliance should be placed on any forward-looking statement. No one undertakes to publicly update or revise any such forward-looking statement. In accordance with the requirements imposed by the JSE, Sibanye Gold reports its reserves using the terms and definitions of the SAMREC Code (2007 edition). There are differences between the SAMREC Code and the Security and Exchange Commission s Industry Guide 7. Mineral or ore reserves, as defined under the SAMREC Code, are divided into categories of proved and probable reserves and are expressed in terms of tonnes to be processed at mill feed head grades, allowing for estimated mining dilution, recovery and other factors. 2

3 A brief recap of how we got here Sibanye indicated interest in the SA platinum sector in Q Entry into the platinum sector was supported by a strong rationale and was a logical next step to Sibanye s value-creation strategy operationally similar to the gold mining industry low PGM prices and operational disruptions were creating financial distress in a fragmented platinum sector opportunity to unlock stakeholder value through consolidation, by realising cost and operational synergies Proposed acquisition of Anglo American Platinum s Rustenburg assets announced in September 2015 transaction completion pending regulatory approval Cash offer for Aquarius Platinum announced in October 2015 transaction approved and concluded in April 2016 Becoming a notable PGM industry participant 3

4 Becoming a top five PGM producer 4E Reserves 1,2 (Moz) 4E Resources 1,2 (Moz) 2015A 4E Production 1 (Moz) AMPLATS-ex Rustenburg Mines AMPLATS- ex Rustenburg Mines³ AMPLATS- ex Rustenburg Mines 3.6 Major global PGM producers Norilsk Nickel Implats Lonmin Sibanye (Rustenburg 3 + Aquarius 4 ) Northam Norilsk Nickel Implats Northam Lonmin Sibanye (Rustenburg + Aquarius) Norilsk Nickel Implats Lonmin Sibanye (Rustenburg + Aquarius) Northam (of which 0.7Moz is platinum) RBPlats 10.8 RBPlats 47.1 RBPlats 0.3 Source: Companies disclosures, Broker reports Notes: 1. Platinum, palladium, rhodium and gold (together referred to as 3E+Au or 4E). Sibanye related data includes Rustenburg Operations and Aquarius 2. Reserves and resources are latest reported by the companies and are on an attributable basis; resources include reserves 3. As publicly disclosed in December As publicly disclosed in June 2015 and depleted based on actual production to reach December 2015 figures 4

5 Location of Sibanye s PGM operations 1. Northam Anglo America Platinum 3. Sedibelo Platinum 4. Platinum Group Metals 5. Wesizwe Platinum 2 6. Royal Bafokeng Platinum 7. Impala Platinum 8. Lonmin Eastern Platinum 10. Glencore Xstrata Sibanye Platinum (Anglo Platinum's Rustenburg assets) Sibanye Platinum (formerly Aquarius) 4 Western Bushveld Joint Venture Sable Project Pandora Joint Venture Well positioned on two of the world s primary PGM deposits 5

6 The Sibanye Platinum Division management team Divisional Chief Executive Officer: Jean Nel SHEQ: Martin Neveling SVP: Mining (SA) Shadwick Bessit SVP: Finance Justin Froneman SVP: Human Capital Bheki Khumalo SVP Technical Services: Peter Turner Conventional mining Mechanised mining Financial reporting Management accounting Platinum marketing Employee relations Human resources management systems Performance management Training and development Talent management Mining technical (MRM, RE, EE) Processing and concentrator operations Engineering Natural environment An experienced and competent management team 6

7 Strategically located Sibanye s PGM operations are located on the Western Limb of the Bushveld Complex and Great Dyke in Zimbabwe, two of the world s largest-known PGM resources Good quality infrastructure and large, high-grade resources Kroondal and Rustenburg Operations are contiguous, with scope for operational synergies As the fifth largest global PGM producer, Sibanye expects that, over the longer term, it would be able to positively influence PGM industry fundamentals: play a leadership role in developing the market for PGMs influence supply by showing production discipline not subsidising loss-making production favourably positioned for further industry consolidation Well positioned to positively influence the market 7

