Sibanye Stillwater Limited

Mick McMullen - President and Chief Executive Officer Chris Bateman - Chief Financial Officer Mike Beckstead - Head of Investor Relations

David Gagliano - BMO Capital Markets John Bridges - JP Morgan Matthew Griffiths - Bank of America Merrill Lynch Daniel McConvey - Rossport Investments

Thank you very much and thank you everyone for dialing in for our second quarter 2015 results presentation. I will run through the presentation firstly and then I will open the floor to questions.

I am joined here by Chris Bateman, our Chief Financial Officer; and Mike Beckstead, our Head of Investor Relations. We have a deck that’s online and I would like to draw people's attention to the forward-looking statements on Slide 2, in particular, that we intend to make forward-looking statements including our 2015 mine production and cost estimates, maintaining a disciplined approach to operational efficiencies, additional opportunities future savings, adding a third TBM crew in August, receiving our Benbow portal payment by year-end, encouraging results from Graham Creek area, clear and concise action to protect shareholder interests, expected reduction in development rates, anticipated savings from headcount reductions and anticipated reorganization costs and positioning the company to withstand all phases of the PGM pricing cycle.

All of those statements are subject to the statutory safe harbors and investors are cautioned not to put undue reliance on these forward-looking statements. We disclaim any obligation to update these forward-looking statements.

We do encourage all investors to consider all the disclosures made in the company's annual report on Form 10-K. With that I might move into the body of the presentation on Slide 3 for the second quarter highlights.

We did process 151,600 ounces of palladium, platinum and rhodium in the quarter, which was just under a 13% increase over the prior year. We had a record month in June, the highest ever, both ounces and tons that we have processed through the facility.

We had a net loss of $27.3 million or $0.23 a share. That compared to $17.9 million or $0.14 a share of earnings in the prior year period.

That does include a $34.3 million after-tax impairment on Marathon property in Canada. We produced from the mines 127,300 PGM ounces, up slightly from the prior year and again, as I have said before, whenever we talk about a PGM ounce it's a mix of palladium and platinum.

The ratio for this year is running at about 3.52 palladium to 1 platinum. We did have a major maintenance program underway at the Stillwater Mine in the month of June which negatively impacted our production.

And AISC was a bit higher than we had expected or would like to say that $785 an ounce, lower than the corresponding period in the prior year. Again, very much driven by the large maintenance shutdown we had at the Stillwater Mine.

We ended the quarter with $531 million of cash and cash equivalents plus liquid investments. I am pleased to report that we had a very strong safety performance with a 9.2% reduction in our incidence rate from the previous year.

Safety is very critical for us and given all the things that were going on at the operations including the large maintenance shutdown that we had and the work that was done, it's a very pleasing result to see a significant improvement in safety. Turning to Slide 4.

Just running through the results. As I have said, production was up 0.5% on the prior year.

Total cash costs per mined ounces were down about 3.6%. that’s net of credits and we are seeing our byproduct credit go down as a result of the fall in copper and nickel prices.

All-in sustaining costs, as I said, down slightly on the previous year. General and administration costs were actually up 20% driven very much by a $1.7 million increase in our medical costs that were received during the quarter.

Sustaining CapEx, relatively flat on the prior year. Project capital up slightly, really driven by Blitz and our [indiscernible] expansion and, overall, our total capital up about 10% on the prior year.

As I said earlier our recycling ounces was up to 151,000 ounces for the quarter. Volume was up significantly over the prior year.

I am going to hand over to Chris Bateman for the next two slides to discuss the financial data.

As Mick mentioned, we had a reported loss of $27.3 million. The after-tax impairment charge on our Marathon property in Canada was $34.3 million.

This lead the Marathon property down to a fair value of $8.6 million. The other major driver in terms of earnings is the declining price environment compared to the corresponding period last year.

Moving on to cash flow. This is the first quarter for quite some time that we haven't added cash although as we have said previously, build and recycling capital signals a strengthening of the recycling business.

