Sibanye Stillwater Ltd (SBSW) 2020 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Sibanye Stillwater interim results presentation. (Operator Instructions) Please note that this call is being recorded.

I would now like to turn the conference over to Neal Froneman. Please go ahead, Neal.

Good morning to those in America and good afternoon to those in South Africa and Europe. It's indeed a pleasure to welcome you to the presentation of our H1 2020 results, which I have the pleasure of presenting.

As always, moving on to the second slide, that's a safe harbor statement. And I would urge you to take note of the forward-looking risks related to this presentation.

Moving on to the next slide. And the foundation of any business is, of course, strategy, and we constantly measure ourselves according to our strategy. And our strategy is simply strengthening our position as a leading international precious metals mining company by doing the following.

And it really starts with -- and I'm looking at the 12 o'clock position, building a values-based culture, ensuring safe production and operational excellence, deleveraging our balance sheet, addressing our South African discount, and then based on a strengthened equity rating, pursuing value-accretive growth. Of course, all of that is pulled together by embedding our environmental, social and governance excellence as a way we do business.

And I would like to move on to the next slide and actually just look at how we are progressing related to each one of those strategic goals. I'm not going to go through this slide in detail. But first of all, looking at building a values-based organizational culture. We made good progress during COVID. We actually used the opportunity to accelerate our program. It's still work in progress. And as you can see, we think we're about halfway there.

Ensuring safe production and operating excellence. I personally think that as a company, we did extremely well, considering the COVID disruptions. And from an operating point of view and a progress point of view, we've given ourselves a big tick.

Embedding ESG excellence in the way we do work -- we do business. Again, this is work in progress. It'll probably always be work in progress. We've put in a huge amount of effort, but I think, again, we could -- we can give ourselves half a tick.

In terms of progress in deleveraging our balance sheet, I think this is one of the highlights of the quarter. We are well below our interim target of 1x. We are close to the type of leverage levels before we embarked on any acquisitions. And with a net debt-to-EBITDA -- adjusted EBITDA of 0.55x, we can give ourselves a big green tick there.

Addressing our South African discount. This is probably going to be something that is ongoing. And again, I think we can give ourselves half a tick. We've had very good engagements in South Africa with our regulators. I do believe we're making progress. And as I say, half a tick there is fine.

And pursuing value-accretive growth. Well, when I get to the end of this presentation, I will show you very clearly that we are significantly undervalued. And until we see a proper valuation of our stock or our equity rating, we will not pursue value-accretive growth. So there's still a lot of work in progress there to be done.

Moving on to the next section of the presentation, and I really just want to spend some time on embedding ESG excellence in the way we do business, one of our central focus areas. And I want to start with the initiatives that we embarked on during the COVID-19 pandemic, which is obviously still at play.

We made very significant contributions to ease the plight of our communities and other stakeholders. We contributed ZAR 23 million to the relief funds. We provided financial support to our employees that were not working to the tune of ZAR 1.5 billion, a very, very significant contribution and probably one of the biggest in the industries.

Employee donations interestingly matched by the company amounted to ZAR 2 million. Very significant and great to see the participation of our employees. Through a very difficult period, we provided counseling and psychological support, which was extended not just to our employees but to their families as well.

We provided over ZAR 14.5 million of support to small businesses. We provided ZAR 5.5 million of social relief through food parcels, water tanks, blankets and mattresses. And we contributed ZAR 3 million through sanitization and catch-up programs to school and education.

One of the bigger contributions, of course, was preparing our own business for quarantine and isolation facilities. And we established a 2,196-bed facility. We also contributed PPE, oxygen tanks for health facilities, sanitization, tracking and tracing, and that was to the tune of almost ZAR 60 million. Hard to quantify the amount spent on education and awareness, and especially with the 80,000 employees, that's a very significant part of getting people to behave in the right way regarding COVID-19 as well. So in my mind, a very significant step-up to the plight.

Moving on to the next slide regarding social issues is really the commitment to renewal and restitution at Marikana. We acquired the Lonmin assets with our eyes wide open, and that really was referenced to the Marikana tragedy. We saw this as an opportunity to create a new future with all stakeholders. We do not intend to sweep this under the carpet. It is really an opportunity to do what I don't think has been done up until now.

First of all, we've created sustainability by incorporating this business into our business, and it is profitable. It's significantly profitable. We are looking to progress fostering and healing and getting closure by providing ongoing counseling and emotional support for the widows and their families.

You will have seen from the many media releases after our memorial lecture, the Marikana memorial lecture, that we intend pursuing unfulfilled justice on behalf of the widows and the communities and restitution for those affected that have not yet received restitution.

We intend honoring the educational support and sustainability that was set in place by the previous owners and managers of Lonmin. There's 144 beneficiaries to that. And then, of course, honoring Lonmin's outstanding SLP obligations. That is a commitment we made at the Competition Commission, and we are now in the process of engaging on what we call SLP III commitments.

Important to look at the pictures on this slide. You can see we handed over 6 houses, and this is despite COVID. We have another 19 houses we intend to hand over before the end of the year. And the balance of the widows' houses will be completed next year. These are substantial and material houses. You can see a picture in the right bottom hand corner of the slide of one of the houses.

During the week of the commemorations or the week that the tragedy happened in 2012, we held prayer sessions. And also amazingly, up until now, there's been no war or monument unveiled, and we unveiled a wall of remembrance, which was erected in memory of the fallen mine workers. I think these are very significant steps, and certainly, in less than a year of owning these operations, a significant step-up to the plant again.

One aspect that perhaps gets forgotten about is our investment in DRDGOLD. And in our view, DRDGOLD is a smart commercial entry into rehabilitation of legacy environmental sites in the South African gold mining industry.

A number of ESG highlights are contained on this slide. There's been continued investment by DRD in rehabilitation. Hundreds of hectares have been cleared. Vegetating tailings deposits to reduce dusts, which is a major complaint and problem to the communities in the Johannesburg area. So that's ongoing.

And then DRD-specific response to COVID-19 is shown in the last few bullet points. They established a quarantine facility with 50 beds. That was at a cost of ZAR 600,000. There's ZAR 1.6 million in employee contributions to the Solidarity fund, which was a voluntary contribution, and then over 5,000 food parcels, which were supplemented with support relief from 2,500 urban farmers. So also, again, one of our subsidiaries contributing to the COVID-19 pandemic in a very real and material way.

In terms of recognition for our ESG efforts, and remember what I said at the beginning of the presentation, I think we're only halfway there. We were admitted as ICMM members in February 2020. And that's not just an organization you apply to become members of when you become a member when you pay your fees. There are very rigorous evaluation processes and standards required, and we're very proud to have been accepted as an ICMM member.

You can see the CDP climate change disclosure. We received an A rating, one of only 179 companies globally and the only one from South Africa. So that, in our view, is also significant.

We were included in the Bloomberg 2020 Gender Equality Index. And we're 1 of only 8 South African companies over 11 sectors to have received that inclusion. We were reincluded in the FTSE Russell ESG Index of the JSE. And very pleasing, we were recognized by the Rand Water Board as the most collaborative and water-saving company in the South African mining industry. And of course, we're very proudly members of the World Gold Council, and we subscribe to their protocols as well.