8 Platinum perspective challenging in the near term, solid in the long term

9 PGM basket prices depressed and volatile Average real monthly basket price: July Jun US$/oz Rand/PGM oz Jul-03 Dec-03 May-04 Oct-04 Mar-05 Aug-05 Jan-06 Jun-06 Nov-06 Apr-07 Sep-07 Feb-08 Jul-08 Dec-08 May-09 Oct-09 Mar-10 Aug-10 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Jul-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jan-16 Jun US$/oz (4E) R/oz (4E) (rhs) Source: INet Industry margins under pressure unable to fund growth 9

10 PGM market fundamentals remain robust Despite prevailing prices, PGM market fundamentals remain robust Industry-wide capex and production cuts already announced SA supply unlikely to return to pre-crisis levels Limited primary supply growth anticipated globally Historically significant secondary supply growth being eroded by prevailing US$ prices Auto sales volumes continue to rise even in diesel markets PGM pricing headwinds may persist over the near term owing to: Limited trading liquidity and excess above ground PGM stocks Effect of ETF volatility and impact on prices which are difficult to quantify Deficit drawdowns and working capital cycle underpin a return to sustainable basket prices over the medium term A 1997A 2002A 2007A 2012A 2017E Platinum: Net market balance (koz) vs price Surplus/(deficit) / (Deficit) Pt Price price (US$/oz) $ / oz) (rhs) Ex-ETF market balance Palladium: Net market balance (koz) vs price A 1997A 2002A 2007A 2012A 2017E Surplus/(deficit) / Deficit (koz) Pd Pall price Price (US$/oz) $ / oz) (rhs) (rhs) Ex-ETF market balance Source: Johnson Matthey, WPIC, broker consensus estimates, company forecasts Despite near-term headwinds, long-term fundamentals remain robust 10

11 Appropriately positioned on the cost curve Mechanised shafts are well-positioned on the industry cost curve while conventional shafts remain under pressure to deliver A substantial part of the SA PGM industry is free cash negative after capex at prevailing prices conventional shafts remain loss making at spot prices and remedial action may be required to ensure sustainability and future configuration viability Delivery and good execution of planned synergies are key to Sibanye s Platinum Division moving into the lower half of the industry cost curve by 2018/ Opex + capex unit cost analysis (R/PGM oz) Spot PGM basket price (at 100%) Sibanye operations R/PGM oz Source: HSBC research, company data * December 2015 quarter PGM (4E) production (koz) Moving down the cost curve over time 11

12 Aquarius in more detail

13 Location of Aquarius assets Kroondal Reserves* 3.7Moz (4E) UG2 Resources* Production 2015* 3.59Moz (4E) UG2 221,000oz (4E) attributable ZIMBABWE 2015 capex R275 million 2015 cash cost R9,194/oz (4E) Mimosa Employees 1 8,747 Production 2016F* 230,000oz (4E) * Attributable, Kroondal includes PSA extension 1 Includes contractors, Exchange rate R11.45 applied Kroondal Mimosa Reserves* Resources* 1.9Moz (4E) 7.41Moz (4E) JOHANNESBURG Platinum Mile Production 2015* 118,000oz (4E) attributable 2015 capex R172 million 2015 cash costs R9,183/oz (4E) Employees 1 1,402 Production 2016F* 118,000oz (4E) SOUTH AFRICA Key * Attributable Bushveld Complex Reserves as publically disclosed in June 2015 and depleted based on actual production to reach December 2015 figures Resources as at 30 June 2015 Other data for 12 months ended 30 June 2015 Great Dyke Platinum operations 13

