Sibanye Stillwater US PGM operations: mine production drives improved outlook

The US PGM operations concluded the recovery from the shaft incident at the Stillwater West mine (which resulted in an eight week stoppage during H1 2023), achieving the mined production volume run rate planned as per the repositioning plan during October 2023.

An improvement in 2E PGM mined production is therefore forecast for Q4 2023 with an associated reduction in unit costs. Inflationary cost pressures and a reliance on contractors due to the persistent skills shortage in Montana and the USA, is likely to keep costs elevated however, we will continue to assess the changing macro economic and commodity price environment to ensure that the appropriate production and cost structures are in place to ensure the sustainability of the operations.

Mined 2E PGM production from the US PGM operations of 105,546 2Eoz for Q3 2023, was 23% higher than for Q3 2022, which was impacted by the regional flooding in Montana in mid-June 2022. The regional flooding restricted access to the Stillwater mine leading to the suspension of production from the Stillwater West and East mines for eight weeks during Q3 2022, followed by a subsequent production build-up during the remainder of 2022.

Mined tonnes milled for Q3 2023 of 316kt was 31% higher than for Q3 2022 with plant head grade of 11.6g/t for Q3 2023 5% lower than for Q3 2022. The mining operations continue to experience grade challenges due to dilution from difficult ground conditions and mining quality factors related to the high staff attrition rates and skills challenges.

AISC of US$1,922/2Eoz (R35,738/2Eoz) for Q3 2023 was 6% higher than for Q3 2022 (US$1,815, R30,947/2Eoz) due to higher than expected contractor costs and persistently high inflationary cost pressures on stores and other operating costs. Ongoing skills shortages and a reliance on contractors for ore reserve development (ORD), contributed to ORD capital increasing by 33% year-on-year to US$56 million (R1,049 million) and sustaining capital increasing by 88% to US$32 million (R602 million) primarily as a result of the requirement to gain additional flexibility for the operations. ORD costs, which now contribute US$535/2Eoz (R9,939/2Eoz) to AISC, has increased due to higher development rates and contractor premiums due to the need to accelerate development and higher development support costs.

Included in the high ORD are other infrastructure costs (vertical alimak raises and raisebore drilling) as well as diamond drilling in order to ensure that stoping remains on reef. Many of these activities are done by contractors at significantly higher cost, supported by maintenance crews, also with a significant component of high-cost contractors. Sustaining capital which contributes US$307/2Eoz (R5,704/2Eoz) was significantly higher due to spending on critical life of mine ventilation improvements at both mines, including fans and a heat exchanger at the East Boulder mine, transport and mining fleet replacement, and expenditure associated with the smelter rebuild for Q4 2023.

Of significant benefit, in terms of the US Inflation Reduction Act (IRA), the US PGM operations qualifies for an IRA credit (45X Advanced Manufacturing Production Credit) equal to 10% of qualifying production costs incurred for critical minerals produced and sold after 31 December 2022, for a period of 10 years. For Q3 2023, management recognised an IRA credit of US$10.8 million (R201 million) against operating costs.

Mine production at the Stillwater operation (West and East mines) of 68,796 2Eoz, was 45% higher than for Q3 2022, reflecting the recovery from the flooding impact during H2 2022, but continued to be impacted by the shaft incident in Q1 2023, grade issues and fleet availability. Mined production volume from the Stillwater mine returned to planned run rates during October 2023. Production from East Boulder of 36,751 2Eoz, was 4% lower than for Q3 2022, impacted by ongoing grade issues, critical skills shortages, particularly mechanical, which affected fleet availability and temporary planned power interruption due to the implementation of the new ventilation arrangements which will improve underground conditions.

2E PGM sold for Q3 2023 of 124,882 2Eoz, was 80% higher year-on-year and 18% or 19,336 2Eoz higher than 2E PGM mined production for the quarter, due to the timing of deliveries.

Consistent with the repositioning plan for the US PGM operations to increase the flexibility and the developed state of the underground operations to 18 months, total development increased by 3% to 6.5 kilometres with primary off-reef development 17% higher year-on-year at 1,957 metres and secondary development 2% lower at 4,587 metres. Whilst development rates were impacted by the shaft incident at the Stillwater mine, ORD is improving with development rates achieved in Q3 2023 being the highest since Q1 2022.