One aspect that I would say is world-class in terms of the basis on which this agreement has been created is what we have at our U.S. PGM operations. We call it the Good Neighbor Agreement. We've marked 20 years this year of environmental and community collaboration. And in that period, we've had absolutely no litigations. So it shows in a very litigious environment, mining companies can operate when they do the right thing and engage their communities in the right way and become good neighbors. So we're very proud of those recognitions and achievements.

Obviously, the primary focus of this presentation is our H1 results and that really consists of 2 parts. One is the operational performance, safe operational performance, and of course, the financials. I will cover the operational performance. And as always, starting with safety.

So I'm looking at the slide that says progressive safety performance. Important to note that we had 0 fatalities in the group in the second quarter of 2020. And that's always pleasing, and it's just part of the journey.

Our South African gold operations have run fatality-free for almost 2 years now. We've had 710 days with 13 million fatality-free shifts. Unfortunately, we recently had a fatality, so that progress has been interrupted. We are seriously committed to achieving even better performance in our next part of the journey to 0 harm.

Our U.S. PG operations have been fatal-free since October 2011. That's 3,194 days with 3 million fatality-free shifts. And pleasing, our South African PGM operations were also fatal-free since March 2020, and they've now achieved 2 million fatality-free shifts.

The graphs on the right-hand side reflect the safety performance. The graph that is worthy of some mention is the serious injury frequency rate. In my view, the difference between a fatality and a serious injury is really a marginal difference. And we do track our serious injuries very carefully because, as we all know, once you build up a number of serious injuries, you are most likely to have a fatality. But what's pleasing with that graph is the continuous downward trajectory, and we will strive to take that even lower.

We've also been recognized, and I've moved on to the next slide now, for our safety achievements at the South African Mining Industry Safety and Health Excellence Awards. We received the JT Ryan Award, a very prestigious award. Our Platinum division was recognized, came in the first place at the Bathopele operations. Kroondal West was third place. And then our processing business, first place was ChromTech at our South African PGM operations. And in second place was our Precious Metals Refinery in South Africa. So again, some recognition for the hard work that we as a company are doing in this area.

Moving on to the next slide, which is titled responsible approach to COVID-19. And I want to spend a little bit of time on this slide. The approach to COVID-19, although similar in the U.S. and South Africa, obviously, had very, very different impacts. Our U.S. PGM business was largely unaffected outside of ongoing social distancing measures, which do disrupt production. They do occur higher costs. So all of those need to be factored into the production and cost profiles in the -- in this presentation.

The U.S. production achieved 89% of what they planned in quarter 2. And that's a great achievement considering the disruption of displacing contractors, introducing sanitizing and social distancing and so on. I think that's a commendable performance under these conditions.

The South African operations entered full lockdown from the end of March and restarting only started from the end of April 2020. And we have been particularly careful in the rebuild process in terms of making sure that we can prevent and manage the transmission of COVID-19. So we have not -- we have been conservative in restaffing our business.

The South African gold and PGM production was 54% and 47%, respectively, of planned output. So you can see approximately half of what was planned was achieved during quarter 2 due to the lockdown. By the end of H1, our South African gold operation had called back about 73% of the workforce, was achieving 80% of output. That's reflected in the graph on the left-hand side of the slide. The South African PGM business had staffed up to 65% levels and was achieving 73% output level. So we are seeing better productivity due to, I would argue, less constraints and easier logistics with lower staffing levels at this stage. It's something we will watch. And we will fine-tune our restaffing around these type of opportunities.

Interestingly, we have introduced a protocol to protect employees with comorbidities. We have recognized that vulnerable employees are those with comorbidities. And just about every single death we have had due to COVID-19 is employees that have comorbidity. So this is a moral issue, and we have introduced a protocol, and that is in place and being implemented.

Moving on to the next slide. I want to state right upfront, these are record earnings despite COVID-19 for our company. Q2 was severely impacted by COVID-19. You can see, as I said in the last slide, that we only had about 50% of quarter 2 production, but it was anchored by a strong quarter 1. And quarter 1 really gives you an indication of the earnings potential of the company under normal conditions.

We had an 8x increase in adjusted EBITDA year-on-year and that was ZAR 16.5 billion versus ZAR 2 billion that was recorded in H1 2019. And in dollar terms, that is $990 million versus $142 million in H1 2019.

Very important to note that 94% of our earnings have come from operations that we have recently acquired. And that would suggest to me that we have completed a very, very successful acquisition strategy. And of course, that is an entry into the PGM sector. And as I said right at the beginning of the presentation, we've deleveraged back into pre-acquisition levels from a point of view of net debt-to-EBITDA.

Now I want to make the point that it's not just output that delivers results like this. During COVID-19, the Sibanye Stillwater team sprung into action, got to grips with potentially very significant cost runaways due to lowering or decreasing volumes, got into control of capital and working capital management. And all of that contributes to the results that you see today. So it's not just a focus on output. It's a focus on controlling costs as much as we can under circumstances like this.

Just moving on to the next slide. And the exposure to what I have seen referenced as rock star commodities at the right time is reflected in this slide. You can see the 3-year performance of rhodium, ruthenium, palladium, iridium, silver, gold are really at the top end of this table. And very pleasingly, we have significant exposure to these metals.

In terms of revenue contribution, interestingly, you can see rhodium makes up 21% of our revenue, which is similar to gold. And of course, platinum is the laggard. But I think it's safe to say that we're very well-positioned for what we believe is a platinum market that is -- got longer -- medium and longer term, really good underpinning fundamentals. So we look forward to getting the benefit from the future upside in platinum as well.

Moving on to the individual operations, and I am discussing them in order of contribution. So the next slide is titled South African PGM operations. And they've contributed 54% of group adjusted EBITDA. And some important things to note. Production is 5% higher than the previous year, but that is really due to the inclusion of Marikana. So that creates a little bit of a distortion and offsets the COVID-19 disruption. But the ramp-up in platinum was really very smartly done. It was risk-based done.

And the production came in at 47%, and it was offset by, obviously, much higher 4E PGM basket prices. The buildup was prioritized at mechanized sections because that's clearly where you get higher productivity. And if you look at the details, you may see lower grades during this period. And that is because the focus was on UG2 Reef, which in the mechanized sections is lower grade, but with the contribution from rhodium and chrome is higher revenue per tonne. So the ramp-up was appropriately focused. The other difference between this and gold is PGM ore bodies are more homogeneous in their grade profile in gold, and you'll see the relevance of that when I come to gold. But there's clearly less flexibility to high-grade PGM mine. In fact, I'll say there's no flexibility to do that.

Interestingly, at this point in time, we've increased our staffing levels to 80%. And I think the other important aspect to note is that our margin -- the adjusted EBITDA margin is now sitting at 42% from these operations, which is remarkable that literally a short while ago, and certainly, when we purchased them, most of them were loss-making or really just breakeven, so very significant profitability from our South African PGM business.

We always get a lot of questions around Marikana, and I'll move to the next slide. And I think very important to note that at the last results presentation, I mentioned that we had exceeded our own estimates of ZAR 730 million a year of overhead cost synergies. We had achieved ZAR 1.2 billion. Well, I'm very pleased to report that today, we've identified ZAR 1.85 billion of annual Marikana synergies that are now being recognized. That's more than double what we originally estimated. And that's highlighted in the annual benefits column very much on the right-hand side of this slide. So that is very pleasing. Of course, there's still additional upside from future processing of Rustenburg ore when we do make the decision to move it from the Anglo Platinum processing facilities to our own. But to be clear, we have not made that decision yet.