We added $11 million in recycling capital. We actually sold a lot more material in the quarter than we previously had but we did see a strengthening of the purchased material market in the quarter which led to more inventories there.

Capital spending was right in line with our guidance of $30.3 million. So as a result the reduction in cash balance could be explained by the increase in recycling.

Thanks, Chris. Turning to Slide 7 where we look at the cost per ton performance for each operation and consolidated.

Again, despite a large reduction in our all-in sustaining cost we did see continued reductions in our mine site costs. If you look at the Stillwater Mine, our cost per ton again came down to $227 a ton from the prior quarter.

We will point out that our milling costs were quite a bit higher than the previous periods. That's because we expensed a mill motor replacement there which is the equivalent of around about $9 a ton.

So adjusting for that, it's broadly in line with the previous periods. Our mining cost per ton continue to trend down after we had seen a little bit of a tick up in the previous quarter.

You can see volumes despite a fairly extended shutdown in June, milled volumes were still reasonable but, again, we would like to see them higher. East Boulder continued a good cost performance, again, after we saw a bit of a tick up in mining cost in Q1.

We saw that downward trend of the mining cost, again strong performance on the milling cost and the downstream cost. So I would say, overall, reasonably good cost control of both sides.

We would still like to do better than that but an extended shutdown of that Stillwater Mine in June did drive that sort of increasing costs there. Turning to Slide 8.

For this quarterly period we have broken out the all-in sustaining cost by month and the production just so that people can understand the impact of that shutdown we had at the Stillwater Mine. You can see from this graph here that the blue part of the bar is the production of the East Boulder Mine.

Relatively stable throughout the quarter month on month. The green portion of those bars is the production at the Stillwater Mine.

And combined we were producing in the order of 47,000 to 48,000 ounces a month in April and May respectively. Production in June was 31,600 ounces and again that was really driven by that extended shutdown at the Stillwater Mine.

This was a major maintenance shutdown. We had planned it to be a week.

We took the underground crusher out from underground, replaced it. We did a significant upgrade on the production hoist which was extended by 8 days over the plan.

And we also changed out the mill motor at the same time. This is the first time each of those things have been done in the history of the mine.

We don’t expect these to be recurring events in the short-term but it did have a significant impact on the production and therefore the costs. You can see that for the April and May periods, very strong cost performance on the all-in sustaining cost.

The average of those two months is around about $716 an ounce. Unfortunately, with the low volume in June that drove out, cost for that month up to $994 an ounce, therefore driving the average for the quarter up to $785.

I think the performance in April and May does demonstrate that we can get to goal of the low 700s. June, I think, demonstrates that we need to do it consistently in order to get where we need to be as a company going forward.

Production in July looks like being closer to May's performance and all of those maintenance items appear to be operating normally at this stage. Going to Slide 9 on the all-in sustaining cost.

We were down $7 an ounce year-on-year. I have touched on the increased medical claims that did drive our G&A quite a bit higher for the quarter.

We would like to think that’s not a recurring item, but again there is an increasing trend in the U.S. for higher medical costs.

We are maintaining a very disciplined approach to capital deployment and operational efficiencies. We are reducing supply cost and material inventory.

We have had some very good success at reducing some of our input costs. Some of those new contracts start early next year some have started already.

But, again, this is the period in which we need to be very focused on cost. Our all-in sustaining cost guidance for this year now has been amended to $725 to $775.

And again, if you look at the table on that Slide, you can see there that when you look at our cash cost, our recycling income credit is down. Our SG&A was up and our sustaining capital was up slightly on the period before.

Going to Slide 10, on the met complex and our recycling business. We did continue to achieve very good growth in that recycling business and I think I noticed some commentary this morning about our revenue was down in our recycling business.

And that is true. However, our volumes were up significantly and really what drives that revenue reduction is the fact that the whole market for this business is changing to more of a tolling model.