14 Aquarius acquisition: deal rationale Positive operational developments have started following the integration of Aquarius Platinum, which is expected to continue following the conclusion of the Rustenburg acquisition in Q Operational stability Kroondal and Mimosa continue to deliver an exceptional safety and operational performance Sharing of corporate costs, with Aquarius corporate and listing costs having been eliminated marginal synergies between Sibanye and Aquarius on a standalone basis combined with Rustenburg creates significant synergies sharing of resources, knowledge, best practice and overhead costs An integrated Sibanye Platinum Division will have the flexibility and financial capacity to deliver growth projects which Aquarius did not have Being part of a more diversified company increases operational stability, facilitates increased capacity to plan strategically, increases purchasing power and the ability to leverage off of combined internal resources Increased mining flexibility, potentially mining through the PSA boundaries northern boundary of Kwezi and K6 shafts Bambanani/School of Mines Kopaneng/Bathopele Extension of the LoM once Rustenburg Operations and Kroondal are combined into one operating entity Potential for increased blending of ore to optimise plant efficiencies, utilisation rates and recoveries at a reduced cost Combined tailings operations with increased throughput volumes and the potential to also re-treat Kroondal tailings Focus on sharing resources 14

15 Safety performance Sibanye Pt FIFR Sibanye Pt SIFR Sibanye Pt LDIFR month LTIFR 3-month LTIFR Actual Target Actual Target Kroondal Mimosa Platinum Mile Safety a priority trends continue to improve 15

16 Kroondal and Mimosa production trend Combined all-time record 4E production across Aquarius Quarterly 4E ounce production Kroondal Mimosa Kroondal and Mimosa delivering record operating results 16

17 Kroondal: record production offsets unit cost inflation Despite the operational impact of unprotected strike action and S54 work stoppages, Kroondal continues to deliver record levels of metal production 6% CAGR in 4E PGM production since 2011 despite mining cost inflation, real unit cost increases have been negated Throughput gains, as a means to control unit cost inflation, are largely exhausted and Kroondal is marginal at current prices (post purchase of concentrate (PoC) agreement) Kroondal s positive operational evolution will be driven by enhanced mining flexibility, incorporating expected synergies and overhead savings once combined with Rustenburg PGM (4E) oz R/4E oz PGM (4E) Ounces PGM basket price (at 100%) Opex + capital Note: Revenue pre-poc Kroondal s operational evolution is set to continue improving 17

18 Kroondal: pressure remains on production and costs Significant business interruptions being experienced and expected to continue: regulatory stoppages S54 notices have resulted in estimated revenue loss of R135m for 12 months to June 2016 community-led protests 39 community led protests over the last 52-weeks, with at least 30 being non-mine related industrial action recent unprotected AMCU strike resulted in estimated revenue loss of R56m Basket cost inflation above Consumer Price Index (CPI) utility tariff escalations substantially in excess of CPI wage inflation higher than CPI The actions of key stakeholders, who currently benefit from the North West PGM mines, are threatening the sustainability of these mines. Sibanye will not support this Kroondal s position is by no means unique Revenue losses due to external factors (Rm) Section 54s Unprotected labour action Community disruptions External issues are a significant impediment to sustainability 18

19 Mimosa: notable performance despite headwinds Mimosa continues to produce metal at record levels, well above annual nameplate capacity and consistently so in a very complex environment a remarkable achievement Consistent quarterly production increases resulted in a c.3% reduction in annual real cash costs and a c.14% reduction in real US$ costs over last 3 years Progress is being made to expand production by 25% in a capital efficient manner, with a focus on reducing the required spend to well below existing estimates and reduce unit costs so as to deliver a robust IRR PGM (4E) oz $/4E oz PGM (4E) Ounces PGM basket price (at 100%) Opex + capital * * Excludes base metal revenue A solid operation with growth potential 19

20 Zimbabwe: challenging but well managed Zimbabwe remains a difficult environment in which to operate Strategic decisions and plans implemented to address the following Zimbabwe-specific issues: 15% revenue levy on un-beneficiated platinum suspended but long-term beneficiation/smelter solution still required Zimplats smelter capacity expansion study due for completion in August 2016 standalone smelter at Mimosa has been scoped feasibility study due by August 2016 US$ monetary supply tightness has necessitated a plan to manage Mimosa s sale receipts 50% of revenue must be retained in Zimbabwe but can be used for disbursement and payment purposes no limitation on dividend declarations and payments to shareholders Indigenisation legislation clarified by statements on 11 April 2016 an entity deemed to be indigenised if 75% of the value generated by that Zimbabwean company is retained in Zimbabwe Mimosa meets this requirement still to be promulgated into law Strategic decision making and proactive management necessary in Zimbabwe 20