I'd like to move on to the U.S. PGM operations, which is the next slide. They contribute to 36% of group adjusted EBITDA. And the combination of mined and recycled production is shown in the graph.

Important to note that year-on-year, we -- despite COVID, we've achieved a 5% higher production output. We were able to continue with these operations. We had to displace our contractors. That was an agreement with the health practitioners or regulators in that region, which has affected our capital growth projects. I'll get to that shortly. These are high-margin underground operations with a 60% adjusted EBITDA margins.

Also important to remember, when you look at the cost line, that the higher PGM prices increased your taxes and royalties, and we've estimated that, that amounts to about $40 per 2E ounce in the cost line. We were able to reduce our inventory, recycling inventory, during the second quarter. That released about $300 million of working capital. Of course, collections since then have been slow. And when I get to the -- an overview of the market towards the end, I will share with you our view on recycling and the impact that COVID has had.

The Blitz build-up has clearly been delayed. We have not brought back the contractors onto site. We're expecting a delay of something between 12 to 18 months due to the contracted demobilizations. There has been force majeure declared on equipment, and we are improving our understanding on the ore body and factoring that into the ramp-up as well.

To be clear, Blitz will still achieve the same steady-state production, but we are factoring in the delays of 12 to 18 months. And much of it will also be dependent on the receptivity of the demand markets, and I'll get to that towards the end of the presentation. Fill the Mill project is proceeding as planned. That is basically all in-house work.

Moving on to the next slide. Very pleased to say that our gold operations were profitable. Although, as you can see, gold in our business has become relatively small, and it only contributed 10% of group adjusted EBITDA. It is a 17% year-on-year increase in production, but we are comparing it to H1 2019, which was severely disrupted by the AMCU strike.

We believe that the gold team approached the post-COVID ramp-up in exactly the right way as well. Q2 production levels lay at 54%, and that was offset by a 28% higher rand gold price, which contributed to the profitability.

As of today, we've increased staffing levels to 90%, and that's been a responsible ramp-up, making sure that we weren't exposing our workers to any health risks due to COVID-19. That has been very well-managed in all sections of our business.

We focused on higher-grade panels. And effectively, we've high-graded the start-up. That is by design. And of course, we'll get back to more normal grade levels. And I'm really referring yet to the underground grades. Of course, we made use of whatever surface capacity we could provide to Fill the Mills. And of course, when you combine these, you may see a total lower grade, but the underground grade has been increased because of selectively targeting high-grade areas.

Our gold business is resting at -- running at a 16% adjusted EBITDA margin, and I have included the DRD production at 77,000 ounces at an all-in sustaining cost of ZAR 605,000 per kilogram.

At this stage, I'd like to hand over to Charl Keyter to do the financial review. Thank you, Charl.

Thank you, Neal. Good morning and good afternoon. It gives me great pleasure to share our financial performance with you today.

Moving on to the half 1 2020 results. As has been highlighted throughout the presentation, COVID-19 had a significant impact on quarter 2. If we start with our deleveraging profile, you can see that net debt-to-adjusted EBITDA, which, to date, has been our primary financial performance measure, reduced to 0.55x. That is down from 1.25x at half 2 2019 and we are now well below our covenant limit, which is set at 2.5x.

Net debt on an absolute basis reduced by 38% or ZAR 5 billion to ZAR 16 billion. Adjusted EBITDA, considering the impact of COVID-19, increased to just below ZAR 30 billion.

The conversion of the convertible bond, which is currently trading well above the soft call, will reduce debt and leverage significantly. As illustrated, you can see that net debt-to-adjusted EBITDA on a pro forma basis would have been 0.23x at the end of half 1 2020.

Looking at the next slide. The group is in a very good position from both a liquidity and a debt maturity position, and our next meaningful debt maturity is the 2022 bonds of $354 million. Gross debt as at the end of half 1 2020 was ZAR 28 billion, and our medium-term target is to reduce this to ZAR 15 billion, as stated previously.

And we are not far from our target, considering that we had ZAR 12 billion cash on hand at the end of half 1 2020. Post half 1 2020, we have already started repaying the rand and the dollar RCF as I believe the risk of accessing these RCFs has abated.

If we turn to the income statement. Half 1 saw a 154% increase in revenue. The main reasons for this was the inclusion of the Marikana operations for a full 6 months and basket prices being up 92% at our SA PGM operations, 43% in dollar per ounce terms at the U.S. PGM operations and 45% at our SA gold operations.

This was, however, impacted by the severe production disruptions due to COVID-19. Cost of sales increased to ZAR 37.7 billion, and that is again mainly due to the inclusion of the Marikana operations for a full 6 months and then an increase in recycling costs. As has been highlighted by Neal, adjusted EBITDA at ZAR 16.5 billion increased eightfold from ZAR 2 billion in half 1 2019.

The next big item to look at, at the income statement is the gain on the financial instrument. And this relates to the downward valuation of the convertible bond, and that is due to the movement in the share price. Mining tax at ZAR 2 billion is directly attributable to the profitability of the company.

If we look at earnings for the period, that was just below ZAR 10 billion or ZAR 3.51 or 351 cents per share compared to a loss of ZAR 200 million for the same period in 2019.

Moving on to the next slide. The surge in earnings and our commitment to reinstating dividends once our net debt-to-adjusted EBITDA was below 1x has resulted in us declaring an interim dividend of ZAR 0.50 per share or about ZAR 1.3 billion. Although a conservative interim dividend equaling 15% of normalized earnings, it does take into consideration the uncertain journey that is still ahead of us due to COVID-19.

It has to be said that although only 15% of normalized earnings, it is the single biggest dividend declared to date, and it highlights the significant transformation of the company into a global precious metals company. If the current trajectory continues and commodity prices hold up, I believe you can expect a significant dividend based on our full year results.

I will now hand back to Neal to conclude on the presentation. Thank you, Neal.

Thank you, Charl. And I will do the last part of the presentation now. And I first want to talk about the PGM market outlook, and I'm not going to spend too much time on this because we are in a very volatile phase that can change at short notice. But at this point in time, on the supply side, we are estimating a 15% decline year-on-year, predominantly based on the South African PGM production, which has been disrupted due to the lockdown due to COVID-19. We also expect recycling supply to decline by 15% year-on-year in 2020.

On the demand side, auto demand is expected to fall about 20% year-on-year to about 70 million passenger vehicles. We only expect passenger vehicle sales back to 2019 levels by 2022. And on the demand side, we've already expressed a very bearish jewelry outlook previously, but we will revise this down again by 20% in 2020 and 2021.

As such, if you now look at the market balance. Our longer-term forecast remain unchanged. Rhodium moves closer to balance in 2020 and 2021. Platinum surplus narrows this year, but it increases in 2021 due to increased production from the South African region.

We believe, and I have seen some commentary that there is some suggestion that substitution of palladium with platinum won't happen. I can assure you, it will happen. And actually, it's inevitable. If we don't do this, we will not alleviate the sustained palladium deficits, and OEMs have a need to reduce their costs. So that will also provide a solution to the increasing cost of rhodium. Overall, we remain positive about the overall basket price when these moves change place. And I expect you will have much better visibility of substitution from 2021.