And when we toll the material, we don’t book it as revenue, we just book the net income from that tonnage that goes through. So I would say that a year ago, we were maybe doing 15% of our business was tolling.

Today I would suggest that over half of our business would be tolled and therefore you have a similar reduction in our top line revenue but our earnings line stays pretty similar. We continue to move the business from short-term contracts to long-term supply agreements, either with a fix volume or exclusive arrangements.

That’s being very successful for us. We did have delivery started from two new contracts during the first -- were signed in the first quarter.

They started early in the second quarter. As I said earlier, the processing for June was the highest on record in the history of the company.

We process well over 60,000 ounces from recycling in a month alone. We did have a positive working capital impact from the shift to tolled material.

And as Chris noted earlier, we have actually also increased our purchase material as well which has led to an overall increase in working capital. But if all of that business from recycle was only in purchase our working capital position would be much larger than currently is today.

Because of the way the business works, the profit that we report on this will lag the volumes by two to three months due to the outturn times on the metal price. So much of the volume, the profit that we will report from the volume we saw in Q2 will actually turn up in Q3.

And we have been quite successful at expanding our market share despite a very challenging market backdrop. I think it's been a very good effort by our team.

I think that we have won a significant amount of business due to, I guess, the trust factor in this business. And we are trying to provide a service for people where they know they can rely on us for a long period of time.

Going to Slide 11 to our development projects in Montana. Blitz is our large development project.

The tunnel boring machine is just under 8,000 feet into the project out of the 23,000 planned feet. The parallel drive above that which is being mined by conventional methods is quite a bit further ahead at 12,000 feet.

We have increased the staffing on the TBM. We expect to add another crew to that in August.

We did significant slowdown in the advance rate in Q1 of this year due to really difficult ground conditions. We are through those now.

The TBM is advancing much closer to plan right now and we expect to see some increase in the proven and probable reserve base from the drilling we are doing on the conventional drive. Relatively limited drilling at this stage but as that drive continues to push out further, that will allow us to get more and more drilling done and hopefully add more to our reserve base.

The other component of that Blitz project is the Benbow portal which is at the far end. We are still in the permitting process for that.

We do expect to get the permit by the end of this year. Graham Creek is our other project.

It's in production already. The results from the first phase of mining of that have been really very positive.

That led us to accelerate the drill out of the next ramp system there and that’s continued to provide very encouraging results and we are pushing on with the drill out planning and then hopefully the development of that as quickly as we possibly can. Turning to Slide 12.

I am just going to talk about the PGM market briefly, which typically we don’t provide a lot of commentary but I think in light of price falls it's worthwhile providing some views on this. We do see some significant headwinds facing the PGM mining industry.

Our second quarter basket price of $842 was the lowest price that we have had for 10 quarters. The current basket price as of yesterday for our mined ounces was the lowest since the third quarter of 2010.

In 2010 the full year basket price was $721 and it's important to note that our all-in sustaining cost was $589 per mined ounce in that year. The current basket price is clearly lower than our second quarter all-in sustaining cost.

And you can see from the graph there, the quite precipitous fall in the platinum price over the last year. And in the more recent period, a fairly steep fall in the palladium price as well.

And the green line is our basked price and you can see over the last two to three months what's happened to that. On the next Slide, Slide 13.

We do see a bit of a difference between the platinum and palladium markets. In the platinum market we have seen a 34% decline in the price in the last 12 months.

There is a fairly significant jewelry component to the demand for platinum and it's being quite soft in Asia, particularly in China which is a large part of the market. We also know that there are fairly large above ground stocks of platinum and they have been coming back to the marketplace.

Many of the stocks are not just released yet but with hedge funds and investors. And I would suggest that probably are in an oversupply of platinum market given that the South African producers have ramped up to their pre-2014 strike levels and then some.

Palladium, we are still seeing pretty strong demand despite a little bit of softening. I would say auto demand remains very robust and auto demand accounts for about three-quarters of the end use for palladium.

We believe that the palladium market remains in deficit. There has been some liquidation of above ground palladium stocks that have come on to the marketplace again from investors.

