Successful restructuring of US PGM operations did not bring financial results
Sibanye-Stillwater reports that the 2E PGM basket price for the US PGM operations has been substantially lower than AISC for the US PGM operations since 2021, despite the successful restructuring of the US PGM operations undertaken during Q4 2023. Mined 2E PGM production of 425,842 2Eoz for 2024 was consistent with 2023 and AISC reduced by 27% to US$1,367/2Eoz (R25,042/2Eoz). The 21% decline in the average 2E PGM basket price from US$1,243/2Eoz for 2023 to US$988/2Eoz for 2024 however, necessitated further restructuring to address ongoing losses.
This next phase of restructuring announced in September 2024 and concluded during Q4 2024, is expected to reduce operating cost from the US PGM operations for 2025 by approximately US$140 million and capex by US$50 million (reduced in line with lower planned production rate) compared with 2024. The Stillwater West mine has been placed on care and maintenance, with production focusing on lower volume, higher margin production from the East Boulder and Stillwater East mines.
The financial position of the US PGM and US Recycling operations could be significantly enhanced by potential payments equivalent to 10% of operating costs arising from Section 45X of the Inflation Reduction Act (IRA). The final Section 45X rules of the IRA, published in Q4 2024 by the US Department of the Treasury, were amended to include extraction and processing costs in addition to refining costs as qualifying for a 10% Advance Manufacturing Production credit.
The change in the US administration in January 2025, has introduced some uncertainty regarding the Section 45X regulations, Ongoing resource nationalism and an imperative to secure local supply chains for many jurisdictions, provides a compelling case for continued support for local supply of critical minerals for the US.
The potential Section 45X tax credit benefit for the US PGM operations for 2025, is estimated to be US$30 million (R547 million) for 2025 (equivalent to a US$110/2Eoz reduction in AISC) with the US PGM recycling operations potentially qualifying for an additional estimated credit of US$30 million (R547 million) for 2025, which combined (US$60 million) would significantly improve profitability from the US PGM operations. Furthermore, the rules are retrospective with combined credits relating to the 2023 and 2024 financial years estimated at approximately US$120 million (R2.2 billion) and US$90 million (R1.6 billion).
The restructuring undertaken at the US PGM operations during Q4 2024 (repositioning for lower PGM prices, by deferring production growth and maintaining lower levels of production to reduce costs and capital requirements), successfully delivered stable mined 2E PGM production of 425,842 2Eoz for 2024 compared with 2023, with AISC reducing by 27% to US$1,367/2Eoz (R25,042/2Eoz). The US PGM operations anticipate claiming approximately US$61 million (R 1.1 billion) credit to the underground operations relating to 2023 and approximately US$58 million (R1.1 billion) for 2024 resulting in 2023 AISC being 7% lower at US$1,754/2Eoz (R32,297/2Eoz) and 2024 AISC 11% lower at US$1,231/2Eoz (R22,547/2Eoz). These credits are expected to be received in 2026 or 2027 when the tax returns will be assessed. The estimated Section 45X credit for 2025 is approximately US$30 million (R547 million), equivalent to a US$110/2Eoz reduction in AISC for 2025.