Moving just to some guidance and some final conclusion. The slide titled 2020 Annual Guidance. I'm not going to go through all the details. Suffice to say that clearly, production from an ounce point of view is down in all regions, but I still think quite respectable, considering the disruptions we've had in the second quarter. Costs are mainly up, and that's primarily due to lower volumes. So unit costs do increase because of the high fixed cost component. And we've adjusted capital costs to suit going forward, and you can see the range of capital costs there.

I think you got to see that in context of the graph on the right-hand side where if you look at the rand 4E basket price and the rand gold price, those more than offset the reduction in volumes and the increase in costs. So we actually see the second half of the year significantly better than the first half of the year from a profitability point of view.

Moving on to the next slide, which is titled offering value, and we offer very significant value as an investment. I mentioned earlier on that part of our strategy of value-accretive growth, it can only really be done off a strengthened equity rating. Well, this shows you why value-accretive growth is not something we consider -- can consider using equity at this point in time.

Although we've seen a substantial re-rating in our share price, you can see we are still significantly undervalued. And you can look at all the different metrics on the slide, EV to EBITDA price for -- free cash flow per share, net debt to EBITDA.

We are now significantly de-risked. And I do believe that with the introduction of the dividend, we will see now further significant re-rating. And even on an EV and market cap, we will start seeing the enterprise value of the company being converted into market capitalization. So I remain very bullish regarding the way the market will revalue our company again despite the very significant increase in valuations that we've seen in the last short while.

So with that, I would like to thank you for your time, and we will now open up the forum to questions. Thank you.

(Operator Instructions) The first question comes from Arnold Van Graan from Nedbank.

So a couple of questions from my side, Neal. So the first one is, can you just quantify the COVID losses for this half? Maybe I missed it, and sorry, if I did, just sort of ounces per operation.

And then my other question is related to Blitz. What really is the issue there? Some teams' geological challenges, can you just give us an update on exactly what you're encountering? And then the other question that relates to that is, will you be able to ramp it up to the regional planned level? So you said it will ramp up, it is going to take longer. But can you achieve your initial target?

And then importantly, from a cost perspective, given the delays and given the geological challenges that you're facing there, do you think you'll be able to achieve your regional envisaged costs on that operation?

Thanks, Arnold. Let me answer your questions in the order you gave them. So the COVID losses, I don't have it in ounces. But if you look at what was achieved in quarter 2, it was roughly in the South African operations, roughly 50% at gold and 50% at platinum. So we lost 50% of quarter 2's output, and you can put a number to that.

In terms of Blitz, it's a myriad of issues. And I'll ask Chris to come in. I'll just give you my view, and then you can get it from the horse's mouth. But that started -- our challenges started with the fall of grounds that we had. There were some knock-on effects where we then tried to concentrate mining, and we had ventilation constraints. And I must say, all of these are actually just typical start-up type problems that you find with bringing a new mine online. I've experienced it many times before.

The COVID disruption is one where we can't complete some of the capital expansion around the mills, and we've had to remove a lot of contract labor in order to run, let's call it, the rest of the business, which is more steady state. And the ongoing impacts of COVID are really on the growth side of that business. That's almost the flexibility we have to switch that on and off.

So when you couple all of that and our, let's say, our improving understanding of the ore body, we anticipate delays of something like between 12 and 18 months. We are busy just redoing some of the planning around that. Blitz will get up to its original target of 300,000 ounces of additional production, and we expect that to happen 12 to 18 months later. Chris, I don't know if you want to add anything to what I've stated.

Neal, I mean, quantify -- on the COVID customer in the U.S., there was $3 million in the first half related to increased cost of COVID. That equates to about $10 an ounce. We're still spending around $500,000 a month related to COVID. And I think, Neal, you hit all of the key points. We did have force majeure declared on various mill parts, and we had a very short time period to respond to the COVID outbreak. And one of the things we agreed with the county health officials, Neal mentioned it in his presentation, was getting people upside. So we suspended a lot of the surface works, the noncritical capital. We did keep going with Blitz underground development, and we're pushing through that during COVID.

I'm pleased to report good progress being made on the Benbow terminal, which is -- which will connect the east side to the west side of Blitz, and we're expecting to finish that up in the first half of next year. We've got through the most challenging grounds on that. That will open up a lot more ventilation. And as we develop on the 56 level, which was one of the other 3 main tunnel infrastructure, we're drilling and further defining the ore body. And as we get that data, we're running it back through the models because the initial drilling was from surface and not a density to fully define the ore body. So progress has been made. There'll be more news as we rerun the numbers and look at the time lines with the impacts from COVID.

The next question comes from Lorenz Heller from JPM.

Can you hear me?

Yes.

The -- it's Dominic, JPMorgan. I've got 3 questions, if you don't mind. The first relates to the gold assets. So if we look at the guidance for second half of the year, we could be looking at a potential 50% increase in the output. The reserves for your South African gold operations are based off ZAR 600,000 per kilogram. Current spot price is over ZAR 1 million per kilogram. How should we think about the optionality and the strategy in the gold assets? And if you don't mind, I'll maybe follow up with 2 quick questions afterwards.

Okay. Thanks, Dominic. Yes, you're correct. There's significant upside in the second quarter. Our planning parameters are conservative, and it does open up the opportunity to scale up our gold business and probably flexibility looking at cutoff grades and so on.

I would argue -- and of course, we would do that, although we prefer to rather retain the margin than, let's say, increase output. So we will look at that going forward. But I think the point is that our current gold business is being well-managed at a certain level. And even if we were to, I suppose, stretch it a bit more, it's still only going to be, I don't know, maybe 15% of revenue in the future. So it is something we'll constantly optimize and look at. But I think your overall sort of point you're making is upside.

Okay. And then just 2 follow-on questions. So the Lonmin synergy number is upscaled again, but how conservative is that number realistically? Because am I correct in assuming that there's no assumption in there for long-term mining synergies with respect to the boundary between Marikana and Rustenburg?

And then my final question is related to sort of your comments around value-accretive growth, and I guess, one of the things that we talk about with investors is M&A aspirations. Could you maybe just give us some context around what the rush is for pursuing those types of value-accretive growth opportunities and what the criteria you and the Board are currently setting for looking at sort of M&A growth options?

Yes. So let me pick up on the Lonmin synergies. It's our experience that the mining-related synergies, when you think of crossing boundaries and saving capital infrastructure, is actually much bigger than these type of synergies that we've tabled today. The problem is they come somewhere in the future, and it's normally a commitment to progress a project. So there's no doubt in my mind that there's still significant upside in terms of value to be created from things like mining through boundaries and so on at Lonmin.

I would, however, say that I've consulted our teams. We thought that ZAR 730 million of overhead synergies was conservative, and it has been -- it has turned out to be conservative. But remember, we also only had limited ability to do due diligence, and hence, the conservative original estimates. So I wouldn't suggest you should go and extrapolate the increases year-on-year that we've had. I would say, we're now getting towards the sort of overhead synergy number that we always envisaged but could not -- did not want to make public just because we didn't have the background information to do that.