And it would appear, again, depending on whose research you read, but it would appear that the recent sharp falls in the palladium price are mostly driven by investor selling more than end user demand. We are not seeing a significant slowdown in end user demand.

The end user demand still appears to be relatively strong. We believe that the industry needs some supply discipline from loss makers.

There appears to be some movements there as economics begin to dictate actions. Again, depending on whose research you believe or you read, somewhere between 50% and 75% of PGM producers are loss making at current prices.

Many of those have got stressed balance sheets and we believe that this is not a sustainable situation for the medium to long term. Turning to Slide 14.

We began to make significant operational improvements last year. We started reallocating resources at the Stillwater Mine in the third quarter of last year to really focus on mining profitable ounces.

That’s continued into the first quarter of this year. We have seen a very strong performance at the East Boulder Mine with production and cost consistency which I think provides a benchmark for the Stillwater operation.

East Boulder, it has to be said is a very consistent operation and if we can deliver that consistency across our business, we will significantly improve our performance. Despite the ore grades at the Stillwater Mine being in the order of 40% higher than the East Boulder Mine, the Stillwater Mine has significantly higher costs.

In the second quarter of this year the cash funding costs for the Stillwater Mine were around about $279 an ounce higher than for the East Boulder Mine. We see the consistent productivity outperformance at East Boulder.

When we measure it in tons milled per employee, it's around about 66% higher than for the Stillwater Mine. The geology is easier at East Boulder but we do believe that the East Boulder Mine provides a benchmark for the Stillwater Mine.

We think that the current market environment demands further action there to improve the cost structure of the company as a whole and at the Stillwater Mine specifically. So going to Slide 15, in terms of securing the future of the business.

Clearly there has been a fairly substantial reduction in PGM prices during Q2 and that’s continued into the third quarter. We are therefore taking clear and concise action to protect shareholder interest and it's imperative to position the company to withstand all phases of PGM pricing cycle and secure the long term future of the business.

We have announced today that we have updated our guidance which is based on an updated Stillwater Mine plan, to again focus on mining the most profitable stopes in a lower price environment. We will be dialing back our development from the current rates and the development rates that we have had at the company have consistently been above budget for the last two years.

We have got the highest developed state in the company's history and the highest reserve position in the company's history. We have a very large amount of money invested in the developed state of the business and we now have the ability to pull back on some of that development to allow us to reduce our cost structure.

We are anticipating reducing our headcount which will result in annual labor savings of between $10 million to $12 million and we anticipate taking reorganization cost of $1.5 million to $3.1 million in the third quarter of this year as a result of those changes. Moving to Slide 16 on our guidance that we have updated.

The first line you can see, we have taken our production guidance down to a range of 500 to 515 from the previous range of 520 to 535,000 ounces. We have increased our total cash cost slightly by about $10 an ounce but we have reduced our all-in sustaining cost down by about $5 an ounce.

Our G&A cost would lift. As per the previous guidance, we have reduced our exploration slightly to a range of $3 million to $5 million and we have reduced our sustaining capital expenditure to a range of $71 million to $76 million which drives that reduction in the all-in sustaining cost.

Project capital is the same. Overall capital we expect now to be in a range of $113 million to $123 million from the previous range of $125 million to $135 million.

We believe that with the new mine plan, the reductions in the sustaining capital, leave us in a very good position still. We are not cutting back into the developed state of the mine significantly.

We are still continuing to invest in the capital in the mine that is necessary to reduce our cost profile but we think this is a better plan for the current pricing environment that we find ourselves in today. So in summary, I think our second quarter results were impacted by PGM price decline and also our planned maintenance shutdown at the Stillwater Mine.

We have made some really good progress in our recycling business, that’s done very well. Really the strong mine production during the first two months of the quarter was offset by that maintenance shutdown in June.

That has delayed some production, so again we have seen a pickup in July. We have a got a very strong balance sheet and a very good liquidity profile.