21 Rustenburg in more detail

22 Location of Rustenburg assets Rustenburg Operations Reserves 1 Resources 2 Production 2015* 25.5Moz (4E) 88.3Moz (4E) (6E) 2015 capex 3 R400 million 2015 cash costs* R10,210/oz (6E) Employees* 16,000 Production 2016F 800,000oz (4E) 1 Publicly disclosed as at 31 December As at 1 October 2015 extracted from CPR for SGL on Rustenburg operations December AAP 2015 Integrated report * AAP 2015 Annual Results 22

23 Rustenburg operations Rustenburg Platinum Mines Excluded from transaction Thembelani (including Khuseleka) Rustenburg section operating mines Siphumelele (including Khomanani on C&M) Bathopele 1 Smelting and refining operations Will be retained by AAP AAP will continue to process concentrate from the Rustenburg Operations Merensky and UG2 Merensky (UG2 in future) Waterval UG2 concentrator Chrome Recovery Plant ( CRP ) UG2 Waterval retrofit concentrator Waterval East & West tailings dams Klipfontein tailings dam Western Limb Tailings Retreatment (WLTR) 2 Kroondal and Marikana pooling and sharing agreements (with Sibanye) 3 Western Limb distribution centre Newly constructed supply chain and related logistics centre + Approximately four months of working capital of the Rustenburg Operations included in the transaction Transaction perimeter of Rustenburg Operations Waterval smelter and refineries (excluded from transaction) Platinum Mile Tailings Large, high grade assets with expansion potential 23

24 Rustenburg operations acquisition Sibanye will acquire the Rustenburg Operations from Anglo American Platinum for: 1. An upfront consideration of R1.5 billion in cash or shares (at Sibanye s election on closing) 2. A deferred payment of 35% of distributable free cash flows generated from the Rustenburg Operations annually for a period of 6 years, subject to a minimum nominal payment of R3.0 billion, including inter alia: An option to extend the earn out period by a further 2 years if required, following which the balance must be settled in cash or shares Anglo American Platinum agrees to provide up to R267 million each year until 31 December 2018, should the Rustenburg Operations generate negative free cash flows A PoC agreement in place for all concentrate produced at the Rustenburg Operations until 31 December 2018 Thereafter a transition to a toll treatment arrangement to smelt and refine the produced concentrate from the Rustenburg Operations giving revenue upside A value-accretive, low-risk transaction 24

25 Favourable transaction structure The phased transaction structure limits the upfront cost and reduces the transaction risk for Sibanye Deal structure provides down-side protection to Sibanye in a 'lower for longer' platinum price scenario, while earn out provides shared upside exposure to higher PGM prices in the medium term AAP to provide up to R267 million per year up to the end of 2018 if the Rustenburg Operations generate negative free cash flows Toll treatment agreement post 2018 provides leverage to increasing PGM prices and enables Sibanye to transition into a vertically integrated mine to market business, without upfront processing capital and technical risks Transaction structured to deliver value sustainability 25

26 Rustenburg empowerment transaction Consistent with Sibanye s vision to create value for all stakeholders, its black economic empowerment is of a broad-based nature Sibanye will facilitate the creation of a fully empowered, low-risk, vendor-financed SPV (BEE SPV) that will acquire 26% of Sibanye s Rustenburg Operations Key stakeholders are existing employees and surrounding communities at the Rustenburg operations. They will be the majority shareholders of the BEE SPV Sibanye also recognises the role played by local communities not only in the Rustenburg Operations but also the platinum belt region, as well as the need to develop black entrepreneurs The Bakgatla-Ba-Kgafela and another empowerment group will comprise the remaining shareholders An inclusive and value-enhancing transaction 26