The -- in terms of value-accretive growth, I suppose we've made it very clear that certainly, from an entry into PGMs, we liked the idea, and we see a lot of complementary benefits when we look at the battery metals. That has been a study that is ongoing and remains an area of interest. We have previously said that we like gold. And in fact, earlier this year, prior to COVID, gold would have been a really good entry. And the basis on which we said that is it's somewhat countercyclical to PGMs. And it is a business we know well, but it's incredibly difficult to find value in gold today. So we maintain a watching brief.

From a Board perspective, it's really been -- we won't -- we're not, let's say, actively engaged. The Board has been very clear that our commitments to shareholders have been, first of all, deleveraged. And I think you've got a good information on that today. And secondly, we made a commitment to our shareholders that we will reinstate our dividend. And yes, we've done that. And clearly, we need to make sure that our dividend is sustainable.

When it comes, I suppose, overall, we will not embark upon M&A if it's not value accretive. And I think we've aptly demonstrated that there were a lot of naysayers, but our entry into PGMs was really well-timed and very value accretive. And when we talk value accretion, we really look at a cash flow per share as well as all the other metrics as well. But if it's not cash flow per share accretive in a reasonable period of time, it just doesn't stack up. And when you start factoring all those into account, you can imagine how difficult it is to identify any value-accretive targets at this point in time. Dominic, I hope that answered your questions.

The next question comes from Chris Nicholson from RMB Morgan Stanley.

So not to be left out, I also have 3 questions, but I think they'll be quite brief. The first question is that it appears that you've drawn down on the inventory pipeline to the tune of about 130,000 4E ounces or so in South Africa. To what extent will you need to rebuild that later this year? So where are we in terms of those pipeline inventories?

Second question on Blitz. I'm just interested to see that your CapEx guidance for Stillwater is pretty much unchanged this year. Maybe a bit surprised given the slowdown we've seen in the Blitz project, in particular. Can you maybe just highlight why that CapEx has still come to prior levels? And should we be expecting with the extension of Blitz, CapEx exceeding, let's say, $200 million, $250 million range in next year or 2? Or are we past the CapEx?

And then just final comment, would you consider share buyback and to try and offset some of the dilution of these convertible bonds? It just would seem to be the obvious thing to do if you're right in that your final slide in your presentation that your shares are (inaudible) at the moment?

Yes. Thanks, Chris. And funny, we, as an executive team, did receive your note just before the call. And your 130,000 ounces of inventory drawdown is not correct. It's probably less than half of that. And I think you got to factor in the force majeure and the blockage that we had with the Anglo converter issue.

You're right on the CapEx development. The -- at Blitz, we have -- sorry, you're right on the CapEx number, but I think, as Chris pointed out, we have tried to continue to develop to get flexibility. I would think that there could be an increase in total capital for Blitz because of the delay. You do have fixed project cost. But as Chris also said, we are running a, let's call it, an assessment of Blitz to come up with a replan. And that should probably be in the next 3 to 4 months, it will be completed. So we'll give guidance on if there is any CapEx increase, which I think there may be. I mean that's just being -- it's logical.

In terms of a share buyback due to the convert, the answer is probably no. And the reason is that when we entered into that convert -- well, sorry, let me take a step back. When we entered into the acquisition of basically Stillwater, we would have wanted to do a bigger rights offer and have more equity underpinned in terms of the financing for Stillwater. Some of our shareholders couldn't step up to the plate, and we didn't want to overly burden them and dilute them. So we had to embark on a smaller rights offer.

I think in terms of the convert and where it was struck and the whole rights offer, it was our hope that the convert would convert because we raised a lot of money at about ZAR 18, ZAR 19 a share. And the nice thing about a convert is it converts at a much higher price than the strike price. And therefore, we do -- we would like to see that become equity in the company.

I also think we want to be prudent with our cash, and I understand the benefits of buyback. But I don't think in this case, that's what we are going to do. But that's not a final decision, Chris.

The next question comes from Adrian Hammond from SBG Securities.

Neal, given the change in fortunes for your business of late, could you just reiterate your capital allocation strategy to us?

And secondly, previously, you mentioned that all cash flows from the gold business would be returned to shareholders. But obviously, that's still under the water despite record gold prices. So how do you think about this strategy going forward? And would you consider divesting of these assets? Do you think they'll be better in the hands of other producers?

Thanks, Adrian. And certainly, let me state upfront, we have no intention of divesting of our gold assets. I think in the longer run, we see real benefit of being a precious metals company, not just a PGM company. And if anything, we'd want to build our gold profile at the right point in time. Only at that point in time may we -- we may consider improving the, let's call it, the risk profile of the company. But certainly, we like the exposure to gold.

So coming to capital allocation, I think it's -- suffice to say at the moment, we were very prudent on the dividend declaration. It was really only 15% as opposed to somewhere between 25% and 35%. It's -- I think we are just being prudent in terms of there could be a little bit more volatility in the last half of the year, and I think we would want to just be well positioned for that. I think Charl made it quite clear that coming to a final dividend, I think it will be substantially bigger. I don't want to commit now. And we would like to get more towards our dividend policy in terms of a final declaration.

So in terms of capital allocation, it is still very much the same. It's -- I think our leverage post, let's say, a convertible bond conversion will be at levels where it is very sustainable. That means the cash that is not allocated to, let's say, direct costs and capital, we don't intend to really embark on any major growth capital at this stage, other than that, that's committed such as Blitz. So the first priority remains returning cash back to shareholders.

In terms of our commitment to dividend out gold -- all the gold earnings, we intend to do that. I just think you need to give us a bit of chance just to get to steady state and make sure that the COVID disruptions are somewhat behind us. And then I think we would have to sit back and say the balance of the cash, especially at these commodity prices, can we employ it perhaps better than what our shareholders could? And if we can't, well, then, I think our shareholders can look forward to even more cash returns. That's really how we think about capital allocation in this case.

Well, just to be clear then, I mean, if you're going to reduce debt through the calling of the bond, you should get pretty close to gross debt of ZAR 15 billion at no cost to you really other than raising -- other than issuing new shares. So I'm just trying to understand what you intend doing with all the cash because your dividend policy then perhaps would you reconsider adjusting that policy to return more cash to shareholders? Or would you keep the balance shored for potential M&A?

No. I think we would -- we -- if we cannot -- if we not -- cannot create more value than by returning it back to shareholders, we will exceed our dividend policy of 25% to 35%. So Adrian, we'd have to see at the time. But certainly, it would be very nice to return more cash back to shareholders than this.

Just maybe one question for Richard, if he's around. Just want to -- could you perhaps give us some color on how we should think about sales versus production at Rustenburg for the year given the benefits you had of the pipeline in H1 and whether there's going to be a lagged effect in H2 at all, please?

Rich?

Sure. Yes. So I think just in terms of our sales on a very high level, as Neal mentioned, 2 different factors. Obviously, the COVID impact and then the downtime on the converter plant. Roughly speaking, if you take the total pipeline over Rustenburg that was, let's call it, depleted net-net of being delayed through force majeure notices and COVID against metal that's being delayed into the future, we're looking at about 50,000 ounces on the Rustenburg side, and Marikana saw a benefit of a similar amount due to treating material, essentially stepping in for processing and tolling on behalf of Amplats during that period for the other operations. I hope that addresses your question, Adrian.