$531 million in cash and liquid investments. I think it puts us a really strong position in the business, gives us a lot of optionality in the current market environment.

And the reorganization plan that we are putting in place is very much aimed about trying to have the best plan for the current price environment that we find ourselves in. We have updated our guidance.

And with that I am happy to open the floor up to any questions.

Regarding the changes to the profile and considering obviously the weak pricing environment, I am wondering would you continue to run at a lower rate in 2016, i.e. defer capital spending.

How should we be thinking about production profile for 2016?

Sure, David. Look, as you know we don’t give out our guidance for the next year yet.

So I can't really go into the detail but I think the current plan that we are implementing now is a plan that we would expect to be in place for the next year or two at least. So as we have said previously before, we sort of expected to see modest increases in production between now and when Blitz hopefully comes online around about 2018.

So I think our current guidance is a pretty reasonable view for the next year or so.

Okay. All right.

That’s helpful. And then just in terms of the decline in unit cost moving forward.

Can you just give us a bit of a sense as to how we should be thinking about that in terms of the timing? So it's a rather steep decline from the second quarter reported numbers.

I am wondering how quickly that will come into play.

Well, we are rolling out the changes as we speak. And so, again, if you look at where we ended up in the second quarter, stripping up June with, the Stillwater Mine was down for two weeks out of the month effectively.

I think if we can just get some consistency, we can deliver on those numbers quite readily. But the changes in terms of the capital spend, they are being rolled in now as we speak.

And then last question. On Slide 8, I appreciate the color on the decline in East Boulder in June -- I am sorry, in Stillwater in June.

If I look at the Slide there for East Boulder, it also looks like there was a -- I mean if I just eyeball, it looks like there was about a rather significant decline from April to June, about 15% to maybe 20% decline in monthly production. Is that just monthly variability or is there anything else going on there?

No. And it wasn’t quite that large.

April was a really strong month. Really strong.

Okay. Thanks.

So I think I can say that the East Boulder Mine continues to perform above budget, month in, month out. The only variable is how much it outperforms budget by.

I just wonder what you could say about the situation of the labor negotiations. Where do you see things going from here?

Sure. Thanks, John.

Well, as we have announced, we believe we have reached impasse on the negotiations and which means that the union has proposed and the committee has recommended twice the same deal and their members have voted that down both times. And therefore we believe we have reached impasse.

So the impasse enables us to implement our last, best final offer. We would obviously like, we would like to workforce to continue working.

They are continuing working at this stage. But I think this is a very difficult pricing environment.

You can see in terms of the cost structure the Stillwater Mine, changes need to be made, and as and when new information comes to hand we will be in a position to announce that. But as of this morning the workforce is working under the expired agreement.

I recognize this is a difficult situation probably for both parties. Just wondering, the hoist problem, what happened to lead to the extended outage?

One of the maintenance parts that was supplied by a manufacturer was incorrectly manufactured. And it's a credit to our teams actually that they managed to get the thing running with only an extra eight days, quite frankly.

So that was the main issue, is that when they went to replace the part, one of the main parts did actually turned out to be incorrectly manufactured.

And then given the long pipeline between your mine and money getting your checking account, just wondered, could you frame the rate at which this change in the PGM prices is going to work its way into your income statement.

Chris, I will hand that over to you.

You are looking typically at two to three months between it. But in terms of when the price hits, the price hits in the current month because we sell based on an average price for the month.

In terms of how long from when we produce something, it's about two to three months before it's out. The price in July will hit our income statement because that’s what we will have sold the mine ounces, a small premium to the average price.

I am just wondering if there -- given the rapid change in price whether there is a sort of concentrated adjustment factors that could come in and surprise us there in Q3.

Sorry, John, it's not like where you have a provisional pricing and then a final settlement where, for instance in the base metal world if you have a rapid fall in copper price for instance, you can sometimes end up owing the smelter money that they have overpaid you for that. That's not the way we sell the stuff.