27 Chrome production guidance* Chrome is expected to be a significant contributor to Rustenburg, accounting for c.10% of total LoM revenues IFM offtake agreement amended and all volumes are shown ex-ifm tonnes interstage project expected to increase throughput volumes and recoveries from September 2016 onwards c.45ktpm at 12% recovery Kroondal s chrome output remains subject to an offtake agreement with Samancor and Glencore and is not impacted by the Rustenburg acquisition Ktpm Recovery (%) * Estimates based on current assumptions before optimisation (subject to change) Chrome is a significant contributor to Rustenburg s revenue stream 27

28 Integration journey

29 The integration journey continues October April 2016 July 2016 TBD (dependent on Rustenburg) Pre- Signing Pre-close: day one planning and execution Stabilisation (90 days) Optimisation Deal announced Aquarius Launch Integration teams, joint planning and communications Regulatory approval (Mar 17, 2016 ) Day One Post-close integration planning sign-off implementation plan (13 May 2016) All Integration activities expected to be completed Integration assessment September 2015 Q3 / Q Q TBD Pre- Signing Pre-close: day one planning and execution Stabilisation (90 days) Optimisation Deal announced Rustenburg Launch Integration teams, joint planning and communications All closing conditions met Day One All Integration activities expected to be completed Integration assessment Post-close integration planning and execution Transactions progressing as anticipated 29

30 Combined platinum footprint Our vision and rationale The conclusion of the acquisition of the Rustenburg Operations, anticipated by Q4 2016, should yield the following operation enhancements Combined, the Rustenburg Operations and Kroondal will increase the number of operating shafts from 5 to 10, creating further efficiency, co-operation and growth opportunities Potential to optimise ore tramming, logistics and transport costs, particularly from K6 and Kwezi shafts, as well as existing plant capacity and recoveries Potential to reduce central service costs by combining services with Rustenburg Operations over the medium term More favourable purchasing power with suppliers once Group contracts are aligned Increased operational footprint allows us to positively leverage off and engage with: DMR Rustenburg Local Municipality communities organised labour SLP requirements Sibanye's Platinum Division will toll treat its concentrate from 1 January 2019 as opposed to delivering concentrate under a PoC agreement. At long term consensus prices this is expected to increase profitability, sustainability and value creation Existing PoC agreements (Kroondal and Mimosa) remain in place and are not subject to toll treatment Superior value creation for all stakeholders 30

31 Operating and separate synergies targeted Operating synergies Removal of mine boundaries results in optimised mine plans and underground infrastructure Optimising plant utilisation and surface ore flow Direct cost savings at operations Best practice operational benchmarking Economies of scale benefits Shared services and central cost savings Bathopele/Kroondal shared services optimised Rustenburg and Kroondal training Regional, central and shared services Corporate overheads reduced Turk # (undeveloped) Aquarius Rustenburg Operations Care and maintenance School of Mines Driving value creation through realisation of regional and operating synergies 31

32 Combined savings of R800m anticipated annually Category Shortlist of key initiatives Combined value (Rm) Employee cost Senior employee and management configured to reflect the Sibanye operating model 200 Sourcing and stores management Deploying Sibanye s procurement power across all suppliers and operations (Kroondal and Rustenburg) 26 Closure of corporate offices Rosebank, Centurion and Perth offices 69 Property/Housing Training Central services synergies Review of low and high density accommodation contracts for employees Consolidate training footprint between Kroondal and Rustenburg Consolidation of production support functions currently duplicated across Kroondal and Rustenburg Other Yet to be specifically quantified infrastructure consolidation, mining flexibility benefits and plant optimisation 124 Total 800 Kroondal: Baseline was 2016 Budget (July 2015 to June 2016) Rustenburg: Baseline was the PFS re-based as a standalone company Extracting synergies is key to sustainability 32