So are we going to balance out by the end of the year in terms of a full year number? Or is there going to be some lag into next year?

No, we'll be balanced out -- we'll be comfortably balanced out by the end of the year, Adrian. That's right, yes.

The next question comes from Leroy Mnguni from HSBC.

A couple of questions, please. So the first one is when Anglo Plats declared their force majeure and you processed your own material, I understand it would have been brief because the lockdown kicked in, but how did your processing operations cope with the increased volumes? Were there any learnings? Any sort of areas of concern around increasing the throughput?

And then just on the substitution of platinum back in for palladium in the gasoline, autocat, like I understand at the time, it was a specific model in the U.S. where it was going to be applied, and it was quite a large vehicle. Are there any indications at the moment that, that solution can be applied a bit more broadly or on slightly smaller models?

And then just lastly, you've spoken quite a bit about your equity being cheap at the moment, and it needing to re-rate before you consider value accretive M&A. I mean do you -- how do you think about that? How will you know when your equity is fairly valued? Is there a kind of an absolute share price? Is there a target multiple? Or do you just kind of use a peer group average?

Yes. Thanks, Leroy. Let me pick up on the force majeure. Because there was such a quick

(technical difficulty)

from, let's call it, total lockdown to you can restart your business, there was very little -- and sorry, and the other thing is, of course, Anglo Platinum repaired their converters much, much quicker than what we expected. There was very little processing that actually went through from Rustenburg into the Marikana facilities now. So we never really got to test their nameplate capacity, but there were a lot of learnings.

It's not a simple process just to 1 day add in another constituent of PGMs. There's a lot of chemistry involved and a lot of planning and logistics. So getting to understand the sulfur contents, the copper and nickel and so on, it was critical, and that took our team some time to get to grips with. And then, of course, introducing matte or any other material into a process not through your normal pipelines is challenging. So there were a lot of good learnings.

I would say that other than having tested -- not being able to test our processing facilities for that additional material, we learned a lot, and we are certainly in a much better position should another incident like that happen. So that is what happened around the force majeure issue.

In terms of substitution, clearly, from the last time we spoke and mentioned this issue, COVID-19 has occurred, and I would suggest that most companies have been busy navigating their way through a lockdown and a restart, and supply chains have been severely disrupted. So it hasn't -- substitution hasn't been the main focus.

And as far as I'm aware, larger vehicles are still predominantly the target market. And it's not just in America, I think we are already seeing substitution in China. Just repeat your question on value-accretive growth again. I just lost track of that.

Sorry. It was just, how do you gauge when your share price is appropriately valued as in when you're ready to do M&A again?

Yes. Sorry. That's a good question. And really, I think it's all relative. So the last slide in the presentation is a slide that tells us whether we are being valued appropriately. And it's really based on multiples and where you slot within your peer group. And when you sit at the bottom of those tables, and we know why we have -- we are there, I really do believe it'll change because our risk profile has changed. But it's only when you sit in your peer group can you really start considering the relative valuation of your equity. There's not an absolute number. It's how you are really rated relative to your peers. Of course, to shareholders, there's an absolute number, and we know that number is significantly higher than where it is now.

The next question comes from Alexandre Ayoub from Waha Capital.

Congrats for these results. I'm coming from the bond side. So I just want to have a bit more insight on the capital structure, your use of cash. If you don't mind reminding us quickly on the debt strategy. So what is it you want to hit the $1 billion gross debt? Hence, you'll be using some of that cash to decrease your gross debt, is that correct?

Alexandre, I'm going to actually ask Charl to field that question. Charl?

Yes, Alexandre. Yes, I mean, exactly that -- remember that we've put out, call it, an intermediate target. Our first primary consideration was to get our leverage below 1, which we've achieved now. And the next target we imposed upon ourselves was to get our gross debt down to about $1 billion. And that is simply a number that we back calculated to make sure that we are comfortable throughout any cycle that we can face. So yes, some of the cash that we have on hand will obviously go towards repaying some of the rand and dollar RCFs. As I said on the results presentation, we have restarted that.

Remember, at the time when we went into lockdown, we fully drew under those facilities just to make sure that we had adequate liquidity and just to be careful that there were no restrictions imposed on us by the lenders. But clearly, that was not the case. So we've restarted repaying those RCFs. So yes, some of that cash is already being applied to that.

Sure. But then you still have a lot of cash on balance sheet. So I was wondering, would you, for example, be calling the bonds -- the 2022 bonds because they have a call option? And in relation to the convert, I guess, it sounds like you're just going to let it convert into shares. So you'll be issuing new shares and then there will not be any cash burden on the convert side. Is that correct?

No. So we are keeping an eye on the convertible bond. Clearly, it's trading above the soft coal price, and it's something that we are keeping an eye on. But at this point, there's no immediate plans to call the 2022 or the 2025 bonds. As Neal has said, one, we have to preserve liquidity in the business. I think we're going to have a bumpy ride still ahead of us due to the global pandemic. So it's just an overall cautious approach to make sure that we have adequate liquidity. And as Neal has said, clearly based on the results, and if the results continue as is, some of that money will be returned to the shareholders in the form of a final dividend.

And I think, Charl -- yes. Just to add in there, I think we like the idea of a mature balance sheet with some gearing on it. And I don't think there's any intentions to early call any of the high-yield bonds, if there is such a thing.

Yes. That's correct, Neal.

Fantastic. And sorry, so just to clarify, can you quantify what you mean by preserved liquidity? Like, is it like [$300 million] of cash on balance sheet?

And then just the last one is on M&A. So I understand you only look at value-accretive M&A, but would you have the kind of size, the maximum size? Would you be going -- embarking through another maybe ZAR 1 billion acquisition? Or that's really not what you're having in mind now? Or you wouldn't really exclude that?

Yes. You do the capital, Charl.

Yes. So in terms of liquidity, our internal policy is to have 2 months of operating expenditure in the form of liquidity, and that's through a balance of cash and available revolving credit facilities. So the number at this point in time is roughly about ZAR 12 billion. And about 1/3 to a half of that we would like to have in cash. So I'm not converting it to dollars. So it's between ZAR 4 billion and ZAR 6 billion that we would like to have cash on balance sheet.

Yes. On the size of M&A targets, it doesn't make sense to do small acquisitions. Although I think when we look at the battery metal strategy, we don't see the same type of strategy as we embarked upon in the PGM sector. It's going to be a lot more selective and strategic. But -- so those could be smaller acquisitions.

We are a company that can stretch our mind for the right reason. And the acquisition of Stillwater was at a time when -- and Stillwater was bigger than the market cap of the company. So Alexandre, it really depends on the target. We don't have a specific size that we target. We look for certain quality and a certain value accretion. And then we work out how best to do it.

Is it fair to say that you would keep your leverage within 1x or around 1x even though you find a very large big acquisition? Or you would be happy to stretch it also temporarily?

Yes. So listen, under normal operating conditions, we'd want to be where we are now and below. So that's when there's no M&A. That is mining, and it's prudent, and in our view, the right thing.