I just wanted to go back to the notification to the union that the negotiations have reached impasse and you mentioned just a moment ago that this allows you to implement your last, best and final offer. And I was wondering if you have actually done that or if you need a third-party like the labor board to agree with you that an impasse has been reached.

There is a notification period and as the press release says, the union was notified yesterday. So we just go through a process now.

Okay. And so on the union's side, what is the, kind of the way forward there.

Their options, I would imagine would be that they could join work under the last, best, final offer or not? Just can you walk me through what might happen on their end?

Well, Matt, I don't think it's really up to me to speculate as to what someone else may or may not do. So I can't really comment on that.

So are they in a position, whether they do or not, where they could call for a strike?

Yes, they are.

Okay. And you would be under no obligation to be just held to hiring, using those people as workers?

You would be able to go out and hire others if that occurred?

Well, I think again, rather than getting into speculating about what circumstances may or may not occur, I can't really going into details.

Okay. I was just wondering, like legally if you were prohibited from hiring now that the contract has expired?

If you are prohibited from hiring others.

Well, again, I don't think it's useful to speculate on an earnings call what may or may not happen based on [indiscernible].

Okay. Fair enough.

Okay. Just I had another question, if I may.

You mentioned that the basket price using like the spot prices today, is still below the all-in sustaining cost. Is there any kind of level at which you could kind of shrink Stillwater and make the cost to be below the basket price?

Well, I think we have put updated guidance out and that’s where we think the costs will come in. But I do point out to you that if you look at, Slide 8 I think it was, we have at times being below $700 on our all-in sustaining cost.

I think that if we can get the operations running consistently and we continue to see improvements in some of our cost savings measures, we might well get there. But that’s not where we are guiding today.

I would say, as I have said sometimes in the past, the key to running a business such as this is consistency. We have shown that on occasions we can get the cost down to where we would be making money today.

We are not doing it consistently today.

It's probably also where, we are still focused on keeping our developed state. So while we have cut sustaining capital in line with the reduced production, there has been times in the past where the company has looked at reducing the developed state for a short period of time to weather down cycles in the pricing.

We haven't done that at this point in time but that’s obviously an option at some point in time as well as looking at some of the project capital expenditure.

Mick, you implied the planning you are doing in the low price environment. I am wondering, hopefully PGM prices are coming towards a bottom.

But let's say they did drop 20%-25%, you have a net cash situation which is where you want to be and I am sure you want to preserve that net cash position. Do you have other contingency plans to cut back further and kind of wait out a period of extremely low metal prices should that happen?

Sure. And again it's speculating as to what may or may not happen, but in the event that prices were to fall significantly from these levels -- and I am not so sure they could for an extended period of time just given where the cost curve support is in the industry.

But as Chris Bateman noted earlier, the plan we have at the moment is actually to maintain the developed state that we have and to continue all of our development projects. And our development capital this year, the midpoint of the guidance is around about $45 million a year.

Clearly, if things got very very tough, you could delay, defer or slow down or suspend altogether that project capital. And you could also, if you wanted to defer or reduce your sustaining capital spend, which would have you eating into your developed state.

But again if you are in a, let's just call it a survival situation and you wanted to maintain a very strong cash balance, that would always be an option as a next step plan. We are not there yet but, absolutely.

We have a very very strong balance sheet. I think probably one of the best in the PGM space.

And we do have lots of options left to go to do some other stuff. And look, the developed state is the, it's the strongest that’s ever been in the history of the company.

So it's effectively money in the bank that if we needed to, we could actually cut back significantly on development and start eating into that. Now you could do that for a period of a couple of years with no impact on production and then if you wanted to ramp back up on production, you would need to catch up on that.

But as I have said earlier, we consistently see that we can do more development than we budget for year-in, year-out. So that’s always an option if you need to.

But we are not near to that.

Thank you. And I thank everyone for dialing in and their thoughtful questions.

We look forward to speaking to everyone again at the next quarterly results. Thank you.