33 Conclusion

34 A secure and prosperous future Despite a difficult operating environment, growth in the platinum industry is a logical extension of our value-creation strategy S54s, organised labour and community unrest are being proactively managed conventional shafts across the Western Limb remain under pressure Current platinum acquisitions will realise significant value Sibanye set to become the world s fifth largest platinum producer, with the potential to consolidate further through acquisitions Ability to influence PGM markets post 2019 Synergy efficiencies of R800m annually within three years will allow Sibanye s Platinum Division to move into the lower half of the industry cost curve S52 process has begun at Kroondal and Rustenburg Sibanye will be uncompromising on production discipline and capital allocation we believe long-term PGM fundamentals remain robust Aquarius is already largely integrated while Rustenburg still requires S11 approval from the DMR Anticipated Q completion of the Rustenburg acquisition Sibanye s strong regional presence on the western limb creates opportunities for further necessary consolidation Gearing up to play a substantial part in the PGM space 34

35 Platinum Appendices

36 PGM (4E) production and capex guidance* * Estimates based on current assumptions before optimisation (subject to change) Maintaining throughput at sustainable level 36

37 Rustenburg LoM plan* Component Unit Total / /42 RoM tonnes Mt Tailings tonnes Mt Milled tonnes Mt E recovered Moz Shaft head cost ZAR M 136,791 5,542 5,760 6,087 6,478 6,542 6,651 6,852 6,762 6,497 54,422 23,816 Concentrator cost ZAR M 32,659 1,557 1,308 1,352 1,382 1,393 1,402 1,422 1,427 1,417 12,771 6,840 Overhead cost ZAR M 34,927 1,395 1,424 1,451 1,451 1,462 1,470 1,490 1,495 1,485 13,608 7,834 Total operating cost ZAR M 204,377 8,494 8,493 8,890 9,311 9,398 9,523 9,763 9,683 9,399 80,802 38,489 Project capital ZAR M 4, SIB capital ZAR M 12, ,762 1,363 Total capital cost ZAR M 16,564 1,194 1,228 1,396 1,236 1,066 1, ,152 1,363 Income tax ZAR M 13, ,255 2,439 Other ZAR M 1, WC changes ZAR M -1, ,250 * Estimates based on current assumptions before optimisation (subject to change) Competent Persons Report (CPR) estimates as published Planning for a long-term viable operation 37

38 Combined LoM models* Tons delivered Bambanani FE Simunye Kopaneng K6 Them L1 Mer Khus L1 Mer Khus L1 UG2 Kwezi Them L1 UG2 Siph L1 Mer Bambanani ACK Bath L1 UG2 Marikana 5 LEV 2 Bambanani MK4 Them L2 UG2 Siph L2 UG2 Khus L2 UG2 * Estimates based on current assumptions before optimisation (subject to change) 38

39 Combined LoM models* E ounces delivered Bambanani FE Simunye Kopaneng K6 Them L1 Mer Khus L1 Mer Khus L1 UG2 Kwezi Them L1 UG2 Siph L1 Mer Bambanani ACK Bath L1 UG2 Marikana 5 LEV 2 Bambanani MK4 Khus L2 UG2 Them L2 UG2 Siph L2 UG2 * Estimates based on current assumptions before optimisation (subject to change) 39

40 Updated reserve position* Operations Attributable Merensky UG2 Total Tons (Mt) Grade 4E (g/t) 4E (Moz) Tons (Mt) Grade 4E (g/t) 4E (Moz) 4E (Moz) Bathopele 100% Thembelani 100% Siphumelele 100% Kroondal 50% Kroondal PSA Extension 50% Marikana 50% RPM Surface [tailings] 1 100% Proved Probable Total SA Total non-sa Mimosa 2 50% Proved Probable Total Sibanye Rustenburg 2 Kroondal 3 RPM Surface [tailings] Total SA 4 Total non-sa Total Sibanye * Subject to change as at December Surface Tailings are combined Merensky and UG2 2 Main Sulphide Zone (MSZ) Zone Great Dyke and not Merensky 3 As publicly disclosed in December As publicly disclosed in June 2015 and depleted based on actual Proved Probable 40