When it comes to M&A, there's no reason why you can't exceed 1x, possibly even go to 2, maybe 2.5x. As long as you are certain, and in most cases, you have to be absolutely certain you can mitigate any risks of deleveraging. And the Stillwater acquisition was exactly that. We moved to about 2.5 -- just under 2.5x, but we were confident of the markets and our ability to deleverage. It's not pleasant going up to those sort of numbers, but -- and a Board will really only support it. If they are reasonably confident, you can deleverage. So under normal conditions, 0.5 and below for a good reason or an appropriate acquisition. Going above 1x is also not something that we would shy away from.

(Operator Instructions) James, I'd like to hand over to you for the questions on the webcast. Hello, James?

I know James was also watching the webcast, so he might be on mute or not at his computer.

(Operator Instructions) While we try and reach James, we're going to take a question from Wade Napier from Avior Capital Markets.

Just a couple of questions from my side. Given that production has recovered post the lockdowns ahead of the sort of rates of return of employees to the mines, have you seen sort of any opportunities to sort of optimize your headcounts within the sort of SA operations?

And then my second question is really around your tolling agreement with Amplats. I mean you've previously described that as a sort of insurance policy against external risk factors such as load shedding. Are you sort of seeing anything in the next sort of 2 to 3 years that would suggest you're willing to shift more volumes back through the Marikana processing facilities?

Yes. Thanks, Wade. There's no doubt that COVID has provided, let's say, a number of opportunities to just relook at the way we do business and the one you're referring to we are watching very carefully, and that is that we are getting better productivity with less amount of production. So there is a case to be made that you're going to get to a point of diminishing returns as we call it. And we are watching that closely now.

At the start of COVID-19 and with the introduction of the social distancing constraints, we were concerned that, especially in our gold division, we would not get back to 100% just because of the logistics. I think since we've done a lot more work, we do have plans to take us back to 100%.

And so to answer your question, we will look to see if we can optimize our business a bit better. And we are getting to that 80%, 90% staffing level where we'll look at it, but I wouldn't like to commit any particular number in terms of productivity improvements or, even worse, job losses. We certainly would not enter into a 189 under these conditions. We would look at other mechanisms, natural attrition and so on. So we will try and balance the productivity aspects as we enter this area of diminishing returns.

On the tolling arrangement, it's a really good arrangement for us with Anglo Platinum. And it does give us the flexibility in terms of growing our own business should we want to do that. And therefore, there doesn't seem to be any real strategic reason why we would want to give notice earlier on that agreement. Obviously, we just keep an open mind, and we have a good relationship with Anglo Platinum. It works for us. I suspect it works for them as well. And we will keep an open mind on that. But certainly, things like load shedding and so on, it does put us in, I think, a better position having that toll treatment arrangement. James, are you online?

Yes. Neal, can you hear me now?

Yes, we can hear you now. So...

Okay. Thanks. So sorry, I just had a bit of problems with it. Obviously, it wasn't coming through. I'll just read through a couple of the questions I've got on the webcast -- from the webcast. Some of them are repeat. So if I don't ask your specific question, please, I apologize upfront.

Just one from [Sophie Davids], asking about as loyal employees, how will I benefit as woman in mining? I thought maybe you could make some comments about our approach to the gender equality of women in mining in response.

Yes. So I have actually volunteered to champion on behalf of the minerals industry -- sorry, the Minerals Council, the whole Women in Mining Initiative, and that's as a male in the women in mining task team. Now I think we all know that right now, the majority of senior management is men. And therefore, men actually have the ability to make this work or not work. And I suppose, outwardly, men will say, yes, let's make it work. But sometimes, deep down, they will stand on the sidelines and perhaps even watch an initiative fail.

I tend to -- I intend to make sure that it doesn't happen and promote the benefits of women in mining. First of all, you increase your exposure to a source of expertise and capacity that, in my mind, in many areas do the work, and they do it better than men in many areas. And certainly, we are, as a company, going to drive the Women in Mining Initiative on the basis that it's good for us, it's good for the company and it's just the right thing to do.

So we've actually put very specific capacity in place within Sibanye-Stillwater. There's been a number of meetings. And we intend to double our women in mining from the current levels of about 11%, 12% into the mid-20s within 5 years, and that's a very, very significant commitment. And then together with the Minerals Council on behalf of the mining industry, we're looking at getting up to the 40%, 50% levels by the end of the decade, 2030.

Thanks, Neal. The next question is from [Charles Boult], asking what are long -- what is the long-term plan for the DRDGOLD investment?

Yes. Charles, we have Niël Pretorius on the call, and we work extremely, I suppose, closely and well with the DRD executive. Our view is to provide the support and the guidance that we can as a shareholder, and hopefully, see the DRD business evolve into something that is multi-commodity, international and become an even better business than it is today, and it's a great business today. We believe that the focus on environmental as we presented in our presentation is certainly a shareholder view. We are mindful of not affecting liquidity in terms of the share. We're very comfortable with our current position. We would like the current large exposure that we have, and we will certainly be supportive of the DRD vehicle going forward. We think it's a very good arrangement. So I trust that answers the question, Charles.

Thanks, Neal. The next question -- or 2 questions are from [Martin Kraemer]. Firstly, will we be taking steps to mechanize Marikana in the same way as Rustenburg and Kroondal are mechanized?

And then the second one, I think we've answered to some extent, which is the opportunity to convert more gold resources into the reserves in the short term. What is the opportunity at the gold operation?

Yes. Thanks, James. And I think we -- there is opportunity, and I did cover that, Martin. Martin, the -- we would like to mechanize as much as we can. And certainly, I think where we have the right ore body properties or profiles, we have mechanized and mechanized very successfully. We -- a substantial part of our business is mechanized. The U.S. operations are basically totally mechanized, and large parts of Rustenburg being Bathopele are also mechanized.

However, it becomes very, very difficult to mechanize ore bodies that are narrow and tabular, and that remains a challenge. But in principle, whatever we can mechanize, we will. And we're constantly trialing new equipment, low profile equipment, to try and achieve that. And that's probably -- it's a very broad answer. I can't give you any specifics. But I think the bottom line is where we can mechanize, we certainly will.

The next question is from René Hochreiter, asking about the SA discount, which he says, he imagines can only be removed by leaving South Africa completely, which we obviously can't do. So could you expand a little bit on how we -- what are we doing to try and reduce the SA discount?

Yes. So as I've said before, there's 2 parts to addressing the South African discount. The one is actually trying to improve the perception of business in South Africa and the investor climate in South Africa. And that's an advocacy issue. It's an issue of engaging with government. And as you know, I've been pretty outspoken about the current state of affairs and my complete disillusionment with the current leadership.

Now having said that, I must also just add that we have a wonderful minister within in the DMRE that listens to us, that engages with us, doesn't always agree. In fact, very rarely agrees, but at least we can engage. And unfortunately, that's a microcosm in a much bigger national environment, which just doesn't allow that to blossom. But our minister is influential. We'll continue to engage with him. His heart is in the right place. And I have no doubt that if we can be successful as an industry that he will influence the national agenda. So that is one key thrust that we worked very hard at together with the Minerals Council.

In terms of -- you're right, René, I think the ultimate is you need to exit South Africa or re-domicile. And unfortunately, we seem to have, as a country, taken a step back in that. So for now, there will always be a South African discount. But I think we can do a lot without re-domiciling from the current levels. And for us as a company, it really involves improving our profile outside of South Africa. We have to build that profile to offset the perception that we are -- majority of our assets are in South Africa.

So we will continue to drive both of those. But I think the recent AngloGold Ashanti issues are very, very sad and completely inappropriate for business. It's just another negative regarding investors looking at this country. And I hope that government takes note that, that is not the right thing to have done. Let me leave it there. Thanks, James.

The next question from Nkateko at Investec. Congratulations in order. Just a question on the recycling volumes and our expectations for global recycling. We're talking about a 15% decline. We're showing a 6% decline in H1 at the U.S. operations. What are the key contributors? And do we expect Stillwater volumes to suffer further in order to, I guess, match that expectation on the 15% global decline?

Yes. So the -- more recently, we've seen recycling volumes normalize. And I would suggest what we see as probably the biggest recycler internationally is probably indicative of what's happening in the rest of the world. So recycling volumes are back to normal levels. So the decrease that we have put forward is really based on the period that's passed. I hope that clarifies the numbers. James, thanks.

Yes. I think that's fine. And I'll follow up with Nkateko to check afterwards. And then from [Jonathan Bloom], potential from Burnstone under current gold price environment.

Yes. So that's a good question. There is potential for Burnstone. We have been in the process of dusting off the strategy -- sorry, the study, not the strategy. However, I want to say that we would need to think very carefully about investing more money in South Africa at this point in time. I think the climate is not conducive to investments. And I've told the minister there are many, many projects that companies have in their bottom drawers that we would be so happy to invest in if the right things were done. And all stakeholders need to actually take note that this is not a patriotic thing. You're called unpatriotic when you won't do it. You're only done if you do it under conditions like this.

Government and other stakeholders need to nurture business, recognize business. It's highly unlikely that anyone can develop -- anyone else, any other stakeholder can develop these type of projects. So the sooner there's a recognition to embrace business, create an investor-friendly environment and nurture business and these projects, that will happen. But other than -- if that doesn't happen, I cannot see shareholders allowing us to use their money to invest under these conditions.

Yes. There was a similar question from [Steve Shepard] regarding K4 and the likely life of the Marikana asset. He mentions that it's a very large long-life, high-grade Merensky and UG2 proposition, which was abandoned due to financial distress of the previous company. So maybe if you can just elaborate on that, whether the same conditions apply there.

Yes, Steve, and it's a similar answer, except we need to be mindful of, let's call it, how receptive the market would be to more platinum, palladium and -- or yes, PGMs in general. It's a great project, and it is the one that I really hope our minister and our Cabinet actually give us the excuse to develop because it deserves to be developed. We have made some commitments to the comp commission, and we will obviously honor those. But it's a project that does deserve to be developed, and it's -- again, it's just one of these really good job creation opportunities that's squandered by a lack of leadership in South Africa, and this view that some stakeholders have that they just press a button and money is created. So I really do hope that these answers find a way into the media in terms of what is such a bad situation in South Africa at the moment.

Then I've got a couple of questions, which is similar around the -- on costs. First of all, from Nkateko again about guidance for the SA PGM for higher all-in sustaining costs despite expecting higher production in the second half and the Marikana synergies.

And then from [Roger Williams] about -- it looks like a reconciliation on the cost per unit in gold, PGM and Stillwater, because it looks like costs are escalating at about 15%, slightly different, but maybe if we can just cover them under the cost focus.

Yes. And I'm going to speak just in general about costs. And certainly, Nkateko, we can, as James said, just make sure that we answer your questions properly off-line. I just want to say that one of your biggest cost drivers is volume. And I tried to make that point at the beginning of the presentation. And when I listen to myself, I didn't make it very well.

As I say, one of your biggest cost drivers is volume. And the moment, especially in the short term where you have volume reductions, you incur very significant higher unit costs. And the volume reductions in the second quarter have been a very substantial driver of higher unit costs. And then within specific regions, you have specific issues. So in the U.S., we've had -- because of commodity prices, we've had higher royalties and taxes, and we actually quantified that at about $40 an ounce.

In addition, across the entire business, we've had increased costs due to sanitizing, transport, social distancing and so on. So I would suggest that some of those are ongoing, and they're here with us for the long term. Some of them are ones-off, and they're more or less a ones-off cost of establishing facilities and so on.

But unfortunately, the costs -- the increase in costs are not because of poor management. I believe that we, as a team, did a very good job in managing costs under these conditions. It could have been a lot worse. So that is unfortunately what it is. We will try and claw back. And I would think next year would be a more normal year. We will see better unit costs.

And then 2 questions, similar in nature again around the electricity issues in South Africa and our plans to maybe generate renewable electricity ourselves or how we plan to deal with the issues that we're facing with Eskom.

Yes. So it's a bit of the same answers as some of the other questions. We are an energy-intensive company. Primarily, my biggest concern is the exposure to CO2 emissions through Eskom as a consequence of them using coal. So there's many reasons why we would want to generate our own electricity from renewable sources, not only just the unreliable power supply.

However, it is very difficult to do that on the scale that is required. It is also still difficult to do it on the basis that some of our operations are -- don't have enough life to recover the cost of the investment in those plants. However, I think it's changing quite fast as well. And with rampant Eskom price increases, which we expect, that scenario can also change. We are looking at some new options where we have longer life. We are also mindful of DRD as being part of that solution in -- especially in the west, that's where we've got many years of tailings retreatment. And of course, that's not an energy-intensive business. So between ourselves, there could be quite a lot of sustainability.

So that's all being addressed and not on a part-time basis. We've got dedicated capacity, looking at this, working with the energy-intensive user group and trying to assist the energy department in fine-tuning these applications. Ours is particularly complex because of wheeling and perhaps even having to consider selling power back to the state.

And just finally, I think similar questions again, but slightly different. Would we consider if we don't re-rate and close the discounts again? Would we consider disposals of assets, whether that be in this instance mentioned gold and/or even Stillwater to -- which would potentially get a substantial premium to the value it's been given in Sibanye?

Yes. I have to believe we will re-rate. And of course, if we don't, we're the sort of team that will ensure that we deliver value to our shareholders. I can assure you that all those things are well understood, and they're being debated many times. But as I said earlier on, we know why we have traded at a discount relative to our peers, and that was principally because of the risk of the high leverage on our balance sheet.

I think we understand the profile of our gold business, but there are other companies with similar profiles, and we're not naive to that. But I would suggest you will see a significant re-rating, not in the next day or 2. I think this is a first step in returning cash back to shareholders. It could well be seen as a flash in the pan. It's going to take 2 or 3 dividend declarations. So I'm not proposing that we would have a re-rating in the short term. This is a medium-term expectation.

Thanks, Neal. I think that's it from my side. There are 1 or 2 questions, which we'll respond to, I think, individually, in the interest of time. It's almost 2 hours since we began. So from the webcast, I think that's all for now.

And from the audio line, there are no further questions. Neal, do you perhaps have any closing comments before we conclude?

Yes. Thank you. And I know it's been a long 2 hours. I want to say thank you to everybody for taking the time. The questions were really good. If there were specific details that we didn't quite answer, we're happy to do that. And really, I think I can certainly say I'm really very pleased with the delivery that the Sibanye team has put here on the table. It's been a tough half to the year, and I think we move into the second half in a really good position. So again, thank you for your time, and we look forward to talking to you early next year with our full year results.

Thank you. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.